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No. 3-02-0913

IN THE

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

A.D., 2003

JUSTICE LYTTON delivered the opinion of the court:

Plaintiff, Carus Chemical Company, sued defendants, JohnCharlton and Calciquest, Inc., for breach of contract and violationof the Illinois Trade Secret Act. Carus obtained a preliminaryinjunction prohibiting defendants from comparing the productsmanufactured by Carus and Calciquest. After discovering that Carusitself had published a comparison between the products in a bidproposal, defendants petitioned the court to dissolve thepreliminary injunction and to sanction Carus. The trial courtdenied the motions and defendants filed this interlocutory appeal.We reverse the trial court's decision on the motion to dissolve andaffirm its refusal to order sanctions.

John Charlton testified that he held a number of technical andmarketing positions with Carus that gave him unique access tocertain trade secrets and confidential information. Charltonsigned a confidentiality agreement as a condition of his employmentwith Carus, in which he agreed not to use or disclose (directly orindirectly) any confidential information after his employmentended. The agreement defined "confidential information" as allprocesses, techniques, compositions, etc., which "are in thepossession of Carus and which have not been published or disclosedto the general public."

Charlton ended his employment with Carus and went to work for Calciquest. Carus and Calciquest manufacture similar chemicalproducts used in community water supplies to control corrosion. Charlton was in the process of selling Calciquest's product to acustomer when he sent a letter which included the followinglanguage:

Please find enclosed a product data sheet for CalciQuestLiquid, our primary liquid phosphate blend for corrosioncontrol and sequestering. It is, essentially, identicalto Aqua Mag [Carus' product], both in specifications andin chemical composition. Chromatographic analysis showsthe two compounds to be virtually identical. The thermalprocess used to make these liquid blends is alsoidentical. As a chemist, I have no doubt that the twocompounds are interchangeable.

Carus filed a motion for a temporary restraining orderalleging that defendants used and revealed confidential and tradesecret information by divulging Carus' proprietary thermal process. Carus claimed that disclosure of the information could result inenormous economic losses, and that by disclosing the thermalprocess, Charlton breached his confidentiality agreement. Insupport of its motion, Carus vice-president Len Kubera testifiedthat: "[a]sserting that the thermal process used to make the twocompeting products is identical, necessarily demonstrates that Mr.Charlton has used and disclosed Carus' trade secret information forthe benefit of Calciquest and to Carus Chemical's detriment."

The court entered a temporary restraining order and on July16, 2002, granted a preliminary injunction prohibiting "defendantsfrom making comparisons to the Aqua Mag thermal process and/orproduction process."

Meanwhile, Carus had attached a copy of the Charlton letter toa bid proposal Carus submitted to Miami-Dade County on June 19,2002. In that proposal, Kubera wrote that "[i]t should be notedthat our products continue to be used as a 'bench mark' by ourcompetitor, your current supplier, who has issued writtenstatements that their product is 'identical' to the Carus ChemicalCompany product." Kubera referenced the letter as support for thatclaim.

When defendants became aware that Carus had used Charlton'sletter in its Miami-Dade negotiations, they filed a motion todissolve the injunction and to impose sanctions on Carus pursuantto Supreme Court Rule 137. During the hearing on the motion todissolve, Carus admitted that no confidential information or tradesecrets were disclosed in Charlton's letter. The trial courtdenied the motion to dissolve and the motion for sanctions.

I.

The defendants argue that the trial court abused itsdiscretion when it denied defendants' motion to dissolve thepreliminary injunction. See Callis, Papa, Jackstadt & Halloran,P.C. v. Norfolk & W. Ry., 195 Ill. 2d 356, 366 (2001).

In order to obtain a preliminary injunction, a party mustestablish four factors: (1) a clearly ascertainable right in needof protection, (2) the risk of irreparable harm if the injunctionis not granted, (3) the lack of any adequate legal remedy, and (4)the likelihood of success on the merits. Hartlein v. IllinoisPower Company, 151 Ill. 2d 142, 156 (1992). The failure toestablish any of the four factors will preclude the court fromissuing the injunction. Hartlein, 151 Ill. 2d at 156.

