ns the legal uncertainty it has engendered. The likely increase in lawsuits will underscore an important problemn in the existing legal system for testing patent validity--the conflict between the procedures und by the Patent Office and those of the courts for determining the validity of patents. The high mortality rate of patents in the courts has been a continuing phenomenon for over twenty years. Between 1973 and 1963, 57.4 per cent of the patents contested in the courts of appeals were invalidated, 48

The Patent Office is faced with tremendous administrative burdens in the granting of patents, which often result in the approval of patents of uncertain validity." There is a backlog of 200,000 patent applica tions with the average period of pendency being two and one half years. A substantial number of patent applications have a pendency of five to ten years. With such a backlog and time-lag, the examiner

19

a basis for an antitrust violation or misuse defense. The court concluded this now. illegal clause did not supply a basis for retroactively finding an antitrust violation, a violation which if found would have constituted a misuse of the patent. This decision represents sound reasoning on this phase of retroactive application. Lear should be applied to all license agreements presently in existence. If a clause such as in Kearney exists, this clause should be declared without any effect. Failure to cancel these clauses should not enable the licensee to automatically raise a misuse defense. Any licensee under any existing license agreement should now be able to challenge the validity of the licensed patent.

The Supreme Court has granted certiorari in a case where 1 issue is whether the elimination of licensee estoppel should be applied retroactively. Standard Indus., Inc. v. Tigrett Indus., Inc., cert. granted, 396 U.S. 885 (1969). Retroactivity is neither prohibited nor required. Linkletter v. Walker, 381 U.S. 618, 629 (1965); Great N. Ry. v. Sunburst Oil & Ref. Co., 287 US. 358, 364 (1932). To determine when a case should be retroactively applied, one must look at the purpose of the overruling decision, the reliance placed on past decisions and the possible burden on the administration of justice. Johnson v. New Jersey, 384 U.S. 719, 727 (1966); Linkletter v. Walker, supra at 627; United States ex rel. Angelet v. Fay, 333 F.2d 12, 20-21 (2d Cir. 1964), aff'd, 381 U.S. 654 (1965). The purpose of overruling licensee estoppel was to prevent invalid patents from being treated as monopolics. This purpose would be most effectively implemented if Lear were applied both retroactively and prospectively. This retroactive application would not be too harmful since the demise of licensee estoppel had been anticipated and the doctrine had been riddled with exceptions. See notes 12-13 supra. Thus reliance on this rule would not be sufficient to bar it from being retroactively applied. There would be no way in which to estimate the burden of retroactive application on judicial administration, but the effects of eliminating invalid monopolies should outweigh any possible burdens on the courts. Finally, the Court in Lear implied that its decision would be applied retroactively. 395 U.S. at 674 n.19.

40 Comment, 34 U.M.K.C.L. Rev. 393, 401 (1966). For figures on the number of patents held invalid between 1948 and 1954 in all of the federal courts see Hearings on S. Res. 92 Before the Subcomm. on Patents, Trademarks and Copyrights of the Senate Comm. on the Judiciary, 84th Cong., 1st Sess., 106, at 177-79 (1956). These figures correlate with the 1953 through 1963 figures. 47 S. Rep. No. 1202, 86th Cong., 2d Sess. 22 (1960).

48 Report of the President's Commission on the Patent System at 2 (1966). 49 Id.

is often unable to check the prior not adequately," mud due to the numerous patent grants the check of prior art becomes increasingly more difficult. Examiners formerly were instructed to resolve all reasonable doubts in favor of the applicant," but applicants may appeal an examiner's rejection."2

The procedures utilized by the courts to determine patent validity differ in several ways from those employed by the Patent Office. The courts which handle the appeals from Patent Office rejections face a disadvantage in that the published case law is confined to those decisions in which the examiner's rejection has been overruled; there is no disclosure of the court decisions upholding administrative rejections,24, The weight given on appeal to a Patent Office decision denying a patent varies depending upon the court which reviews the decision, The Patent Office decision is presumed correct in the district court and the court of appeals in the District of Columbia, but not in the Court of Customs and Patent Appeals. The courts are also unclear on whether certain elements of patent validity are questions of law or fact, and the Supreme Court has given differing answers." There is no agreement about the precise definition of the statutory requirements of novelty and nonobviousness. The lack of a uniform and consistent approach to patent validity has resulted in a patent being held valid by one court and invalid by another.50

56

50 Stedman, The U.S. Patent System and its Current Problems, 42 Texas I.. Rev. 450, 463-64 (1964).

51 Report of the President's Commission on the Patent System at 22 (1966). 52 The applicant can appeal to the Board of Appeals, 35 U.S.C. § 134 (1964). From here an applicant has a choice of appeals. He can appeal either to the Court of Customs and Patent Appeals, id. § 141, or to the United States District Court for the District of Columbia, id. § 145.

