Petition for Writ of Certiorari — Chemical Engineering Corp. v. Paterson

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(') Supreme Court, U.S,

oe FILED

85-21 39 JUN 27 1908

JOSEPH F. SPANIOL, JR,

No. 85- Cpe

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1985

CHEMICAL ENGINEERING CORPORATION,

RoBerT M. WILFONG, RuDY WILFONG,

AND LAWRENCE D. GORDON,

Petitioners,

Vv.

LAURENE O. PATERSON AND MULTI-TEC, INCORPORATED,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE MICHIGAN COURT OF APPEALS

ROBERT LUKE WALKER

LUNDY AND WALKER

1020 Anthony Wayne Bank Bldg.

Fort Wayne, Indiana 46802

(219) 422-1534

Counsel Of Record

Davip A. LUNDY

LUNDY AND WALKER

1020 Anthony Wayne Bank Bidg.

Fort Wayne, Indiana 46802

(219) 422-1534

Counsel For Petitioners

June 27, 1986

PRESS OF BYRON 8. ADAMS, WASHINGTON, D.C. (202) 347-6203

QUESTION PRESENTED

Petitioners, were held liable under Michigan trade

secret law for using Respondents’ information after

the information had been published. It had been stip-

ulated at trial that a published European Patent Ap-

plication, fiied by Respondent Paterson, disclosed all

of Respondents’ alleged trade secrets. The European

Patent Application was published prior to the earliest

alleged misappropriation by Petitioners. The Michigan

Court of Appeals foliowed the law of a number of

jurisdictions and upheld the trial court despite a con-

flict with the repeated pronouncements of this Court

and other lower courts that Federal law requires that

all ideas in general circulation be dedicated to the

common good unless they are protected by a patent.

The question presented is:

Whether Petitioners could be held liable under State

trade secret law for using information after the in-

formation was completely disclosed to the public by

Respondents in a published European Patent Appli-

cation or whether the State is preempted by Federal

law from holding public information to be trade se-

cret?

RULE 21.1 STATEMENT

All parties are the same as those before the Mich-

igan Court of Appeals and Michigan Supreme Court.

The action before the Lenawee County, Michigan Cir-

cuit Court was dismissed as to two additional

defendants: Hillsdale Pump And Supply Company and

Clymer’s Geothermal Heating And Cooling. Their dis-

missal was not appealed.

RULE 28.1 STATEMENT

Chemical Engineering Corporation has no parent

company, subsidiary or affiliate.

TABLE OF CONTENTS

CONSTITUTIONAL AND StaTuToRY Law INVOLVED ...

STATEMENT OF THE CASE .......cccesssssssssscesserseseeesees

A. Raising The Federal Question .................

B. Statement Of Facts ............ceceseecessseeeeeeeees

REASONS FOR GRANTING THE WRIT .......coseeseesessseees

I. A DEFENDANT CANNOT BE HELD LIA-

BLE UNDER STATE TRADE SECRET

LAW FOR USING INFORMATION PREVI-

OUSLY COMPLETELY DISCLOSED TO

THE PUBLIC IN A PUBLISHED EURO-

PEAN PATENT APPLICATION BECAUSE

FEDERAL LAW PREEMPTS A STATE

FROM HOLDING THE PUBLIC INFOR-

MATION TO BE TRADE SECRET ............. 8

A. There Was No Di In This Case That

The Information Held To Be Trade Secret

Had Previously Been Completely Disclosed

oanwwns Ns

To The Public ...........cccccsscssssscrserrensnessesees x

B. The H Of The Mi Court Of

A That Information Be Both

Follows The Law Of A Number Of Juris-

dictions But Conflicts With Pronounce-

ments By This Court And Other

Jurisdictions ..............sseeseeeseseeeseneresereeeeeeees 10

1. Information Available To The Public In

A Patent Publication Is In The Public

Domain And Thus Cannot Be Trade Se-

\ 2. ing Public Information As Trade

ag terferes With ion By —

y Discouraging Competition or-

mer Associates Or Employees ............ 19

3. Seacciog AS sy Information As Trade

Secrets ides A Disincentive To Use

of The U.S. Patent System By Provid-

ing Equivalent Or Even Superior Pro-

OS RG OE cn SN 21

4. The Protection Of Public Information

As Trade Secrets Does Not Protect

Commercial Morality, Equity Or Con-

fidential Relationships ................:.0000. 23

LT, COURS SRIRSORUOEY * secostyhtchichshstds chbsiedocsenevictlbcaccices 27

APPRIIIG iG ciiapickdeickin debbie BE abbosddedicdabies la

Text of Constitutional and Statutory Law

SPO a sicedld ehtineedeldch ins hshesesdicnetisces la

Circuit Court of Lenawee County, Michigan:

Pretrial Statement (reprinted in part) _........... 64a

Defendants’ Post Trial Brief (reprinted in

SIE Sigh cadiadarsth sas vepsacdeatbeceemnmnnestucceteceense 66a

Defendants’ Post Trial Reply Brief (reprinted in

DES Seen enti tew.. 186

Opinion of June 10, 1983 (Opinion J) _............ 79a

Opinion of September 26, 1983 (Opinion II) .. 93a

PO vv cricstsaioscbpistesetatoasinipbigc ee wcsccvs 97a

Court of Appeals of the State of Michigan:

Brief of Appellant (reprinted in part) _............ 99a

Reply Brief of Appellant (reprinted in part) 106a

NMOS 2 5s in sii ceuibbicsicéieacdiblialicin ia Lais tee 112a

Supreme Court of the State of Michigan:

Brief Supporting Application For Leave To

‘ape | (reprinted in Part) .....-....eeesee 13la

Order ing Application For Leave To

Verified Motion To Reconsider Denial Of Ap-

plication For Leave T inted

“ego an siedin oma carmen

Order Denying Motion To Reconsider _........... 150a

Supreme Court of the United States:

Order Extending Time To File Petition For Writ

Of Certiorari — ............ceseseeeeeeeeeceeeensssnenenees 152a

TABLE OF AUTHORITIES CITED

CASES: Page

Arco Industries Corp. v. Chemcast ., 6388 F.2d

435, 208 U.S.P.Q. 190, (6th Cir. 1980) .......... 15

Benton v. Ward, 59 Fed. 411, (C.C.N.D. Iowa :

TINO «sed stenonstssothaeaiacui tie ee a 1

Brulotte v. Thys Co., 879 U.S. 29 (1964) ..0.......... 10, 20

Classic Instruments, Inc. v. VDO-Ango Instruments,

Inc., 226 U.S.P.Q. 894, (Ore. Ct. App., May 22,

TOGB) 2 Whiiave cc ncissciidbiejaadndes Hola. 13

Compeo Corp. v. Day-Brite Lighting, Inc., 376 U.S.

