issued and secured patent may be enjoined from further infringement and is subject to damages (which may, under certain cireumstances, be trebled) and to reasonable attorney fees in exceptional

A patentee's statutory patent rights commence upon the date of issuance and expire seventeen years thereafter. Patent infringement remedies to the extent that they are available relate solely to that period. Upon publication, the patent becomes a public dornment, and its subject matter falls into the public domain of every foreign jurisdiction unless the United States patentee has complied with the patent laws of such jurisdictions within the prescribed time, and the invention meets that jurisdiction's standard of patentability. Under the principal patent treaty to which the United States and some seventy-seven other nations adhere, applications must be made in all foreign member nations within twelve months of domestic filing in order to obtain the benefits of their United States filing dates."7

An example illustrates the importance of foreign filing. Suppose Mr. Flash invents a revolutionary patentable process to manufacture, at one-half the ordinary cost, a common nonpatentable product. If, by virtue of Painton's trade secret holding, he is precluded from licensing his process as a trade secret, he must secure worldwide patents on the process in order to have legal protection. Otherwise, the process could be freely used abroad and the nonpatented end product imported into the United States to compete with Flash's domestically manufactured product. In addition to the great expense18 and uncertainties entailed in foreign patent application proceedings, Mr. Flash must consider the

45 Id. § 283-85 (1964), as amended, (Supp. V, 1970). See Brand Plastics, Inc. v. Dow Chemical Co., 168 U.S.P.Q. 133 (C.D. Cal. 1970).

44 Most Communist bloc countries, it may be noted, subscribe to the US. Patent Gazette, and do not pay any royaltics on use made of published foreign inventions. It is estimated by patent counsel for a leading United States licensor of technology that the Eastern European bloc market for United States confidential technology is enormous and appears to be curried by current Department of State policy, but that patents are of only nominal value in Eastern Europe. Gilkes, Licensing as a Business and Financial Technique, in Proceedings of the First Annual Licensing Law and Practices Institute 68-71, 76 (1970).

47 International Convention for the Protection of Industrial Property, Oct. 31, 1958, 75 Stat. 748 (1968), T.I.A.S. No. 4931.

48 A well-known New York patent law firm estimates that a "moderately" difficult application for an electronics patent costs $2000 to 4000. It is estimated that a relatively comprehensive foreign filing of the electronic patent application mentioned above would cost $15,000 to $20,000.

Application costs are a relative trifle in comparison to litigation costs. An unsuccessful patentee in a recent infringement action has been ordered to pay more than $1 million in legal fees and disbursements to the alleged infringers. Brand Plastics Co. v. Dow Chem. Co., 168 U.S.P.Q. 133 (C.D. Cal. 1970).

realities of policing the process patent abroad. Since the end prodnct is nonpatentable and indistinguishable from that produced by the nonpatented expensive process, the problem of policing may be insurmountable,

B. Trade Secrets

Judge Motley incorrectly viewed trade secrets solely as a preliminary and adjunct step to patents. The subject matter of a trade secret is not and should not be limited by notions of patentability. The character, duration and purpose of trade secret protection does not warrant any such limitation.

One may capsulize the most widely recognized definition of a trade secret by stating that it is data or information, or material embodiments thereof, used in the owner's business, lending a competitive advantage and not generally known in the owner's industry." Classes of technological matter recognized as trade secrets include formulae, processes, methods and techniques, machines, plans, designs and patterns."

60

It is axiomatic that, unlike a patentee who enjoys a seventeen year period of exclusivity, a trade secret owner has no rights against an independent subsequent developer, including one who copies matter marketed or otherwise made public by the owner."1 The trade secret owner may, however, restrict the use or disclosure of the secret by persons who learned of it subject to contractual limitations or those imposed by operation of law ("confidential relationship” and “implied contract” are the standard rubrics). Included in the latter category are persons who obtained the trade secret wrongfully, such as by inducing one having knowledge of the secret to breach his legal duties to the owner.53

82

Similarly, the rights of the trade secret owner are limited to matters maintained in secrecy. If use of the trade secret requires its publication, such as through sale of a previously secret mechanism or product that can be readily reverse engineered, secrecy and consequently trade secret protection are lost."