We believe that Carus' disclosure of Charlton's lettervitiated the need for a preliminary injunction. When Carus sentthe letter to Miami-Dade county, the information was no longerconfidential. In effect, Carus had republished the letter, puttingit into the public domain. Since the information became public byCarus' own hand, defendants' further use of it cannot be said tocause Carus irreparable harm. Cf. Heller v. Howard, 11 Ill. App.554, 560 (1882) (holding that the repetition of a slanderousstatement is not actionable when plaintiff consents to therepetition).

In Campbell Soup Co. v. ConAgra, Inc., 977 F.2d 66 (3d. Cir.1992), the plaintiff obtained an injunction prohibiting defendantfrom using or exploiting the plaintiff's product preparationprocess. The defendant became familiar with the process whileemployed by plaintiff. The plaintiff obtained a patent for theprocess before suit was filed; in the patent application, thedetails of the process were disclosed. The appellate court foundthat further disclosure of facts already revealed could notconstitute irreparable harm and reversed the award for injunctiverelief. Campbell's Soup Co., 977 F.2d at 92.

Our supreme court decided a similar issue in ILG Industries,Inc. v. Scott, 49 Ill. 2d 88 (1971), where the plaintiff obtainedan injunction preventing former employees from using its tradesecrets. The court, in determining whether the documents used bydefendants were indeed trade secrets, made the followingobservation: "[t]hat which is of general knowledge within anindustry cannot be a trade secret; something which is fully andcompletely disclosed by a business through its catalogs orliterature disseminated throughout an industry cannot be a tradesecret." ILG Industries, Inc., 49 Ill. 2d at 93. Although we arenot determining the existence of a trade secret in this case, theprinciple remains the same. Charlton's letter comparing the twoformulas ceased to be proprietary or protectable when Carusrepublished it.

Furthermore, under the terms of the preliminary injunction,Carus is free to compare the thermal processes of the twocompanies, but defendants are not. The threat of irreparable harmis belied by Carus' ability to use the letter as a sword in itscompetition with defendants while relying on the preliminaryinjunction as a shield against them. Thus, while the preliminaryinjunction improperly protects Carus, it also acts as anunreasonable restraint on competition. See ILG Industries, 49 Ill.2d at 93-94.

Since the information is not confidential, no threat ofirreparable harm exists, and Carus is not entitled to injunctiverelief. The preliminary injunction must be dissolved. SeeHartlein, 511 Ill. 2d at 156.

We make no comment on other issues pending in the trial court.

II.

Defendants complain that the trial court erred by not imposingsanctions on Carus under Supreme Court Rule 137. Defendants claimthat Carus made allegations in its complaint which it must haveknown were untrue.

We will not reverse a trial court's decision to deny sanctionsabsent an abuse of discretion. Belfour v. Schaumburg Auto, 306Ill. App. 3d 234, 243 (1999). A party requesting sanctions bearsthe burden of proving both that the statements in the pleadings areuntrue and that they were made without reasonable cause. In reEstate of Baker, 242 Ill. App. 3d 684, 688 (1993).

Although Carus had previously published Charlton's letter, itmay have had reasonable cause to believe it was entitled to reliefbased on the allegations in the complaint. Though we have foundthat Carus is not entitled to a preliminary injunction, we cannotsay that Carus made the allegations without reasonable cause. Ageneral assertion of impropriety is insufficient to warrantsanctions. See In re Estate of Baker, 242 Ill. App. 3d 684, 688(1993). The trial court did not abuse its discretion in refusingto sanction Carus.

CONCLUSION

The order of the circuit court of LaSalle County is reversedin part and affirmed in part.

Reversed in part and affirmed in part.

HOLDRIDGE and SCHMIDT, JJ., concur.