SRE (TOG) aici cecdiccicdicccietss cece se 10, 15

Electro-Craft Corp. v. Controlled Motion, Inc., 332

N.W. 2d 890, 220 U.S.P.Q. 811, (Minn. S.Ct.

RE vaitaslblskincnnin ncn Eo 12, 14, 16

Ethyl Gasoline Corporation v. United States, 309 U.S.

Ue EE pbiticisicubi 10, 20

E. W. Bliss v. Struthers-Dunn, Inc., 408 F.2d 1108,

161 U.S.P.Q. 263, (8th Cir. 1969) oo... 19

Ferrara v. Becton, Dickerson & Co., 223 U.S.P.Q.

682, (E,D.N.Y. Sept. 12, 1983) oovecececcccceees 16

Ferroline Corp. v. General Aniline and Film Corp.,

207 F.2d 912, 99 U.S.P.Q. 240, (7th Cir.

SOUR Ctincs decal rskcistchecesanidesis pl PA cisosie 14, 16

Frank M. Denison, Inc. v. Westmore Denial Arts,

212 U.S.P.Q. 601, (W.D. Pa. Jan. 15,

We aa 16

Franke v. Wiltschek, 209 F.2d 498, 99 U.S.P.Q. 481,

(Gal CHOW oe 12, 13, 21

Fuels Research Corp. v: Husky Oil Co. of Delaware,

183 U.S.P.Q. 403, (D. Colo. June 28, 1974) .. 16

Gilson v. Republic Of Ireland, 606 F. Supp. 38, 223

U.S.P.Q. 956, (D. D.C. 1984) 682 F.2d 1022 14

vii

Table of Authorities Continued

Page

ames v. Medtronic, Inc., 686 F.2d 1219, 216

U.S.P.Q. 89, (7th Cir. 1982) ........eccceseseseseoes 12

Goldstein v. California, 412 U.S. 546, (1978) ...... 10, 15

Great Lakes Carbon ved v. Continental Oil, Co.,

219 F. Supp. 468, 188 U.S.P.Q. 613, (W.D. La.

19GB) ccc. .ccccvesccccccvecsvesccccovecneeseeees shcicaldedetasives 16

Haglund v. Dow Chemical Co., 218 U.S.P.Q. 55,

(E.D. Col. Apr. 7, 1982) ........ccsscsssesessseeseeeees 16

Hayes-Albion v. Kuberski, 421 Mich. 170, 364 N.W.

2d G09, (Mich. 1984) ...........ccssccseseeesseeseneeesees 11

Hyde Corp. v. Hujfines, 158 Tex. 566, 314 S.W. 2d

763, 117 U.S.P.Q. 466, (Tex. 1958) © ............. i3

International News Service v. Associated Press, 248

U.S. 215, 250 (1950) (Brandeis, J.,

pr ene So Ye gE BES REE RS a ence 10, 15

Jet gy Apt Ine. v. Cra , 377 Mass. 159,

E. 24 1349, 203 U.S.P.Q. 363 (Mass. S.Ct.

I ee oh caress cadbetelvegiecicgionetveccsssouscess

Jones v. Ulrich, 342 Il. App. 16, 95 N.E. 2d 113,

87 U.S.P.Q. 881, (1950) ..............ccccccressereneseees 13

Kamin v. Kuhnau, 232 Ore. 189, 374 P.2d 912, 185

U.S.P.Q. 188, (Ore. 1962) .........cse0e- 12, 18, 21, 24

Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470

a0 7 SERGE ERIS ARACLE MPN ak Or ave mee her er 9, 10, 15, 16, 23

Kinnear-Weed Corp. v. Humble Oil & Refining Co.,

150 F. Supp. 148, 112 U.S.P.Q. 385, (E.D. Tex.

LOBE) © cocscisssvenrveserertersrrecscsscsscossocccccvsceesecsvosnsoes 14, 16

Kubik, Inc. v. Hull, 56 Mich. App. 335, 224 N.W.

2d 80, 185 U.S.P.Q. 391 (1974) ......... 4,41, 37

Lear, Inc. v. Adkins, 395 U.S. 653 (1969)

ccccbasesbe sensaupsbsassianbbbonseesctesweanibbbbeus 10, 15, 16, 25, 26

Lear Siegler, Inc. v. Ark-Ell Springs, Inc., 569 F.2d

286, 197 U.S.P.Q. 273, (5th ‘Cr. emo 19

Table of Authorities Continued

Page

Lemelson v. Kellogg Co., 440 F.2d 986, 169 U.S.P.Q.

00, SE Se. TOT EY ia a 14

Lyon v, Bausch & Lomb Optical Co., 119 F. Supp.

42, 52, 100 U.S.P.Q. 100, (W.D.N.Y. 1953) .. 16

M & T Chemicals, Inc. v. International Business Ma

chines, 403 F. Supp. 1145, 188 U.S.P.Q. 568

ot & ie. | ara aS 14, 16

Materials Corp. v. Atlantic Metals, Inc.,

172 U.S.P.Q. 595, (Mass. S.Ct. Nov. 11,

SUFED chiamaceaanadicmaeean a a 25

Midland-Ross Corp. v. Sunbeam E. ipment Corp.,

316 F. Supp. 171, 167 U.S.P.Q. 460, (W.D. Pa.

TUNED ~ocigiegestimnvaniimneabertodenni 14, 15, 16

Mine Safety Co. v. Electric oe B , 405 F.2d

901, 160 U.S.P.Q. 413, (CCPA 1969) _............ 15

Motorola, Inc. v. Fairchild Camera & Instrument

Co., 366 F. Supp. 1173, 177 U.S.P.Q. 614, (D.

