those to whom he confidentially discloses his invention from revealing and independently using it, but he cannot exclude anyone who independently develop, the device through research or by examination of the manufactured product." This limited protection is based on nondisclosure in contrast to the required disclosure of the patent laws, for once the invention is no longer secret, the protection ends." Consequently, although both state trade secret law and federal patent law promote invention, there is a conflict: Public disclosure of the invention terminates trade secret protection, while public disclosure is required to obtain patent protection.

Despite the conflict, patent and trade secret law should generally co-exist, except in the situation of the “potentially perpetual secret" where disclosure may not occur within the period protected by the patent laws." Congress did not intend that its patent legislation be preemptive." Disclosure in return for a monopoly is the means to meet the objective of promoting science on the theory that access to other inventions will spur further discovery." Trade secret protection also presumably promotes invention. If an investor knew that after successfully developing his invention he would have no protection against one who fraudulently copies the device and manufactures it without the burden of development costs, the inventor would be discouraged from further efforts. Moreover trade secret law only temporarily conflicts with the means which Congress has chosen to promote invention through the patent laws, for whether the inventor

Supremacy, 80 HARV. L.. Rev. 1432, 1435-39 (1967) (hereinafter cited as Doerfer]. See also Handler, Antitrust: 1969, 55 Cornell. L. REV. IQI, 186-87 (1970).

90. See MILGRIM § 5.04[1].

91. Id. at § 2.03. See also Doerfer 1434-35.

92. Adelman and Jaress describe "potentially perpetual secrets" as being "usually process inventions where an examination of the resulting product does not disclose the method of manufacture, or chemical formulations whose composition cannot be analyzed." Adelman & Jaress, supra note 41, at 92. A patent will not be issued when the invention is put to public use for more than a year prior to the patent application. 35 U.S.C. § 102(b) (1964). Therefore, it has been suggested that state trade secret law protection of "potentially perpetual secrets" should be limited to the one year period. Adelman, Trade Secrets and Federal PreEmption-The Aftermath of Sears and Compco, 49 J. Pat. Off. Soc'y 713, 729-32 (1967). It might be suggested, however, that the decisional standards of what constitutes a "potentially perpetual secret" will involve both state and federal courts in impossible technicalities and may lead to the abandonment of trade secret law. Alternatively, it may be argued that these "potentially perpetual secrets" rarely ripen into perpetual secrets and should be tolerated without the abandonment of trade secret law. Cf. Doerfer 1448.

93. See Note, The Stiffel Doctrine and the Law of Trade Secrets, 62 Nw. U.L. Rev. 956, 964-66 (1968).

94. See Doerfer 1440-41.

relies exclusively on trade secret protection or whether he uses it only during the patent pending period, the conflict will soon be resolved. Disclosure will usually be accomplished in the former situation by commercialization" and in the latter by the issuance of the patent

When an inventor licenses his invention but relies exclusively on trade secret protection, or relies on such protection while his patent application is pending, would enforcement of his contract frustrate the policy of the patent and antitrust laws? The refusal of the 7 ear Court to answer that question precipitated the concurrence by Justice Black." He argued that enforcement of a contract calling for royalties on the invention while a patent is pending would indeed frustrate federal policies if the invention is later deemed unpatentable, and that by enforcing such agreements the state was illegitimately creating a monopoly." To support his proposition he cited Sears, Roebuck & Co. v. Stiffel Co." and Compeo Corp. v. Day-Brite Lighting Co.” in which an Illinois unfair competition law prohibiting a manufacturer from copying an unpatentable device was held to be preempted by the federal patent law. While it is true that the state's action in denying an independent manufacturer the opportunity to copy an unpatentable article by its unfair competition law-thereby granting an exclusive right to an invention to the inventor though he did not have a patent-must be overturned, it does not follow that all licenses of unpatentable or patent pending inventions are unenforceable.

