The agreement contained no express restriction on l'ainton's use or disclosure of the licensed technology, Painton argued that after termination it had an unfettered right to use; Bourns, on the other hand, claimed that an implied negative covenant precluded further use.

Cross motions for summary judgment were filed on submitted facts. On the contract issue, Judge Motley held that California law would not supply a negative covenant. As an alternative and on entirely unsolicited (by argument or motion briefs) grounds, Judge Motley held for the licensee:

Our patent policy of strict regulation of inventions would be undercut if inventors could enforce agreements for compensation for alleged secret ideas without being required to submit those ideas to the Patent Office, and, thereby, eventually have the ideas disclosed to the public. Furthermore, patent policy (reaffirmed by the holding in Lear that estoppel will not be a bar to challenging the validity of a patent...) which allows compensation only for ideas which rise to the level of invention would be further undermined by the enforcement of such a contract, since compensation would be awarded for non-inventions. And if this court were to hold that before a state could enforce a trade secrets contract, the ideas must be found to be an invention as prescribed by the rigid requirements of federal patent law, inventors would be able to circumvent "the manner in which (inventions] may be protected." [Citing Lear, at 677.] Inventors would be encouraged to avoid filing applications altogether and contract for long licensing arrangements. The severely restricted area which the Supreme Court left open to applicable State law would become a yawning abyss. Fewer patent applications would be made. The Patent Office would soon have a less accurate view of the state of the art in a particular field. And state courts, rather than the Patent Office, would become the initial triers of whether a discovery is an invention.

For these reasons, this court holds that federal patent law requires an inventor to submit his ideas to the Patent Office before he can compel consideration for the use of his idea. The court, however, does not decide whether under California law an inventor, if he makes a patent application, can be compensated for his disclosure before the patent has issued. [Citing Lear, at 676-77.] That question is not before this court.30

In so holding, it is submitted, Judge Motley misconstrued the holding and thrust of Lear and followed, instead, Justice Black's dissent in Lear.31

80 Id. at 274.

31 395 U.S. at 676 (Black, J., Warren, C.J., & Douglas, J., concurring in part and dissenting in part). Since the significant portions of his opinion constitute a dissent, it is referred to in text as such. That Judge Motley relied on Black's opinion was recognized by Painton: "The District Judge in substance abolished the law of trade secrets on th basis of the concurring opinion of Mr. Justice Black in Lear . . . (she erroneously attributed the concurring opinion to Mr.

1. Black on Black

That dissent purported to reiterate a belief expressed by Justice Black when he wrote the Court's opinions In Sears and Compco:

I still entertain the belief I expressed for the Court in Scars and Compen that no state has a right to authorize any kind of monopoly on what is claimed to be a new invention, except when a patent has been obtained from the Patent Office under the exacting standards of the patent laws. One who makes a discovery may, of course, keep it secret if he wishes, but private arrangements under which self-styled "inventors" do not keep their discoveries

Justice Douglas .)" Brief for Appellee at 47, Painton & Co. v. Bourns, Inc., 309 F. Supp. 271 (S.D.N.Y. 1970) (reference is to brief on appeal). Since Lear, approximately 30 decisions have considered trade secret issues. With the exception of Painton, not one opinion has found Lear, Sears or Compco impediments to the continued vitality of trade secret principles; relief has been granted or denied on the basis of fundamental trade secret principles. A list of the cases decided since Lear and involving trade secret issues is set forth below. For ready reference, the cases have been divided (somewhat arbitrarily) into five categories:

1. Trade secret protection granted. E.I. duPont de Nemours & Co. v. Christopher, 431 F.2d 1012 (5th Cir. 1970), cert. denied, 39 U.S.L.W. 3321 (U.S. Jan. 25, 1971); Water Servs., Inc. v. Teseco Chems., Inc., 410 F.2d 163 (5th Cir. 1969); Mixing Equip. Co. v. Philadelphia Gear, Inc., 312 F. Supp. 1269 (E.D. Pa. 1970); Sperry Rand Corp. v. Pentronix, Inc., 311 F. Supp. 910 (E.D. Pa. 1970); Raybestos-Manhattan, Inc. v. Rowland, 310 F. Supp. 993 (D.S.C. 1969) (recognizing trade secret status of pending patent application); Homes v. Thew Shovel Co., 305 F. Supp. 139 (N.D. Ohio 1969) (patent application); Heathbath Corp. v. Ifkovits, 117 Ill. App. 2d 158, 254 N.E.2d 139 (1969); Carboline Co. v. Jarboe, 454 S.W.2d 540 (Mo. Sup. Ct. 1970); Glass Laboratories, Inc. v. Crystal, 165 U.S.P.Q. 647 (N.J. Super. Ct. 1970).