A trade secret owner has none of the comforts of the pre

149 Restatement of Torts 757 comment b, at 5 (1939). See note 5 supra. 50 Trade Secrets, supra note 5, § 2.09. Recent cases of the last category cited are found in id. at 27 nn.138.2-138.6 (Supp. 1970). The parties in Painton did not put in issue whether Bourns' technology constituted trade secrets.

1 Id. § 5.04 (1).

62 Id. § 4.01 to 03.

53 See id. § 5.04(3).

64 This well-settled proposition, see id. § 2.05[2] n.8, is entirely consonant with the results of Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964).

sumption of validity afforded a patentee." He must meet a difficult burden of establishing that the matter in question is not generally known, that the defendant knows of It by virtue of a protected relationship and that use or disclosure by the defendant would injure the owner." Moreover, injunctive relief, if available, is apt to be limited to a period equal to the time that independent development of the secret would require."7

C. Bargaining for Patent and Trade Secret Licenses

Applying the foregoing thumbnail comparisons of trade secret and patent law to the licensing context under consideration in Lear and Painton, it can be observed that the license reward for a trade secret tends to be a function of consideration for disclosure; for a patent, consideration for use. A trade secret owner says to his prospective licensee "I will disclose something to you which you do not know, which you cannot yourself develop economically or presently obtain elsewhere, and which I have a right to keep to myself." Since a prospective trade secret licensee knows that his licensor cannot protect him from independent developers, he weighs the value of disclosure against the risks of relying on matter which is subject to third-party royalty-free use. Whether articulated or not, such balancing is the stuff that leads to hard negotiating for royalty rate and duration. A patent owner, on the other hand, says "I will allow you to practice my already published and thus known invention for a fee." The royalty rate will be in large part a function of the potential economic value of the invention's use and of the degree of exclusivity conferred and the licensor's contractual duty to police the patent.

While trade secret and patent licenses are voluntary arrangements, there are important differences between them. In the former the parties do not contemplate public disclosure and the licensee knows that he has no protection against independent developers. In the latter, disclosure has occurred (or is about to occur) and the licensee relies upon the validity of the patent to protect against competitive use.

55 35 U.S.C. § 282 (Supp. V, 1970).

50 Trade Secrets, supra note 5, § 7.07[1].

57 See, eg, Hampton v. Blair Mfg. Co., 374 F.2d 969 (8th Cir.), cert. denied, 389 U.S. 829 (1967); Plant Indus., Inc. v. Coleman, 287 F. Supp. 636 (C.D. Cal. 1968); Schulenburg v. Signatrol, Inc., 33 Ill. 2d 379, 388, 212 N.E.2d 865, 869-70 (1965), cert. denied, 383 U.S. 959 (1966).

58 See, eg, United States v. E.I. duPont de Nemours & Co., 118 F. Supp. 41, 218-19 (D. Del. 1953), aff'd, 351 U.S. 377 (1956). Despite its vast resources of scientists and chemical experience, duPont had been unable to produce cellophane and required a know-how license to permit it to enter the field and become a competitor.

D. A Solution to Lear's Question

In light of these distinctions, and the effect that they have on the bargaining between the parties, it is my view that the rights and duties bargained for and embodied in the trade secret license should govern. If a trade secret licensee does not elect to condition continuing royalty on continuing secrecy, we may assume that the value of immediate disclosure weighed heavily. It is no more appropriate for a court of law, after the fact, to renegotiate a trade secret license agreement when the subject matter becomes generally known than it is for a court to set aside a contract to purchase a house, a car or tickets to the opera where the purchaser could have driven a better bargain but did not. Thus, leaving the parties where their bargain has placed them in a trade secret licensing context is not inconsistent with holding that a patent licensor may not require royalties beyond the life of the patent. Patent exclusivity is an extraordinary legislative grant, one which absolutely inhibits independent development by all others. Exacting a patent royalty beyond the statutory exclusive period as the price for practicing as a licensee under the patent has, therefore, been held to constitute patent misuse." Since trade secret licenses in no way discourage independent, competitive development and use" by any and all parties not bound by contract or a duty arising from a direct relationship with the trade secret owner, their impact on free competition is no greater than an arm's-length transaction between a seller and purchaser. After such a transaction, the purchaser will have less moncy to spend elsewhere, but can we regard the transaction as being in restraint of trade?