Ariz. MOIR Lcttsichscisncicgs civckasighcccicinn «tcc ce 14, 15

Northern Pacific Railway v. United States, 356 U.S.

be |... Se SR ee CaS Pie ote eis 10, 20

O’Brien v. Westinghouse Electric Co., 298 F.2d 1,

130 U.S.P.Q. 79, (8rd Cir. 1961) oo... 14, 15

Rototron or v. Lake Shore Burial Vault Co., Ine.,

712 F.2d 1214, 220 U.S.P.Q. 169, (7th Cir.

SRG a 16

Ruckelhaus v. Monsanto Co., 467 U.S. sp 01 L.Ed

I 11

Scharmen v. Carrollton Ma acturing, Co., 525 F.2d

95, 187 U.S.P.Q. 736 (6th Cir. 1975) ........... 15, 16

Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225

GENS dice edttsiiertteiiscasiines, ck cc 10, 15

Sikes v. McGraw-Edison Co., 671 F.2d 150, 217

U.S.P.Q. 1086 (5th Cir. 1982) oo... 13

Table of Authorities Continued

Page

Standard Brands, Inc. v. Zumpe, 264 F. Supp. 254,

152 U.S.P.Q. 731, (E.D. DOT. iestssisiercinne i2

Stanley Aviation Corp. v. United States, 196 U.S.P.Q.

612, (D. Col. Aug. 1, 1977) .......cccccrsrrcssrrcseeees 16

Telex Corp. v. IBM Corp., 367 F.Supp. 258, 179

U.S.P.Q. 777 (N.D. Okla 1973) ......cesceessreeeees 20

Tempo Instrument, Inc. v. Logitek, Inc., 229 F. Supp.

1, 142 U.S.P.Q. 76, (E.D.N.Y. 1964) ............ 14, 16

—< Products Corp. v. Arron, 523 F.2d 288, 187

S.P.Q. 257, (2nd Cir. 1975) — ..........eecereseeeees 14

Tower Manufacturing Co., Inc. v. Monsanto Chemical

Works, 20 F.2d 386, (S.D.N.Y. 1927) ........... 25, 26

United States v. Loew’s, Inc., 371 U.S. 38 (1962)

BN kerio ate bok REE WEL HR be obo ea OPO ERSTE EE 10, 20

Van Products Co. v. General Welding And Fabri-

ry: Co., 419 Pa 248, 213 A2d 769, 147

We BEE, CPM, TOBE) x cacnsecncconeconcyscccssecneyeese 16

Verkamoff Holland B.V. v. Pipe Benders, Inc., 211

U.S.P.Q. 955, (D. Minn. Feb. 18, 1981). _....... 16

Vulcan Detinning Co. v. American Can Co., 72 N.J.

Eq 387, 67 A 339, (1907) ......sccessssseesseseeeeeeees 24

Water Services, Inc. v. Tesco Chemicals, Inc., 410

F.2d 168, 162 U.S.P.Q. 321, (5th Cir. 1969) (Ga.

ea ices ccdiieveicccscostseviasicescescececees 13

Wesley-Jessen, Inc. v. R lds, 182 U.S.P.Q. 135,

D. Tl. May 28, 1974) ..........ccccsccssccessssrees 16, 26

Zenith Radio Corporation v. Hazeltine Research, Inc.,

EE PI ERUPOUE cacivivsncnccieccssivonconcensvecssees 10, 20

TREATIES, CONSTITUTIONAL AND STATUTORY LAW

U.S. Constitution, Art. I, §8, Cl. 8 .......... 2, 10, 15, 19

VB US. BLT cvccecccccscccccaccssacccccccccesescccvesescssoncescoes 2, 10

DB. UBC. 8 TRE ~ wvccccccnciccceicccssscreccncoccceqneszcsescnccscsen 2, 10

2B U.S.C. § 1257S) — .........cccceccscccererenvsnscrsssscsccesssers 2

Table of Authorities Continued

Page

35 U.S.C. § 101-104, 111-112 .o........ccceceecesceceeee 3, 10, 19

Patent Cooperation Treaty, Art. 17, 19, 20, 22, 29,

ee ae Ne ee ene OE 3, 18, 19

OTHER AUTHORITIES

Injunctions to Protect Trade Secrets—The Goodrich

and DuPont Cases, 51 Va. L.R. 917 (1965) .. 19

Milgrim on Trade Secrets §2.06[1]; § 2.06[3];

§ 2.07[2]; § 7.08[2] (1985) ..........eccecceserccesecceees

Orenbuch, Trade Secrets and The Patent Laws, 52

AR Rf arenes te ote 23

5 Patent Law Perspectives §16.2[5.2] ....ccccccececseee 20

Restatement of Torts (First) Ch. 35, p. 540

GONE. ~apbiiberidibedatttnenet cectathsadininatig ag ae 23

Stern, A Reexamination of ly gs of State Trade

Secret Law After Kewanee, 42 George Washi

ton Law Review, 927 (1974) .............000. 17, 19, 24

IN THE

Supreme Court cof the Gnited States

OCTOBER TERM, 1985

No. 85-

CHEMICAL ENGINEERING CORPORATION,

Rogert M. Witronc, Rupy WILFONG,

AND LAWRENCE D. GORDON,

Petitioners,

Vv.

LAURENE O. PATERSON AND MULTI-TEC, INCORPORATED,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE MICHIGAN COURT OF APPEALS

Petitioners Chemical Engineering Corporation, Robert

8, 1985.

OPINION BELOW

The opinion of the Michigan Court of Appeals has not

been reported. It is reprinted in Appendix J. The Michigan

Supreme Court denied an application to appeal in an order

reprinted in Appendix L. The Michigan Supreme Court

denied a motion to reconsider in an order reprinted in

Appendix N.

JURISDICTION

A final judgment of the Michigan Court of Appeals was

entered on March 8, 1985 affirming a judgment of the

Circuit Court of Lenawee County, Michigan filed Septem-

ber 26, 1983 on Opinions of the Circuit Court issued

June 10, 1983 and modified on Sept. 26

rage

reprinted in Appendix J, Appendix L and Appendix N.

The jurisdiction of this Court to review the judgment

of the Michigan Court of Appeals is envoked under 28

U.S.C. 1257(8).

TREATIES CONSTITUTIONAL AND STATUTORY

LAW INVOLVED

Constitution of the United States Article I, Section 8,

Clause 8. Full text is reprinted in Appendix A.

