Kewanee Oil Co. v. Bicron Corp.

Mr. Justice Douglas,

with whom Mr. Justice Bren- ■ nan concurs, dissenting.'

Today’s decision is at war with the philosophy of Sears, Roebuck & Co. v. Stiffel Co., 376 U. S. 225 , and Compco. Corp. v. Day-Brite Lighting, Inc., 376 U. S. 234 . Those cases involved patents — one of a pole lamp and one of fluorescent lighting fixtures each of which was declared invalid. The lower courts held, however, that though the patents were invalid the sale of identical or confusingly similar products to the products of the patentees violated state unfair competition laws. - We held .that when an article is unprotected by a patent, state law may not forbid others to copy it, because every article not covered by a. valid patent is in the public domain.' Congress in "the patent laws decided that where no patent existed, free competition should prevail; that where a patent is rightfully issued, the right to exclude others should obtain for no longer than 17 years, and that the States may not "under some other law, such as that forbidding unfair competition, give’ protection of a kind that clashes with-the objectives of the-federal patent laws," 1 376 U. S., at 231.

The product involved in this suit, sodium iodide synthetic crystals, was a product that could be patented but was not. Harshaw the inventor apparently contributed greatly to the technology in that field by developing processes, procedures, and’ techniques that produced *496 much larger crystals than any competitor. These processes, procedures, and techniques were also patentable; but no patent was sought. Rather Harshaw sought to protect its trade secrets by contracts with its employees. And the District Court found that, as a result of those secrecy precautions, “not sufficient disclosure occurred so as to place the claimed trade secrets in the public domain”; and those findings were sustained by the Court of Appeals.-

The District Court issued a permanent injunction against respondents, ex-employees, restraining them from using the processes used by Harshaw. By a patent which would require full disclosure Harshaw could have obtained ’ a 17-year monopoly against the world. By the District Court’s injunction, which the Court approves and reinstates, Harshaw gets a permanent injunction running into perpetuity against respondents. In Sears, as in the present case, an injunction against the unfair competitor issued. We said: “To allow a State by use of its law of unfair competition to prevent the copying of an article which represents too slight an advance to be patented would be to permit the State to block off from the public something which federal law has said belongs to the public. The result would be that while federal law grants only 14 or 17 years’ protection to genuine inventions, see 35 U. S. C. §§ 154 , 173, States could allow perpetual protection to articles too lacking in novelty to merit any patent at all under federal constitutional standards. This would be too great an encroachment on the federal patent system to be tolerated.” 376 U. S., at 231-232.

The conflict with the patent laws is obvious. The decision of Congress to adopt a patent system was based on the idea that there will be much more innovation if discoveries are disclosed and patented than .there will be when everyone works in secret. Society thus fosters a *497 free exchange of technological information at the cost of a limited 17-year monopoly. 2 .

A trade secret, 3 unlike a patent, has no property dimension. That was the view of the Court of Appeals, 478 F. 2d 1074,1081 ; and its decision is supported by what Mr. Justice Holmes said in Du Pont Powder Co. v. Masland, 244 U. S. 100 , 102:

“The word property as applied to trade-marks and trade secrets is an unanalyzed expression of certain *498 secondary consequences of the primary fact that the. law makes some rudimentary requirements of good faith. Whether the plaintiffs have any valuable secret or not the defendant knows the facts, whatever they are, through a special confidence that he accepted. The property may be denied but the confidence cannot be. Therefore the starting point for the present matter is not property or due process .of law, but that the defendant stood in confidential relations with the plaintiffs, or one of them. These have given place to hostility, and the first thing to be made sure of is that the defendant shall not fraudulently abuse the trust reposed in him. . It is the usual incident of confidential relations. If there is any disadvantage in the fact that he knew the plaintiffs’ secrets he must take .the burden with the good.” 4

A suit to redress theft of a trade secret is grounded in tort damages for breach of a contract — a historic remedy, Cataphote Corp. v. Hudson, 422 F. 2d 1290 . Damages for breach of a confidential relation are not pre-empted by this patent law, but an injunction *499 against use is pre-empted because the patent law states the only monopoly over trade secrets that is enforceable by specific performance; and that monopoly exacts as a price full disclosure. A trade secret can be protected only by being kept secret. Damages for breach of a contract are one thing; an injunction barring disclosure does service for the protection accorded valid patents and is therefore pre-empted.

From the findings of fact of the lower courts, the process involved in this litigation was unique, such a great discovery as to make its patentability a virtual certainty. Yet the Court’s opinion reflects a vigorous activist anti-patent philosophy. My objection is not because it is activist. This is a problem that involves no neutral principle. The Constitution in Art. I, § 8, cl. 8, expresses the activist policy which .Congress has enforced by statutes. It is that constitutional policy which we should enforce, not our individual notions of the public good.

I would affirm the judgment below.

Here as in Lear, Inc. v. Adkins, 395 U. S. 653, 674 , which held that a licensee of a patent is not precluded by a contract from-challenging the patent, for if he were, that would defeat the poliey of the patent .laws: “enforcing .this contractual provision -would undermine the strong federal policy favoring- the full and free use of ideas in the.public domain.”

“The holding [of the Court of Appeals] in Kewanee seems correct. If it is permissible for an inventor to use the law of unfair competition as a substitute for patenting, certain categories of inventions would receive privileged protection under. tha,t law. Thus a new laser, television set, or airplane could not' be protected because inventions which by their nature cannot be put into commercial use without disclosure, are not eligible for trade secret protection after they are put' on the market. Tho-:e that can be maintained are eligible. But as the basic economic function of the patent system is to encourage the making and commercialization of inventions, there seems to be no justification for providing incentives beyond those provided by the patent law to discriminate betweén different categories of inventions, i. e., those that may inherently be kept secret and those that may not. Moreover, state rules which would grant such incentives seem to conflict with the economic quid pro quo underlying patent protection; i. e., a monopoly limited in time, in return for full disclosure of the invention. Thus federal law has struck a balance between incentives for inventors and the public’s right to a competitive economy. In this sense, the patent law is an integral part of federal competitive policy.” Adelman, Secrecy and Patenting: Some Proposals for Resolving the Conflict, 1 APLA Quarterly Journal 296, 298-299 (1973).

Trhde secrets often are .unpatentable. In that event there is no federal policy which is contravened when an injunction to bar disclosure of a trade secret is issued. Moreover, insofar as foreign patents are involved our federal patent policy is obviously irrelevant. S. Oppenheim, Unfair Trade Practices 264-265 (2d ed. 1965). As respects further contrasts between patents and trade secrets see Milgrim, Trade Secret Protection and Licensing, 4 Pat. L. Rev. 375(1972).

As to Goldstein v. California, 412 U. S. 546 , the ruling of Mr. Justice- Brad’ey concerning the distinction . between patents and copyright is relevant:

“The difference between the two things, letters-patent and copyright, may be. illustrated by reference to the subjects just enumerated. Take the case of medicines-. Certain mixtures are found to. be of gteat value in the. healing art. If the discoverer writes and publishes a book on the subject (as regular physicians.generally do), he gains no exclusive right to the manufacture and sale of. the medicine; he gives that to the public. .If he desires to acquire such exclusive right, he must obtain a patent for the mixture as a new art, manufacture, or composition of matter. He may copyright his book, if he pleases; but that only secures to hitíi the exclusive right of printing and publishing his book. So of all other inventions or discoveries.” Baker v. Selden, 101 U. S. 99, 102-103 .