Not only do distinctions between patents and trade secrets abound, but some hard pragmatic facts warn against Judge Motley's edict. While we are told that under our prior-examination patent system a patent is presumptively valid, more than 80% of patent infringement actions on appeal result in a holding that the patent sued upon is invalid."2 Thus, after spending a respectable

59 It may be difficult to establish that every significant element of a licensed trade secret has become generally known, particularly with respect to complex secret processes. Both a prospective licensee and licensor may recognize this and avoid the difficult-and expensive-litigation implications by fixing a finite duration. 00 Brulotte v. Thys Co., 379 U.S. 29 (1964).

61 An honest discoverer may use his discovery of another's trade secret with absolute impunity. Trade Secrets, supra note 5, § 5.04[1]. To the extent that a trade secret license may attenuate secrecy precautions and lead to the subject matter becoming generally known and readily copiable, it is intensely procompetitive.

02 See I. Kayton, The Crisis of Law in Patents, pts. 1, 5, app. 2, at 13-14. (Patent Resources Group 1970). The Court's 1966 interpretations of the non

sum for the issuance of a piece of paper, a patentee is given an opportunity to expend a vast sum" to prove that he initially made a poor investment.

E. The Gospel According to Congress

Implicit in Judge Motley's decision and Justice Black's dissent in Lear is an assertion of federal preemption of the trade secret field by the Patent Act." While Congress undoubtedly has the power to substantially preempt the field under its interstate commerce and invention monopoly powers, it has not done so. Had there been congressional intent to preempt all legal protection of technology—and the vast compilation of other matter covered by state trade secret development-such intent was carefully hidden in the Patent Act." Indeed Congress has, in numerous statutory enactments prior and subsequent to the Patent Act, expressly recognized trade secrets. And, while it may not be obviousness test of 35 U.S.C. § 103 (1961), were set forth in Graham v. John Deere Co., 383 U.S. 1, 12-19 (1966), and United States v. Adams, 383 U.S. 39 (1966). In the view of many commentators the Court has done little to clarify the standards for "invention" in Anderson's-Black Rock, Inc. v. Pavement Salvage Co., 396 U.S. 57 (1969). See Brief for the American Patent Law Ass'n as Amicus Curiae, Blonder-Tongue Labs., Inc. v. University of Ill. Foundation, 422 F.2d 769 (7th Cir.), cert. granted, 400 U.S. 864 (1970) (reference is to brief in Supreme Court); 1 D. Dunner, J. Gambrell & I. Kayton, Patent Law Perspectives § A.1(1), (3) (1970).

63 While the $1 million award of attorney's fees to the putative infringers in Brand Plastics Co. v. Dow Chem. Co., 168 U.S.P.Q. 133 (C.D. Cal. 1970), may appear dramatic, taking a complex patent infringement case to trial and through appeal may be conservatively estimated to cost from $150,000 to $500,000 in legal fccs for each party.

04 Secondary sources analyzing "preemption" were cited by the majority opinion in Lear in connection with the Court's statement that "[a]t the core of this case, then, is the difficult question whether federal patent policy bars a State from enforcing a contract regulating access to an unpatented secret idea." 395

U.S. at 672 n.18.

65 US. Const. art. I, § 8.

06 P. J. Federico, then Examiner-in-Chief of the United States Patent Office and chief technical advisor to the subcommittees having jurisdiction over the patent law, is credited with having written the first draft of what became the Patent Act. Ile was an active participant in the studies and the revisions that matured into the Act. It is noteworthy that his commentary does not suggest any change in the 1952 existing law of trade secrets. It states that after the first draft committee print of a proposed bill, attention focused upon codification with only relatively noncontroversial changes in the law. Such attention and intention are inconsistent with any change so fundamental and far-reaching as that suggested by the trial court. Federico, Commentary on the New Patent Act, 15 U.S.C.A. 7 (1954).

07 See the Freedom of Information Act, 5 U.S.C. § 552(b)(4) (1964), prohibiting federal agency disclosure of trade secrets; 18 U.S.C. § 1905 (1964), making it a federal crime for a United States officer or employee to disclose a trade secret; 24 of the Securities Exchange Act of 1934, 15 U.S.C. § 78x(a) (1964), preventing the Securities & Exchange Commission from requiring that trade secrets or processes be revealed; § 6(f) of the Federal Trade Commission Act, 15