15 U.S.C. §§ 1-7, Codifying Sherman Antitrust Act, July

2, 1890, 26 Stat 209, as amended.

15 U.S.C. §§ 12-27 and 29 U.S.C. § 52, Codifying Clay-

ton Antitrust Act, October 15, 1914, Ch. 323, 38 Stat 730,

as amended.

28 U.S.C. 1257(3).

35 U.S.C. § 101-104, 111-112, Codifying Patent Act, July

19, 1952, Ch. 950, 66 Stat 792, as amended.

Patent Cooperation Treaty, Done at Washington on June

19, 1970, amended on October 2, 1979 and modified on

February 3, 1984, Articles 17, 19, 20, 22, 29, 55, 64.

'STATEMENT OF THE CASE

A. RAISING THE FEDERAL QUESTION:

The Federal question in this case is: whether Petitioners

could be held liable under State trade secret iaw for using

information after the information was completely disclosed

to the public by Respondents in a published European Pat-

ent Application or whether the State is preempted by Fed-

eral law from holding the public information to be trade

Federal question was raised repeatedly before the

trial and appellate courts including at least as follows.

Brief pp. 3-4 and 7-8 (Appendix D).

(Defendants’ Post Trial Briefs were submitted pursuant to

Order of the Court. Court’s Pre-Trial Statement, March

31, 1983, p. 5, Appendix B.

In its opinion, the Lenawee County Circuit Court found

Petitioners liable for misappropriation of trade secrets for

some time after June 24, 1981 (Ap-

pendix E) and also held:

“Although Paterson’s trade secret information was

not readily available to the public at the time the

disclosure agreements were signed with Engineering,

that secret information was available to the public

after June 24, 1981 following publication of Paterson’s

European patent application.” (Opinion of Lenawee

County Circuit Court, June 10, 1983, page 9, Appen-

dix E).

The Federal question was presented to the Michigan

Court of Appeals in Brief of Appellant, pp. 1-5 and 34-36

(Appendix H) and Reply. Brief of Appellant pp. 1-4 and

13-14 (Appendix I). The Michigan Court of Appeals held:

“Further, contrary to the contention of the

Defendants, the publication of Plaintiffs’ European

patent application does not, per se, preclude a finding

that Plaintiffs’ process remained a secret. Under the

ruling in Kubik, [Inc. v. Hall, 56 Mich. App. 335, 347,

224 N.W. 2d 80 (1974)] the publication of a patent

application is only one of several factors to be con-

sidered in determining secrecy. The publication of the

patent application in Europe is, in any event, of lim-

ited significance since Defendants admitted that they

did not learn of the publication until after the insti-

tution of the present lawsuit. Therefore, any infor-

mation regarding the nature of Plaintiffs’ process must

have come to Defendants through their confidential

relationship with Plaintiffs. Moreover, there was no

evidence presented at trial which would indicate that

any other person or entity involved in water treat-

ment processes was aware of Plaintiffs’ European pat-

ent application or the information contained therein.

The trial court’s finding that Plaintiffs’ process con-

stituted a trade secret was thus clearly supported by

substantial evidence in the record and we affirm that

finding.” Opinion of Michigan Court of Appeals, page

11 (Appendix J).

The Federal question was presented to the Michigan

Supreme Court in Brief Supporting Application For Leave

To Appeal, pp. 3-5, 7-8 and 10-18 (Appendix K) and Ver-

ified Motion To Reconsider Denial Of Application For

Leave To Appeal, pp. 3-4 (Appendix M).

B. STATEMENT OF FACTS

In 1979 and 1980, Laurene O. Paterson through

personal corporation, Multi-Tec, Inc. (herei

“PLAINTIFFS”), produced some water treatment units,

and her associate Gerald Griewahn, installed several units.

(Opinion dated June 10, 1983, hereinafter Opinion I, p. 1).

During the Summer 1980, Griewahn severed connections

with Multi-Tec and began manufacturing and selling the

same treatment units. (Opinion I, pp. 2-3). Paterson sued

ee p. 3). The Court

found:

“Plaintiff's trade secret is the novel combination sev-

eral features. It is the use of an air injector system

such as the Dema valve properly adjusted to create

and hold stable a colloid solution of extremely minute

iron particles in water. Coupled with this, Filter Ag

is then used for the removai of those particles through

the neutralization of the negative charge of the colloid

suspension.

The whole system here has been sold to members of

the public. Any buyer or his assignee can take the

system apart and duplicate the components. Probably

the Dema valve would be the first to be uncloaked.

Someone familiar with valves or injectors could get

manufacturer’s catalogues and go through them until

he located which valve this system used’ (PX 11)

On December 15, 1980 Paterson filed an application for

a European patent which disclosed in full her iron removal

* PX is used herein for Plaintiffs’ Exhibit. DX is used herein for

Defendants’ Exhibit. T.T. is used herein for Trial Transcript.

process, (T.T. pp. 233-4) and in that application, referred

to three prior United States patent applications, filed on

December 14, 1979; May 2, 1980 and November 28, 1980.

(DX H). The European patent application was published

on June 24, 1981. (DX H). Defendants first became aware

of Paterson’s European patent in February or March, 1983.

(Opinion I, p. 3).

Beginning April 11, 1980, Chemical Engineering signed

an agreement with Paterson agreeing to hold Paterson’s

confidential information in confidence, installed test units

and began negotiating a manufacturing and sales arrange-

ment. (Opinion I, p. 2).

On December 10, 1980, Robert Wilfong and Lawrence

Gordon signed individual agreements with Paterson to keep

confidential and not to disclose or use any secret or con-

fidential technology involved in the Paterson process for

their own use (Opinion I, p. 2), and on January 6, 1981

Wilfong signed a consultant agreement incorporating the

prior agreements. (Opinion I, p. 2).

On May 13, 1981, Chemical Engineering purchased from

Multi-Tec twenty-five (25) of the Paterson iron removal

devices which they sold with the permission of Multi-Tec,

te the public on an unrestricted basis (Opinion I, p. 2; T.T

p. 189).

At approximately the same time that Wilfong became

a consultant to plaintiff, plaintiff became heavily involved

in negotiations with Structural Fibers Corporation, which

had been brought into the relationship by Chemical En-

gineering (T.T., pp. 241-242). Initially, defendants were

involved in negotiations with Structural Fibers, however,

as time passed, defendants were no longer invited to par-

ticipate in plaintiff's meetings with Structural Fibers. (T.T.

p. 241-4).