63 See Graham v. John Deere Co., 383 U.S. 1 (1966).

64 Doerfer, supra note 24, at 1444.

Report of the President's Commission on the Patent System at 26 (1966). 66 For a discussion of this law-fact controversy see Comment, Appellate Review of Determinations of Patentable Inventions, 29 U. Chi. L. Rev. 185 (1961). 57 Compare Keyes v. Grant, 118 U.S. 25, 37 (1886) with Graham v. John Deere Co., 383 U.S. 1, 17 (1966).

58 For a discussion of how courts apply different standards in interpreting invention see Kitch, Graham v. John Deere Co.: New Standards for Patents, 1966 Sup. Ct. Rev. 293; Note, The Impact of the Supreme Court Section 103 Cases on the Standard of Patentability in the Lower Federal Courts, 35 Geo. Wash. L. Rev. 818 (1967); Comment, 34 Geo. Wash. L. Rev. 802 (1966); Comment, 31 Mo. L. Rev. 553 (1966); Comment, 44 Texas L. Rev. 1405 (1966); Comment, 34 U.M.K.C.L. Rev. 393 (1966).

69 Sce, e.g., Graham v. John Deere Co., 333 F.2d 529 (8th Cir. 1964), aff'd, 383 U.S. 1 (1966). The same patent held invalid by the Eighth Circuit was found valid by the Fifth Circuit in 1957, Jeoffroy Mfg., Inc. v. Graham, 219 F.2d 511 (5th Cir.), cert. denied, 350 US. 826 (1955). See also Bradley v. Great Atl. & Pac. Tea Co., 78 F. Supp. 388 (E.D. Mich. 1948), aff'd sub nom. Great Atl. & Pac. Tea Co. v. Supermarket Equip. Corp., 179 F.2d 636 (6th Cir.), rev'd, 340 U.S. 147 (1950) (a patent upheld by 2 courts was found invalid by the Supreme Court).

There has been no basic change in the patent laws since 1836.*" A presidential commission on patents was formed and it made numerous recommendations for altering the patent laws." So far, none of these suggestions have been implemented. Due to problems similar to those facing the United States Patent Office, including ever increasing, mummbers of patent applications with resulting backlogs and difficulty in checking, prior art, several foreign countries have recently made sweep ing changes in their patent systems." Three possible changes in the system would alleviate the present uncertainty surrounding patent litigation. If a claim rejected by an examiner and the Patent Office Board of Appeals could not be reversed unless clearly erroneous,“ Patent Office decisions would be vested with greater finality and the temptation to litigate patent validity, now increased with the abolition of licensee estoppel, would be significantly limited. A more far-reaching change would be the establishment of a special court composed of experts to review patent validity cases. A third change might be the incorporation of adversary procedures into the disposition of patent applications, as is currently done in several European countries." In those countries, notice is given of an examiner's acceptance of an application, and interested persons may oppose the final grant within

60 Report of the President's Commission on the Patent System at 1 (1966). 01 Id.

62 In Germany, due to a 5 year delay in the processing of patent applications, a law was enacted in 1967 which generally reorganized their patent system. Hollman, The German Patent Examining Procedure, 51 J. Pat. Off. Soc'y 4 (1969). No major changes had been made prior to this since 1877. Id. Japan in 1960, and France in 1968 have also drastically altered their patent laws to keep pace with changing industrial conditions. See Hiance & Plasseraud, The New French Patent Law, 50 J. Pat. Off. Soc'y 209 (1968); Jarkovsky, A Comparative Review of Japanese and U.S. Patent and Related Laws, 50 J. Pat. Off. Soc'y 76 (1968). Some of the major changes in these systems are limitations on amending patent applications, opposition proceedings, an increase in personnel, reorganization of examining procedures and the elimination of chemical substances from patent protection—a procedure which greatly reduces the number of patent applications. For a summary of recent changes in foreign patent systems see Gambrell, Kayton & Trucano, Patent Law, 1969-70 Ann. Survey Am. L. 139.