2. Subject matter held not to be a trade secret. Cataphote Corp. v. Hudson, 422 F.2d 1290 (5th Cir. 1970); Midland-Ross Corp. v. Sunbeam Equip. Corp., 316 F. Supp. 171 (W.D. Pa. 1970); Cudahy Co. v. American Laboratories, Inc., 313 F. Supp. 1399 (D. Neb. 1970); Central Specialties Co. v. Schaeffer, 165 U.S.P.Q. 15 (N.D. III. 1970); G.T.I. Corp. v. Calhoon, 309 F. Supp. 762 (S.D. Ohio 1969).

3. Absence of contractual or implied legal restriction on use or disclosure. Chemithron Corp. v. Procter & Gamble Co., 427 F.2d 893 (4th Cir. 1970); Bendix Corp. v. Balax, Inc., 421 F.2d 809 (7th Cir. 1970); Shatterproof Glass Corp. v. Guardian Glass Co., 168 U.S.P.Q. 212 (E.D. Mich. 1970); Superior Testers, Inc. v. Damco Testers, Inc., 315 F. Supp. 934 (E.D. La. 1970); Gallo v. Norris Dispensers, Inc., 315 F. Supp. 38 (ED. Mo. 1970); Thomson Mach. Co. v. LaRose, 306 F. Supp. 681 (E.D. La. 1969); Bimba Mfg. Co. v. Starz Cylinder Co., 119 Ill. App. 2d 251, 256 N.E.2d 357 (1969); J.T. Healy & Son, Inc. v. James A. Murphy & Son, Inc., 260 N.E.2d 723 (Mass. 1970).

4. Submission of ideas. Joseph Bancroft & Sons, Inc. v. M. Lowenstein & Sons, Inc., 167 U.S.P.Q. 137 (D. Del. 1970); Epstein v. Dennison Mfg. Co., 314 F. Supp. 116 (S.D.N.Y. 1969) (Motley, J.); Flemming v. Ronson Corp., 107 N.J. Super. 311, 258 A.2d 153 (1969). As to submission of ideas generally, see M. Nimmer, Copyright, ch. 15 (1963); Trade Secrets, supra note 5, § 8.03.

5. Miscellaneous. Varo, Inc. v. Corbin Mfg. Co., 168 U.S.P.Q. 95 (E.D. Pa. 1970) (burden of proof); Struthers Scientific & Int'l Corp. v. General Foods Corp., 314 F. Supp. 313 (D. Del. 1970) (discovery).

secret, but rather disclose them, in return for contractual payments, run counter to the plan of our patent laws, which tightly regulate the kind of inventions that may be protected and the manner in which they may be protected, The national policy expressed in the patent laws, favoring free competition and narrowly limiting monop oly, cannot be frustrated by private agreements among individuals, with or without the approval of the State.""

Justice Black's beguilingly brief remembrance of things past is disturbing for two reasons: (1) it rests upon a completely inapplicable notion of “monopoly”3 and (2) it plainly contradicts his own contemporaneous description of the Scars' holding in Compco Corp. v. Day-Brite Lighting, Inc.:"4

Today we have held in Sears... that when an article is unprotected by a patent or a copyright, state law may not forbid others to copy that article. To forbid copying would interfere with the federal policy... of allowing free access to copy whatever the federal patent and copyright laws leave in the public domain.35

II

A THEOLOGICAL VIEW: ARE TRADE SECRETS DEAD?

The gospel according to Judge Motley would sweep trade secret law into obsolescence by reducing its subject matter solely to patentable inventions and then shortening its effective term to the period of gestation between patent application and patent grant. Painton was a predictable, conceptualistic adoption of the ill-defined formulae of Sears, Compco and Lear. But, were it taken at face value and given currency, the following are but a few of the far-ranging consequences.

First, only matter eligible for patent protection could be

32 395 U.S. at 677. A patentee is given statutory exclusivity and third parties subsequently and independently deriving a patented invention may not practice it during the term of the patent. Trade secret owners, on the other hand, have no protection against independent developers. See text accompanying notes 41-45, 51-53 infra.

33 Properly used, the term "monopoly" is applicable when a privilege, previously available to the public, is restricted to the exclusive benefit of one partye.g., the seventeenth century trading monopolies of the colonial powers. While the term is often used to describe the status of an inventor who has secured statutory exclusivity in exchange for public disclosure, it is not accurate since "[a]n inventor deprives the public of nothing which it enjoyed before his discovery, but gives something of value to the community by adding to the sum of human knowledge." United States v. Dubilier Condenser Corp., 289 U.S. 178, 186 (1933).

34 376 U.S. 234 (1964). There is quite a difference between saying that a state may not forbid copying of unpatented material and saying that individuals may not enter into a trade secret license agreement which in no way impairs the right of any independent third party to develop, use and disclose the subject matter of such license.