In order to protect themselves from what defendants

thought would be their total exclusion from the iron re-

moval device market, defendants began investigating the

possibility of marketing other iron-removal units. (T.T., p.

425-428). In furtherance of this plan, Robert Wilfong

searched patents in the U.S. Patent Office and obtained

a copy of a patent issued to John O. McLean on March

14, 1972, (T.T., p. 428-429). After several discussions,

defendants signed an exclusive license agreement with

McLean in July or August, 1981. (Opinion I, p. 2).

On August 6, 1981, Wilfong sent Paterson a ietter ter-

minating the Consulting Agreement. (P.X. 16). On August

14, 1981, Wilfong wrote Paterson indicating that Chemical

Engineering was no longer interested in participating in

negotiations regarding the Paterson process and that

Chemical Engineering had become the exclusive licensee

under U.S. Patent No. 3,649,532, John O. McLean’s pat-

ent. (P.X. 17). Defendants, acknowledged that the confi-

dentiality agreements with plaintiff would continue in full

force and effect and would be honored by defendants in

the future. (Opinion I, p. 2). Paterson accepted this reaf-

firmation of the Confidentiality Agreements without telling

defendants that her European Patent application had been

published over a month earlier. (D.X. H).

Subsequently to the termination of the consulting agree-

ment with Paterson, Chemical Engineering began selling

the MACCLEAN iron removal device. Multi-Tec alleged

these sales to be a misappropriation of its trade secrets.

(Complaint, Paragraphs 16-21). No evidence or testimony

was given that Defendants did any act alleged to be mis-

appropriation of Multi-Tec’s information other than the

sale of the MACCLEAN iron removal devices after Pa-

terson’s European Patent Application was published on

June 24, 1981. Chemical Engineering alleged the MAC-

CLEAN iron removal devices sold after August 14, 1981

to be solely based upon the technology of John O. McLean

and U.S. Patent No. 3,649,532. (Opinion I, p. 5).

The trial court’s first written opinion (Opinion I) was

issued on June 10, 1983. (Appendix E). The trial court

granted plaintiff $100,000 for one-half of development

costs, $63,750 for loss of royalties on the 3,700 MacClean

units sold by defendants; and $60,000 as “future dam-

ages’. (Appendix E).

A second opinion (Opinion II) was entered by the trial

court on September 28, 1983 pursuant to a motion to

reopen trial by Defendants in which the trial court amended

the original opinion. (Appendix F). The Michigan Court of

Appeals on an appeal by Defendants-Appellants affirmed

the holding of the trial court in an opinion fiied March 8,

1985. (Appendix. J).

A Judgment of the Supreme Court of the State of Mich-

igan denying Application For A Leave To Appeal was

entered on November 25, 1985. (Appendix L). The Mich-

- igan Supreme Court entered an Order denying Motion To

Reconsider Deniai Of Application For Leave To Appeal on

January 28, 1986. (Appendix N).

REASONS FOR GRANTING THE WRIT

I. A DEFENDANT CANNOT BE HELD LIABLE UN-

DER STATE TRADE SECRET LAW FOR USING

INFORMATION PREVIOUSLY COMPLETELY DIS-

CLOSED TO THE PUBLIC IN A PUBLISHED EU-

ROPEAN PATENT APPLICATION BECAUSE

FEDERAL LAW PREEMPTS A STATE FROM

HOLDING THE PUBLIC INFORMATION TO BE

TRADE SECRET.

A. There Was No Dispute In This Case That The Infor-

mation Held To Be Trade Secret Had Previously Been

Completely Disclosed To The Public.

In this case, trade secrets were found to have been

misappropriated, after they were made public in a

published European patent application. The trial court

ruled:

“Although Paterson’s secret information was not

readily available to the public at the time the non-

disclosure agreements were signed with Engineering,

that secret information was available to the public

after June 24, 1981, following publication of Pater-

son’s European patent application.” (Opinion of trial

court, June 10, 1983, p. 9).

The earliest misappropriation alleged by Plaintiffs was

after June 24, 1981. (Court of Appeals Opinion pp. 3-4)

Plaintiffs stipulated at trial that the European Patent

Application disclosed all of the trade secret information

with the exception of a brand name of a component.” There

was no allegation in this case that the trade secret infor-

mation was available to the public only by compiling di-

verse sources, since the European Patent Application

revealed all of the trade secret information in a single

document clearly written for the understanding of a person

skilled in the technology involved.

Unlike Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470

(1974), the instant petition does not question the protection

2“* **T’m willing to stipulate that there’s a disclosure of the in-

jector, disclosure of filter bed and the other things. There’s no disclo-

sure of the specific Dema valve by name, the type of valve that was

described in here, and also the type of various types of filter beds

which will attract end electrostatically attract colloidal particles was

disclosed in here, and the fact that this injector makes colloidal particles

containing iron in the water. It’s all in here. To have her sit here and

have her read this for the next hour or so is total waste of time. The

Mr. Lundy: That all trade secrets we’re talking about are in that

document?

Mr. Harness: Everything is in here, there’s no specific reference to

the Dema vaive, Dema injectors as such. The name Dema—

of secret information by State trade secret law. This

petition rather argues that a State cannot restrict the use

of public information under State trade secret law.

B. The Holding Of The Michigan Court Of Appeals That

Information Can Be Both Public And Protectable As A

Trade Secret Follows The Law Of A Number Of Ju-

risdictions But Conflicts With Pronouncements By This

Court And Other Jurisdictions.

This Court has repeatedly held that it is a policy of

Federal Patent, Copyright and Antitrust law that infor-

mation in the public domain cannot be removed therefrom

by the States:

“(Federal law requires that all ideas in general cir-

culation be dedicated to the common good unless they

are protected by a patent.” Lear, Inc. v. Adkins, 395

U.S. 658, 668 (1969); Kewanee Oil Co. v. Bicron Corp.,

416 U.S. at 481.

This principle underlies the United States Patent Laws

generally and forms the essence of the conditions of pat-

entability of the patent laws. U.S. Const. Art I. §8, Cl.