63 The law currently provides that patents are presumed valid and places the burden of showing invalidity on the challenging party. 35 U.S.C. § 282 (Supp. IV, 1969). However, this standard does not seem to have greatly hindered those parties contesting patent validity. See text accompanying note 46 supra. The main difficulty in instituting the clearly erroneous rule would be compelling the courts to adhere to such a rule. Courts easily could find many ways to circumvent this type of rule.

64 The use of a special court was discussed in Harris, A Dual Patent Program: To Increase Patent Reliability and Decrease Litigation Costs, 13 Idea 1 (1969).

05 For a brief discussion of these opposition proceedings see Harris & Weiser, Informed Foreign Experience and the Opinion on Provisions Similar to Commission Recommendations, 12 Idea 1021 (1968); Stuart-Prince, Patent Oppositions in Great Britain, 40 J. Pat. Off. Soc'y 769 (1958); Reichel & Frishauf, Opposition Proceedings in the German Patent Office in the Light of the Sixth Transfer Law, 44 J. Pat. Off. Soc'y 52 (1962).

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a limited time. If there is no opposition, then a patent is issued. Under This system, secrecy is maintained for those applications rejected by the examiners.

Greater public disclosure of unpatented ideas could be achieved by the establishment of a utility law similar to that used by Germany, Japan and Italy." The utility system provides protection for subject matter of slight novelty or ideas which would not merit regular patent protection. These utility products would receive monopoly status for only a limited time, such as three years. The system would involve smaller fees and prompter registration than that provided by the patent system, and inventors would be more likely to apply for a utility patent than rely upon state protection. Such new legislation, moreover, seems more appropriate for realizing the goals of the federal patent system than the Court's expansive interpretation of federal policy in Stiffel, Compco and Lear.67

06 See Mott, The Concept of Small Patent in European Legal Systems and Equivalent Protection Under United States Law, 49 U. Va. L. Rev. 232 (1963). 67 Two bills have been introduced into Congress by Senator McClellan which would preserve the right to enter into licensing agreements and also continue to have state law protect trade secrets. S. 2756, 91st Cong., 1st Sess. § 301 (1969); S. 766, 91st Cong., 1st Sess. § 43(a) (3) (1969). Section 301 was proposed as an addition to the new Patent Act, while § 43 (a) (3) was part of a proposed Federal Unfair Competition Act. Thus, congressmen seem to be concerned about the continued protection of trade secrets.

SEARS TO LEAR TO PAINION, OF VIHALES
AND OTHER MATTERS

ROGER M. MILGRIM

A recent decision in the Southern District of New York jeop. ardizes the entire law of trade secrets. Based upon dictum in nontrade secret Supreme Court cases, Painton & Co. v. Bouus, Inc. holds that the law of trade secrets is applicable only to patentable inventions and only during the time between the application for and issuance of the patent. Mr. Milgrim, a noted expert in trade secrets, traces the genealogy of this case and warns of the perils of permilling a concept expressed as dictum in response to one, sel of circumstances to become a rule of law of general applicability. He concludes that trade secret protection is too important in our technological society to be cast lightly aside through mechanical application of questionable dictum.

WH

I

A CETOLOGICAL APPROACHI TO TRADE SECRETS

A. Conceptualism

HEN a captured whale's riches of oil, flesh and bone have been exhausted its carcass is cast astern. Melville chronicles that the leviathan's funeral is attended by sharks and fowls who feast upon the remains.

Nor is this the end. Desecrated as the body is, a vengeful ghost survives and hovers over it to scare. Espied by some timid man-of-war or blundering discovery-vessel from afar, when the distance obscuring the swarming fowls, nevertheless still shows the white mass floating in the sun, and the white spray heaving high against it; straightway the whale's unharming corpse, with trembling fingers is set down in the log-shoals, rocks, and breakers hereabouts: beware! And for years afterwards, perhaps, ships shun the place; leaping over it as silly sheep leap over a vacuum, because their leader originally leaped there when a stick was held. There's your law of precedents; there's your utility of traditions; there's the story of your obstinate survival of old beliefs never bottomed on the earth, and now not even hovering in the air! There's orthodoxy!1

B. The Whale is Cast Adrift

Stiffel & Co., the pioneer of the popular pole lamp, secured a mechanical and a design patent for it. Scars duplicated the lamp

Member, New York Bar. A.B., 1958, University of Pennsylvania; LL.B., 1961, New York University; LL.M., 1962, New York University.

1 II. Melville, Moby Dick 284 (Dodd, Mead & Co. ed. 1942). For those who And the ensuing cetological data incomplete, see V. Scheffer, The Year of the Whale (1969), a pleasant book that has nothing to do with this Article.