By enforcing a contract based on an unpatented or patent pending invention, state law is not creating a monopoly in contravention of the patent laws since the licensee, under the common law of trade secrets, does not acquire the protection of the patent laws or its equivalent. Trade secret law provides that if a

95. See Adelman & Jaress, supra note 41, at 91-92. The exception to this position, however, is the "potentially perpetual secret." See note 92 supra and accompanying text.

96. 395 U.S. at 676-77. The majority of the Court held that the state court had not satisfactorily passed on the issue as yet so it decided to reserve the question for later determination. Id. at 674-75. Justice White, in a concurring opinion, reasoned that the Court should not pass on the issue since: (1) if the patent were determined valid on remand, the issue would be moot, (2) if the patent were held invalid and the state had a chance to pass on the issue it might accommodate federal and state law so as to dispense with the need for further review, and (3) the parties had not briefed or prepared the issue adequately. Id. at 682. 97. Id. at 677.

98. 376 U.S. 225 (1964).

99. 376 U.S. 234 (1964). For a recent discussion of Sears, Compco, and related trade secret decisions, see Adelman & Jaress, supra note 41, at 80-84.

101

member of the public develops the same device through independent research, such person is not prohibited from exploiting it TM If a member of the public can, under these circumstances, exploit the invention there is no monopoly, and the contract should be enforced. Moreover, by enforcing such contracts, the courts would be furthering the policy of the federal patent laws promotion of invention for there is a greater economic incentive for an inventor to produce when he is assured that his discovery, even if not patentable, may be licensed for profit. There is a need for such incentive, for unpatentable, as well as patentable inventions, "promote the progress of science," and the former do not involve the grant of a legal monopoly.

104

Though not creating a monopoly, it is possible that state law enforcement of these licenses may create an unreasonable restraint of trade.102 If the restrictive convenants are not too broad 103 and are necessary to accomplish a legitimate business purpose it is unlikely that there will be antitrust problems. A covenant not to disclose the invention qualifies as a necessary restrictions since once the invention is disclosed, trade secret protection terminates and the underlying discovery becomes accessible to the public in general. Moreover, despite the disclosure restriction, unpatented and patent pending licenses promote invention by giving the inventor a “head start" toward recouping research and development costs.1o Although there may be some restraint on trade by the disclosure

100. See MILGRIM § 5.04[1].

101. See United States v. E.1. du Pont de Nemours & Co., 353 U.S. 586, 593 (1957) (quoting Transamerica Corp. v. Board of Governors, 206 F.2d 163, 169 (3d Cir. 1953)). An Illinois law of unfair competition gave the holders of the trade secrets în Stiffel and Compco the power to prevent the copying of an article which represents too slight an advance to be patented.. ." Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 231-32 (1964). When the holder of the trade secret does not have this power to exclude competitors from his secret at will, no monopoly results.

102. See R. CALLMANN, THE LAW OF UNFAIR COMPETITION, TRADEMARKS AND MONOPOLIES § 57(c) (3d ed. 1968).

103. For an example of an agreement that was held to be too broad, see United States v. National Lead Co., 63 F. Supp. 513 (S.D.N.Y. 1945), aff'd, 332 U.S. 319 (1947).

104. See R. CALLMANN, supra note 102, at § 57 (c).

105. "[S]o far as these contracts limit the communication of what the [inventor] might have refrained from communicating to anyone, there is no monopoly . . . and no contract in restraint of trade, either under the [Sherman Act] or at common law." Board of Trade v. Christie Grain & Stock Co., 198 U.S. 236, 252 (1905). But see Associated Press v. United States, 326 U.S. I, 15-16 n. 14 (1945).