8; 35 U.S.C. 101-104; 111-112. This Court’s rulings on

trade secret laws are in accord with this principle. In

ruling on Ohio trade secret law, this Court stated:

“By definition a trade secret has not been placed in

the public domain.” Kewanee Oil, 416 U.S. at 484.

* Generally see: Goldstein v. California, 412 U.S. 546, 570 (1973);

Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964); Compco Corp.

v. Day-Brite Lighting, Inc., 376 U.S. 234 (1964); International News

Service v. Associated Press, 248 U.S. 215, 250 (1918) (Brandeis, J.,

dissenting); See Northern Pacific Railway v. United States, 356 U.S.

1 (1958); United States v. Loew’s Inc., 371 U.S. 38 (1962); Ethyl Gas-

oline Corporation v. United States, 309 U.S. 436 (1940); Zenith Radio

Corporation v. Hazeltine Research, Inc., 395 U.S. 100 (1969); Brulotte

v. Thys Co., 379 U.S. 29 (1964). reh. den. 379 U.S. 985; 15 U.S.C. § 1-

7, 12-27.

This Court similarly stated in Ruckelhaus v. Monsanto

Co., 467 U.S. —__, 81 L.Ed 2d 815, 832 (1984):

“Because of the intangible nature of a trade secret,

the extent of the property right therein is defined by

the extent to which the owner of the secret protects

his interest from disclosure to others. [citations omit-

Information that is public knowledge or that is

known in an industry cannot be a trade

secret. [citation omitted] If an individual discloses his

trade secret to others who are under no obligation to

protect the confidentiality of the information or oth-

erwise publicly discloses the secret, his property right

is extinguished.”

Michigan trade secret law as applied in this case conflicts

with this principle.

The Michigan. Supreme Court in Hayes-Albion v. Kuber-

ski, 421 Mich. 170, 364 N.W. 2d 609, 615 n.4 (Mich. 1984),

recently ruled that various factors including public knowl-

edge are to be considered in determining whether infor-

mation is trade secret with the weight attached to each

factor varying on a case by case basis. See also, Kubik,

Inc. v. Hull, 56 Mich. App. 355, 224 N.W. 2d 80, 185

U.S.P.Q. 391 (Mich. App. 1974). The Michigan Court of

Appeals in following that rule in the instant litigation held:

“Furthermore, contrary to the contention of the

Defendants, the publication of Plaintiffs’ European

patent application does not, per se, preclude the find-

ing that Plaintiffs’ process remained a secret. Under

the rule in Kubik the publication of a patent appli-

cation is only one of several factors to be considered

in determining secrecy. The publication of the patent

application in Europe is, in any event, of limited sig-

nificance since Defendants admitted that they did not

learn of the publication until after the institution of

the present lawsuit. Therefore, any information re-

garding the nature of Plaintiffs’ process must have

come to Defendants through their confidential rela-

tionship with Plaintiff. Moreover, there was no evi-

dence presented at trial which would indicate that any

other person or entity involved in water treatment

processes was aware of Plaintiffs’ European patent

application or the information contained therein. The

trial court’s finding that Plaintiffs’ process constituted

a trade secret was thus cleariy supported by sub-

stantial evidence in the record, and we affirm that

finding.”” (Court of Appeals Opinion p. 11, Appendix

p. 1387).

The conflict’ between the Michigan courts and this Court

is repeated among various jurisdictions and authorities.

The leading treatise on trade secret law Milgrim On

Trade Secrets supports the Michigan Court Of Appeal’s

position that information can be both publicly known at

the time of an alleged misappropriation and protectible as

trade secret or confidential information, at least insofar

as information that is published in something other than

a United States patent. Milgrim on Trade Secrets § 2.06[1]

pp. 2-78, 2-79, § 2.06[3! pp. 2-86 - 2-93; § 2.07[2] pp. 2-

129-2-131; 7.08[2] pp. 7-202 - 7.209 (1985).

Some of the leading cases that support this position are:

Franke v. Wiltschek, 209 F.2d 493, 495, 99 U.S.P.Q. 481,

433, (2nd Cir. 1953) (N.Y., N.J. and Mass law) (Trade

secrets disclosed in expired patent and publicly marketed

product), Kamin v. Kuhnau, 232 Ore. 139, 374 P.2d 912,

916-921, 185 U.S.P.Q. 133, 136-140, (Ore. 1962) (Trade

secrets disclosed in patent and marketed product); Gold-

berg v. Medtronic, Inc., 686 F.2d 1219, 1227-1228, 216

U.S.P.Q. 89, 94-95 (7th Cir. 1982) (Minn. law) (Trade se-

crets disclosed in European patent. Contra: Electro-Crajt

Corp. v. Controiled Motion, Inc., 332 N.W. 2d 890, 897

n.5, 220 U.S.P.Q. 811, 816 n.5, (Minn. S. Ct. 1983)); Stand-

ard Brands, Inc. v. Zumpe, 264 F.Supp. 254, 262 n.15,

152 U.S.P.Q. 731, 736 n.15, (£.D. La. 1967) (Trade secret

or confidential information available elsewhere); Water Ser-

vices, Ine. v. Tesco Chemicals, Inc., 410 F.2d 163, 172-173,

162 U.S.P.Q. 321, 328-329 (5th Cir. 1969) (Ga. law) (Trade

secret in publicly marketed product); Hyde Corp. v. Huf-

fines, 158 Tex 566, 314 S.W. 2d 763, 774-775, 117 U.S.P.Q.

466, 468-469, (Tex. 1958) Cert. den. 358 U.S. 898 (1958)

(Trade secrets disclosed in patent); Jones v. Ulrich, 342

tl. App. 16, 95 N.E. 2d 113, 119, 87 U.S.P.Q. 331, 335,

(1950). (Confidential information/trade secret disclosed in

publication or abandoned to general public).‘

Typical expressions of the rule followed in these cases

are the following:

“Where defendants obtain confidential information

of a confidential relationship, they shall be held

accountable for its use to their own advantage at the

expense of the rightful possessor.

It matters not that defendants could have gained their

knowledge from a study of the expired patent and

plaintiff's marketed product.” Franke, 209 F.2d at

495. |

and ‘The decree proscribes only against the use of ideas

acquired in the course of the confidential relationship.

- The fact that coincidentally the defendants’ use of

these ideas may also constitute an infringement of

plaintiff's patent is immaterial.” Kamin, 374 P.2d at

922.

