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issuell and secured patent may be enjoined from further infringe110.000 :10.1 : sudojau... to obornisgro/onlelle loomay, under omslalu clic.1117staners, for forbuloil) nail to reasonable attorney fees in exceptional

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A palentee's statutory patent rights commence upon the date of ins:40:10.00.102001 o.zpovero trwborn years Thierrafirr. Pilont infringirment remedies to the extent that they are availablc relate solely to th:10 porriol. ligonins poublication, ther potent lorcomra a public cloriiment, immed its subject matter falls into the public clomain of every forrige juriselie 11on te uless the United States patentee has complied with thic patent laws of such jurisdictions within the pre

rribeu lime, and the invention meets that jurisrliction's standard us patentability. Under the principal patent creaty to which the United States and some seventy-seven other nations where, applications must be made in all sorcign member nations within twelve months of domestic filing in order to obtain the benefits of their United States filing dates."

An example illustrates the importance of foreign filing. Suppo:c Mr. Bliche invent's a revolutionary pritentable process to manufacture, at one-half the ordinary cost, a common nonpatentable product. II, lsy virtue of Painton's trade secret hokiling, he is precluded from licensing his process as a trade secret, he must Secure worldwidc 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 expenses and uncertainties entailed in foreign patent application proceedings, Mr. Flash must consider the

46 Id. $$ 283-85 (1964), as amended, (Supp. V, 1970). Sce 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 Gacelle, 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 technolory that the Eastern European bloc markct 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 Techniquc, in I'roceedings of the First Annual Licensing Law and I'ractices Institute 68-71, 76 (1970).

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

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

Application costs are a relative trillc in comparison to litigation costs. An unsuccessful patentce in a rcent 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).

roolllies of puliring the process patent abroadl. Since the end prod

i is not patentable and indistinguishosholo 120.000 thiol gorendoveoof loy the preotipusotruford repornsive forces oss, the problein of proliring may be insus 110.000 isbele.

B. Trade Serrels

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Jorrige Molley incorrectly vicwcil traile secrets solely as a preliminy ill oljene cilrju tos portro11.. 'Tlir couloirid mullri of in donde secret is not and should not be limitely notions of patente ability. Thir character, duration nol purpose of trade sreret protection does not warrant any such limitation.

One my e:piilize tlır most wiilrly recognized clerinition of Il trade secret by stating that it is dita or information, or material cmboliment: thercol, used in the owner's business, lending a competitive advantage and not generally known in the owner's inu::ery."" Classes of technological matter recognized as trade secrets includle formulac, processes, methods and techniques, machines, plans, designs anı patterns.

It is axiomatic that, unlike a pitcntcc who cnjoys il :evesteen year period of exclusivity, a trade secret owner has no rights against an independent subsequent developer, including one who copics matter marketed or otherwise made public by the owner. The trade sccrct owner may, however, restrict thc usc or disclosure of the secret by persons who Icarned of it subject to contractual limitations or those imposed by operation of law ("confidential relationship" and "implied contract" are the standard rubrics).62 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



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 sccrct mechanism or product that can be readily reverse engineered, secrecy and consequently trade secret protection are lost.**

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


19 Restatement of Torts $757 comment b, at 5 (12.19). Sec note 5 sopra.

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 partics in Painton did not put in issue whether Bourns' technology constituted trade secrets.

61 Id. $5.04(1).
62 Id. $$ 4.01 to .03.
63 See id. 5.04(3).

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

sumption of valiility alforici a palcntcc.6* llc must mect a difficult bordons of roboliching that the matter in question is not gonerally kuown, that the defendant kuuws ul Il by virtue of a prulcited relationship and that use or disclosure by the desendant would injure the owner."- Morcover, injunctivc rclicl, is available, i:3 apt to be limited to a period equal to the time that independent developrncnt of the secret would requirc. 57

C. Bargaining for Patent and Trade Secret Licenses

Applying the foregoing thumbnail comparisons of trade secret and palcnt law to the licensing context under consideration in Lcar and Painton, it can be observed that the license reward for a trade secret tends to be a sunction 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."68 Since a prospective trade secret liccnsce 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.

65 35 U.S.C. $ 282 (Supp. V, 1970).
66 Trade Secrets, supra note 5, $ 7.07(1).

67 Sce, e.g., Hamplon 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 m. 2d 379, 388, 212 N.E.2d 865, 869-70 (1965), cert. denied, 383 U.S. 959 (1966).

08 See, e.g., 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.

1), 1 Solution lo 1.sor's Jurstion sus liylie of thirup dirinti0.11., sv thr effort that they have on the bargaining belween the parties, it is my view that the righils and duties bargained for and embodied in the trade secret license should govern. If a trade secret licensec droes not clect to condition continuing royalty on continuing secrecy, we may assume that the value of immediate disclosure wcigled heavily. It is no inorc appropriate for a court of law, after the fact, to renegotiate a trade sccrct license agreement when thc subject maller becomes generally known than it is for a court to set aside a contract to purchasc 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 thc lise 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 cxclusive period as the price for practicing as a licensee under the patent has, there. fore, been held to constitute patent misusc.“ Since trade secret licenscs 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 money 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.62 Thus, after spending a respectable


60 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.

60 Brulotte v. Thys Co., 379 U.S. 29 (1964).

81 An honest discoverer may use his discovery of another's trade secret with absolute impunity. Trade Secrets, supra note 5, $ 5.0411). 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 Sce 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 nonolivivustess test of .35 U.S.C. $ 10.3 (1961), were set forth in Graham v. John Dcere 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 donc little to clarify the standards for "invention" in Anderson's-Black Rock, Inc. v. l'avement Salvage Co., 396 U.S. 57 (1969). See Brics for the American Patent Law Ass'n as Amicus Curiae, Blonder-Tonguc Labs., Inc. v. University of III. Foundation, 422 F.2d 769 (71h Cir.), cert, granled, 400 U.S. 864 (1970) (reference is to brick in Supreme Court); 1 D. Dunner, J. Gambrell & I. Kayton, Patent Law Perspectives $ 4.1(1), (3) (1970).

sim fror the issuance of a piece of paper, a patcnlce is given an popunorlunity to reproud on vnst sum to prove that lir initinlly made it pour investiment.

1.. 'The Gospel According to Congress linplicit in Jurigo Motlcy's decision anıl Justice Black's dissent in l.cus is illi assertion of sceleral preemption of the laule secret field by the Patent Act.““ While Congress undoubtedly has the power to substantially preempt the field under its interstate commcrcc and invention monopoly powers, it has not done so. Tal there been congressional intent to preempt all legal protection os technology—and the vast compilation of other matter covered by statc trade secret development-such intent was carefully hidden in the Patent Act.“ Indeed Congress has, in numerous statutory cnactments prior and subscqucnt to the Patent Act, expressly recognized tradc secrets.o? And, while it may not be

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63 While the $1 inillion award of attorney's fces to the putalive 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 secs 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 cnforcing a contract regulating access to an unpalented sccrct idea." 345 U.S. at 672 n.18.

65 U.S. Const. art. I, § 8.

60 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. Jie was an active participant in the studies and the revisions that matured into the Act. It is noteworthy that his commentary docs not suggest any change in the 1952 existing law of trade secrets. It states that after the first drast 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.CA. 7 (1954),

67 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. I 1905 (1964), mak. ing 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(1) of the Federal Trade Commission Act, 15

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