I. HISTORY OF PATENT LAW

What is believed to be the world's first patent 1 law, enacted by the city-state of Venice in 1474, was built upon two basic concepts:

See Patent Study No. 15, 85th Congress 2nd Session (1958). There follows what is believed to be an accurate translation of the Italian text:

"1474, the 19th day of March.

"There are in this city, and also there come temporarily by reason of its greatness and goodness men from different places and most clever minds, capable of devising and inventing all manner of ingenious contrivances.

"And should it be provided that the works and contrivances invented by them, others having seen them could not make them and take their honor, men of such kind would exert their minds, invent and make things which would be of no small utility and benefit to our State.

"Therefore, decision will be passed that, by the authority of this Council each person who will make in this city any new and ingenious contrivance, not made heretofore in our dominion, as soon as it is reduced to perfection, so that it can be used and exercised, shall give notice of the same to the office of our Provisioners of Common.

"It being forbidden to any other in any territory and place of ours to make any other contrivance in the form and resemblance thereof, without the consent and license of the author up to ten years.

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"And, however, should any body make it, the aforesaid author and inventor will have the liberty to cite him before any office of this city, by which office the aforesaid who shall infringe be forced to pay him the sum of one hundred ducats and the contrivance be immediately destroyed.

"Being then in liberty of our Government at his will to take and use in his need any of said contrivances and instruments, with this condition, however, that no others than the authors shall exercise them. favorable 116

(1) property right of
the inventor
in the product of his mind; and

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(2) "benefit to our State" resulting from inducement of men of "most clever minds" to "exert their minds and "make things which would be of no small utility and benefit to our State.

The patent clause of our Constitution, seems to have stirred up no controversy or debate in the Constitutional Convention, and it carries the same two connotations, the inventor's property right and the benefit to the state. Article I, Section 8, Clause 8 reads:

"The Congress shall have Power * * *

"To promote the Progress of
Science and useful Arts by
securing for limited Times
to Authors and Inventors the
exclusive Right to their re-
spective Writings and Dis-
coveries."

It is noteworthy that the Constitutional language which relates to both process inventions that can be used in secrecy and to product inventions that inherently must be disclosed by sale and use thereof, is in terms of grant, of "securing .

to. Inventors". There is no intimation found either in the Constitutional clause or its legislative history, of taking anything from inventors-like their freedom to contract for disclosure of their inventions or for disclosure of unpatentable know-how.

Similarly, from the first patent act of April 10, 1790, c.7, 1 Stat. 109, through the present patent act of 1952, present Title 35 U.S. Code, the statutory language was always language of grant of rights to inventors. Neither in the various patent acts nor in the legislative history of any of those acts, is there to be found any suggestion of taking anything from inventors.

No concept of the statutory patent right's preemption of the common law rights to protect confidential information can be found in any of this history.

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The patent law is expressly restricted in its scope, does not purport to treat at all of many classes of innovation such as new improved hybrid seeds, new accounting methods, most classes of computer programs, and new applications engineering work within the skill of those in the art. See 35 U.S.C. and 103. In such areas it grants no patent but it has no phrase of interference with other applicable law.

When the present patent law was passed, it was the intent of the drafters to leave the common law as it was in such areas as trade secrets and confidential information.2

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What then was the common law of trade secrets, confidential information, and know-how licenses, at the time of the enactment of the 1952 Patent Act?

_ment.

To that theme, we must give further develop

2. P. J. Federico, then Examiner-in-Chief of the United States Patent Office, was the chief technical advisor in 1949-1952 to both the House and Senate subcommittees having jurisdiction over the patent law. He personally wrote the first draft of what became the Patent Act of 1952, and was a participant in both the bar studies and the Congress's studies in all the revisions that matured into the 1952 Act. His personal files today are likely the most complete legislative history of the 1952 Patent Act in existence.

As a result of his deep involvement in all phases of the drafting and revision of drafts of what is now Title 35, he wrote a comprehensive "Commentary on the New Patent Act" which was published by West Publishing as a foreward to its original publication of the new Title 35, U.S. Code Annotated.

It is noteworthy that this commentary, written immediately after three years of vigorous work on the act in both bar and Congressional circles, does not suggest any change in the 1952 existing law of trade secrets, confidential information, know-how licenses, or other possible unfair competition. The Commentary does state, that after the first draft

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Committee Print of a proposed bill, the focus of attention was upon codification with only relatively noncontroversial changes in the law. That is clearly inconsistent with any change so fundamental and far reaching as that promulgated by the court below.

[End of footnote]

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II. PREMISE FACTS:

INDUSTRIAL LIFE IN ACTION

So frequently is there gross misconception of the pragmatics of trade secrets, confidential information, know-how and the relationship of patents to them, that we must first be sure the premise facts are clearly stated.

Industry finds that various bodies of information used in business, both exist and must be treated as proprietary.

We need not here focus upon confidential financial information, upon secret future advertising programs, upon secret plans to enter the X market or secret methods of doing business. But, we must focus upon:

Patented concepts vs. know-how

One body of information that is used by industry, is that represented by patents on new concepts.

A much larger body is that represented by detailed engineering drawings and specifications for a particular application of a concept; by the experience of having tried a dozen publicly available alternative solutions to a given problem and having selected the one which is most economic in context of other parameters of a system; by having spent $50,000 on a literature search and pilot plant tests to evaluate the most likely choices found in the literature in view of anticipated changes in labor costs vs. machinery costs; etc. --All of which are generally characterized as "know-how".

While some bits of a know-how package may be patented or be patentable, know-how is in major part available in bits and pieces of a puzzle, from published sources. Often the know-how package includes numerous trade secrets. But since the knowhow package is normally the distillation of knowledge--the assemblage of the pieces of the puzzle-from hundreds of trials and failures, distillation of a multitude of compatible details for an integrated operating system, it is expensive to come by even when no element of the know-how package is itself truly unknowable from public sources of information.

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