‘Other later cases supporting the Michigan courts’ position are: Sikes

v. McGraw-Edison Co., 671 F.2d 150, 151, 217 U.S.P.Q. 1086 (5th Cir.

1982), Cert. den., 458 U.S. 1108 (1982) (Tex. law) (Relying on Hyde

Corp. and Water Services); Financial Programs, Inc. v. Falcon Finan-

cial Services, 371 F.Supp. 770, 777, 182 U.S.P.Q. 36, 40 (D. Ore. 1974)

(Relying on Kamin); Classic Instruments, Inc. v. VDO-Ango Instru-

ments, Inc., 226 U.S.P.Q. 894, 904, (Ore. Ct. App., May 22, 1985)

(Relying on Kamin and Franke).

j a confi-

dential relationship: Ferroline Corp. v. General Aniline

and Film Corp., 207 F.2d 912, 921, 99 U.S.P.Q. 240, 246

(7th Cir. 1953) Cert. den. 347 U.S. 953 (1954), rehrg. den.

347 U.S. 979 (1954); GN.J. law); Midland-Ross Corp. »v.

Sue eee a 316 F. Supp. 171, 177, 167

U.S.P.Q. 460, 464 (W.D. Pa 1970) aff'd. 435 F.2d 159, 167

U.S.P.Q. 422 oe Ti 1970); Lemelson v. Kellogg Co., 440

F.2d 986, 987. 169 U.S.P.Q. 449, 449-450 (2nd Cir. 1971).°

* See also: Motorola, Inc. v. Fairchild Camera & Instrument Co., 366

F. Supp. 1173, 1184, 177 U.S.P.Q. 614, 620-621 (D. Ariz. 1973) (Cal.

law), Tempo Instrument, Inc. v. Logitek, Inc., 229 F. Supp. 1, 3, 142

U.S.P.Q. 76, 77 (E.D.N.Y. 1964); Gilson v. Republic of Ireland, 606 F.

Supp. 38, 43, 48, 223 U.S.P.Q. 956, 957 (D. D.C. 1984) 682 F.2d 1022;

M & T Chemicals, Inc. v. International Business Machines, 403 F Supp.

1145, 1149, 188 U.S.P.Q. 568 (S.D.N.Y. 1975), affd. 542 F.2d 1165

(2nd Cir. 1976), cert. dismissed 429 U.S. 1030 (1976); Kinnear-Weed

Corp. v. Humble Oil & Refining Co., 150 F. Supp. 143, 159, 112 U.S.P.Q.

385, 397 (E.D. Tex 1956) affd. 259 F.2d 398, 119 U.S.P.Q. 10 (5th

Cir. 1958) rehrg. ag Aa lela 1959), Cert. den. 361

U.S. 903 (1959), rehrg. den. 363 U.S. 857 (1960), Clerical error cor-

rected, 296 F.2d 215 (5th Seg? 1961), Cert den. 368 U.S. 890 (1961),

rehrg. den. 368 U.S. 936 (1961), disqual. hrg. ord. 403 F.2d 437 (5th

Cir. 1968), disqual. pet. den. 324 F. Supp. 1371 (S.D. Tex. 1969) affd.

441 F.24 631 (5th Cir. 1971), (150 F. Supp. 143 aff'd.) 504 F.2d 565

(5th Cir. 1974); O’Brien v. Westinghouse Electric Co., 293 F.2d 1, 13,

. 1961). Timely Products Corp. v. Arron,

257, 269 (2nd Cir. 1975}, Electro-Craft

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* See also Goldstein 412 U.S. at 570-571, Sears, Roebuck & Co., 376

U.S. at 231; Compeo Corp., 376 U.S. at 237-238; International News

Service, 248 U.S. at 250.

’ See also Scharmen v. Carroilton Manufacturing Co., 525 F.2d 95,

99, 187 U.S.P.Q. 736, 739 (6th Cir. 1975); O’Brien, 293 F.2d at 13,

Arco Industries Corp. v. Chemcast Corp., 683 F.2d 435, 448, 208

U.8.P.Q. 190, 196 (6th Cir. 1980); 5 Patent Law Perspectives 16.2{2.1]

p. 16-19 n.28.

F. Supp. at 1188; Tempo Instrument, Inc., 229 F.Supp. at

or other publication of comparable scope to a patent (here-

inafter “patent publication”) is destroyed at the time of

issuance or publication, Scharmen, 525 F.2d at 99; Mid-

land-Ross Corp. 316 F. Supp. at 177; Van Products Co.

213 A2d at 778-779; Motorola, Inc., 336 F. Supp. at 1186.°

State trade secret laws, however, have not universally

followed this principle. As one author has stated:

“{Bjecause the definition of what is a ‘trade secret’

varies so widely that a particular state denominates

a given legal doctrine as ‘trade secret’ law does not

guarantee that that doctrine avoids impermissible (ac-

cording to Lear and Kewanee) protection of things ‘in

* See also: Rototron Corp. v. Lake Shore Burial Vault Co., Ine. 712

F.2d 1214, 1215, 220 U.S.P.Q. 169, 170 (7th Cir. 1983), Lyon v. Bausch

& Lomb Optical Co., 119 F.Supp. 42, 52, 100 U.S.P.Q. 100, 108

(W.D.N.Y. 1953) affd. in pertinent part 224 F.2d 530, cert den. 350

U.S. 911 (1955) rehrg. den. 350 U.S. 955, (1956); Van Products Co. v.

General Welding And Fabricating Co., 419 Pa 248, 212 ‘2d 769, 779,

147 U.S.P.Q. 221, 228 (Pa 1958); M & T Chemicals, Inc. v. IBM Corp.,

Co., 219 F. Supp. 468, 503-504, 188 U.S.P.Q. 613, 641 (W.D. La. 1963),

aff'd. 345 F.2d 175, (5th Cir. 1965); cert. den. 382 U.S. 905 (1965);

Wesley-Jessen Inc. v. Reynolds, 182 U.S.P.Q. 135, 145 (N.D. TL May

23, 1974), Frank M. Denison, Inc. v. Westmore Dental Arts, 212

(W.D. Pa. Jan. 15, 1981); Ferrara v. Becton, Dick-

erson & Co., 223 U.S.P.Q. 682, 683 (E.D.N.Y. Sept. 12, 1983), Kinnear-

Weed Corp., 150 F. at 159; Ferroline, 207 F.2d at 921: Stanley

Aviation Corp. v. United Statez, 196 U.S.P.Q. 612, 617, (D. Col. Aug.