85 376 U.S. at 237.

entitled to trade secret protection. This is contrary to rudimentary

Second, unless patent application has been made for matter ultimately entitled to patent protection, contractual and confidential relationship: would afford no protection. Thus, for example, even express restrictions on use and disclosure of trade secrets in employment contracts would, in most instances, be unenforceable. This would come as an unwelcome surprise to the numerous employers who rely upon some form of employment agreement to protect their trade secrets." Similarly, a confidential relationship, such as that between employer and employce, would no longer impose any restriction on use or disclosure of nonpatentable matter nor even on patentable matter if patent application has not been effected. Heretofore, the sanctity of trade secret matter imparted in the employment relationship has been widely recognized.38

Third, practically all existing technology licenses would be invalid to the extent that patent application had not been made. Such a result also conflicts with settled law.30

Fourth, monied corporations could elect to retain processes and other secret matter and to use their assets to keep such matter solely in-house. In contrast, smaller developers and owners of trade secrets, lacking sufficient assets to exploit their trade secrets adequately, would not have available to them the capital-substitution technique of licensing such matter.

Fifth, Painton involves a domestic trade secret licensor and a foreign licensee; it presents in microcosm the potential economic impact of its trade secret holding. If all foreign licensees of United States licensors' technology which does not meet the standard established in Painton's trade secret holding halted payment of royalties, the United States balance of payments would be adversely affected by a sum estimated to be in excess of $1 billion."

30 See Restatement of Torts § 757, comment b at "Definition of Trade Secret" and "Novelty and Prior Art" (1939); Trade Secrets, supra note 5, § 2.08. 37 See, eg., Employce Patent and Secrecy Agreements 13 (Nat'l. Indus. Conf. Bd. Pamphlet No. 199 (1965)).

38 Trade Secrets, supra note 5, § 5.02[1].

39 Imperial Chem. Indus., Ltd. v. National Distillers & Chem. Corp., 342 F.2d 737, 742 (2d Cir.), modified on other grounds and on new findings of fact, 354 F.2d 459 (2d Cir. 1965); Formulabs, Inc. v. Hartley Pen Co., 275 F.2d 52 (9th Cir.), cert. denied, 363 US. 830 (1960); Foundry Servs., Inc. v. Beneflux Corp., 206 F.2d 214 (2d Cir. 1953).

40 1969 fccs and royalties from direct foreign investments are estimated at $2.052 billion. Office of Business Economics, United States Dep't of Commerce, 50 Survey of Current Business No. 3 (Mar. 1970). The National Industrial Conference Board, in its 1969 research report "Appraising Foreign Licensing Performance," citing published and unpublished data from the United States Department

While the exact amount can be only conjectured because of the absence of precise statistical data, it is certain that there would be an immediate and significant net loss to the United States' balance of payments if domestic and foreign licensees of trade secret licensors were freed from further royalty payments.

Before allowing trade secrets to be excommunicated by Judge Motley, perhaps we should review the controlling theology. We can do this by contrasting the substantive character of patents with that of trade secrets. Only after such an examination can we consider whether "preemption" is a real issue.

A. Patents

The Constitution authorizes Congress to promote the progress of science and the useful arts by granting exclusive rights to inventors for limited periods."1 Exercising this power, Congress enacted the Patent Act."2 Section 101 grants eligibility for patent protection to inventors of new, useful and nonobvious processes, machines and manufacture or composition of matter." Assuming proper and timely disclosure of the invention in a successful application, the patentee secures, for a term of seventeen years, the right to exclude all others from making, using or selling the invention throughout the United States." Any infringer of a validly of Commerce, states that "receipts of royalties and license fees from abroad have more than doubled over the course of the last ten years, rising from around $378 million in 1957 to an estimated $786 million in 1967." National Industrial Conference Board, United States Dep't of Commerce, Studies in Business Policy No. 128 (1969).

Taking into account patent and trademark royalties which may be included in those figures, when know-how licenses and equity-type transactions are added In, a $1 billion order of magnitude for know-how licensing is a plausible estimate. See also Lightman, Compensation Patterns in U.S. Foreign Licensing, 14 Idea 1 (1970).

The figures from 1961 are of interest although nine years old.

An important element of our international balance of payments is what is called the technological balance of payinents. This international account reflects payments for technical know-how, patent royalties and the like. ... A recent study shows the U.S. receiving roughly ten times the technological payments from abroad as goes out in payments to other nations. This is a very significant secondary effect of innovation in the American economy.

In 1961 payments by the United States to other countries amounted to $63 million; receipts by the United States from others, $557 million; net balance to the United States in 1961, $493 million. United States Dep't of Commerce, Technological Innovation: Its Environment and Management, A Report of the Panel on Invention and Innovation (1967). The author wishes to express his gratitude to Tom Arnold of the Texas Bar for the economic information cited above.

41 U.S. Const. art. I, § 8, cl. 8.

42 35 U.S.C. § 1-293 (1964), as amended, 35 U.S.C. § 41-282 (Supp. V, 1970) (hereinafter Patent Act].

43 Id. 101 (1964).

44 Id. § 154 (1964), as amended, (Supp. V, 1970).