106. See 395 U.S. at 682 n.2 (White, J., concurring); Adelman & Jaress, supra note 41, at 88-91; Doerfer 1451.

restriction, this minimal restraint should not be held to be unreasonable since the restraint is necessary to effectuate a licensing agreement in furtherance of a legitimate business purpose which promotes invention

Therefore, trade secret law, in general, and licenses of unpatented and patent pending inventions in particular, stimulate invention, the primary purpose of the patent law, and this stimulation outweighs the non-disclosure and minimal restraints on trade brought about by trade secret law and licensing agreements under its sole protection. Consequently, the Lear holding should not be extended as proposed by Justice Black, but patent and trade secret law should co-exist through enforcement of non-patent and patent pending licenses.

CONCLUSION

Lear broadly represents an attempt to strictly circumscribe the existence of lawful patent monopolies. The legal right to invalidate a patent has been given to the party with the greatest economic interest in its elimination. The licensee who has developed a sophisticated marketing system and can absorb the costs of litigation will not hesitate to challenge voidable patents, because he can immediately realize a profit free of royalty costs. This incentive of economic self-interest should not be frustrated through devices such as consent judgments or by royalty recoupment; otherwise the public ... [will] continually be required to pay tribute to would-be monopolists without need or justification.' 107 Nevertheless, post-Lear patent policy should not bar the enforcement of contracts regulating access to unpatented or patent pending secret ideas and thereby lead to the demise of state trade secret law.

107. 395 U.S. at 670.

PATENT LAW ESTOPPEL Doctrine or Licensee EstoPPEL Overruled; STATE PROTECTION OF UNPATENTED INVENTIONS Qosmon Lear, Fue n. Adkin: *

The federal patent laws,' granting statutory monopolies for inven. tions, represent an exception to the general federal policy of maximizing competition. In order to limit the anti-competitive effects of the patent system, the Supreme Court has construed patents strictly? and, in a series of decisions, consistently narrowed the scope of patentee's rights.3 In addition, the Court has relied upon the supremacy clause to strike down state unfair competition laws which conflict with the system of patent monopolies established by federal law.' In Lear, Inc. v. Adkins,” The Court formally removed a barrier to challenging the validity of patents by overruling the doctrine of licensee estoppel. In so doing, however, the Court questioned but left unanswered the issue of whether the states may protect the owners of unpatented inventions who wish to disclose their ideas to manufacturers for the payment of royalties. The Lear case thus raises the larger question of the permissibility of state protection of secret inventions and ideas outside the federal patent system.

Plaintiff Adkins was hired by Lear in 1953 to help develop an improved gyroscope for the company. In 1954, Adkins applied for a patent on the inventions which he had developed and executed a licens ing agreement with Lear, under which Lear agreed to pay royalties for the use of Adkins' methods during the pendency of his patent application and thereafter until a patent was either finally refused, or

* 395 U.S. 653 (1969).

1 See 35 U.S.C. 88 1-293 (1964).

2 United States v. Masonite Corp., 316 U.S. 265, 280 (1942).

3 The patent cannot be used to secure any monopoly beyond that contained in the patent, Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488, 492 (1942); the patentee's control over the product when it leaves his hands is sharply limited, United States v. Univis Lens Co., 316 U.S. 241, 250-52 (1942); the patent monopoly may not be used in disregard of the antitrust laws, International Business Machs. Corp. v. United States, 298 U.S. 131, 136-38 (1936); when the patent expires the monopoly created by it expires, Kellogg Co. v. National Biscuit Co., 305 U.S. 111, 120 (1938).

4 See, e.g., Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234 (1964); Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964). See text accompanying notes 20-24 infra.

395 U.S. 653 (1969).

8 Id. at 671. This doctrine prohibited a licensee from contracting to use patented device and then suing to have the patent declared invalid. The effect of declaring the patent invalid would be to allow the licensee to continue using the device while avoiding all royalty payments. The underlying principle was that the licensee should not be allowed to reap the benefits afforded by the license while arguing that the patent which provided the major consideration for the agreement was invalid. Thus, principles of contract law and unjust enrichment were at the core of licensee estoppel.

7 The Patent Office does not have to make a final judgment on the inven tor's initial application. Generally, the original application seeks patent protection