1, 1977); Haglund v. Dow Chemical Co., 218 U.S.P.Q. 55, 70 (E.D. Col.

Apr. 7, 1982);

* Electroeraft Corp., 382 N.W. 2d at 897 n. 5; Fuels Research Corp.

v. Husky Oil Co. of Delaware, 183 U.S.P.Q. 403, 407 (D. Colo. June

28, 1974); Verkamoff Holland B.V. v. Pipe Benders, Inc., 211 U.S.P.Q.

955, 980 (D. Minn. Feb. 18, 1981) aff'd. 696 F.2d 608, 217 U.S.P.Q.

32 (8th Cir. 1982).

a oe preclude a finding

ruling in Kubik, [Inc. v. Hull, 56 Mich. App.

224 N.W. 2d 80 (1974)] the publication of a

application is only one of several factors to be

;

did not learn of the publication until after the insti-

substantial evidence in the record and we affirm that

finding.” Opinion of Michigan Court of Appeals, page

11).

In Benton v. Ward, 59 Fed. 411, 413 (C.C. N.D. Iowa

1894) a court applied this same reasoning to a U.S. patent:

“Many an invention and many an idea of value are

doubtless to be found in the records of the patent

office, but, so far as public actual knowledge thereof

is concerned, they might as well be nonexistent.”

The standard followed by the Benton court and in the

instant litigation is based upon a legal fiction: a presump-

tion that patent publications are so inaccessible as to be

generally unknown. This legal fiction conflicts with the

purposes of the patent laws to make inventions available

to the public and ignores modern industria] and scientific

practice. United States and foreign patent publications are

today available through computerized data bases, technical

indicies, public and private patent search organizations,

public search facilities, patent and technical subscription

services, periodicals, and many other information distri-

bution networks. This is in part a result of the interre-

lationship between the United States and Foreign Patent

Offices under the Patent Cooperation Treaty, under which

international publications are published in English, two

copies of each publication are transmitted to the United

States Patent Office, and the United States and other

contracting states (the European countries under the Eu-

ropean Patent convention being a contracting state) have

agreed that published European Patent applications and

other publications are to be given the same effect as a

published United States patent in the United States. Pat-

ent Cooperation Treaty, June 19, 1970 amended October

2, 1979, modified February 3, 1984, Art. 17, 19, 20, 22,

29, 55, 64.

The decision by the Michigan Court of Appeals in the

instant litigation thus conflicts with Federal patent policy

under the Patent. Laws and the Constitution, with the

Patent Cooperation Treaty and with the actual availability

of patent publications. U.S. Const., Art. I, § 8; 35 U.S.C.

101-104, 111-112; Patent Cooperation Treaty, Art. 17, 19,

20, 22, 29, 55, 64.

2. Protecting Public Information As Trade Secrets In-

terferes With Federal Law By Discouraging Compe-

tition By Former Associates Or Employees.

The free use of public knowledge is vital to the United

States and the purposes for which the United States Pat-

ent System was created, since freely available public

progress. Restricting use of public information by declaring

Appear on ig oc Aaalty he epee Lagramanny

mi ye i go holders degrades: competition by put-

ting former associates or employees at risk of liability for

ane Sane ae Yee Unlike non-competition agree-

ments, this liability is not limited in scope or duration since

to courts that follow this approach, “agree-

pagsanaalr tip Se ee mme t O Serene not

one, sree be challenged as an unreasonable re-

straint of trade.” Lear Siegler, Inc. v. Ark-Ell Springs,

Inc., 569 F.2d 286, 289, 197 U.S.P.Q. 273, 275 (5th Cir.

1978).

In a new technology, law protecting trade secrets, after

they become public knowledge, prevents former employees

or associates from competing as a result of their having

learned the public information when it was secret. One

court has described this effect as: “a sword to be used by

employers to retain employees by the threat of rendering

them substantially unemployable in the field of their ex-

perience should they decide to resign.” E. W. Bliss v.

Struthers-Dunn, Inc., 408 F.2d 1108, 1112-1113, 161

U.S.P.Q. 263, 266 (8th Cir. 1969). See Stern, supra at 972-

974, 983-986 and Injunctions To Protect Trade Secrets -

The Goodrich and DuPont cases, 51 Va L. R. 917, 921

(1965). Third parties are discouraged from competing by

their inability to hire persons having experience with the

technology, even though the technology is publicly known.

This “chilling effect’”’ on the entry of competitors continues

indefinitely until a competitor takes the risk of entering

the field without experienced personnel.

Among competitors, this ‘chilling effect” could provide

effective control over a particular technology broader and

for a longer duration than could be obtained by patenting

the technology. Any extension of the patent grant is con-

trary to the Patent Laws and may be a violation of the

Federal Antitrust Laws.’

Aside from this effect on competition, the legal protec-

tion of public information on the basis of its past secrecy

can also directly effect competition by the deliberate place-

ment of former employees with potential competitors. Such

placement of former employees can neutralize the ability

of a potential competitor to utilize a publicly known new

technology. The potential competitor after hiring the for-

mer employee, is at risk of a trade secret suit if it utilizes

the new technology unless it can prove it learned the new

technology from public sources and not the new employee.

Since it is v>ry difficult to prove where knowledge was

obtained, years later in litigation the potential competitor

stands a good chance of loosing a trade secret misappro-

priation suit. Trade secret litigation can yield an award of

damages disproportionate to actual profits, thus potential

competitors are well deterred from entering the new field

of technology. 5 Patent Law Perspectives § 16.2[5.2] pp.

16-56 - 16-57." |

1 (1958); United States v. Loew’s Inc., 371 U.S. 38 (1962); Ethyl Gas-

oline Corporation v. United States, 309 U.S. 436 (1940); Zenith Radio

Corporation v. Hazeltine Research, Inc., 395 U.S. 100 (1969); Brulotte

v. Thys Co., 379 U.S. 29 (1964). reh. den. 379 U.S. 985:

1 Commenting on Telex Corp. v. IBM Corp., 367 F.Supp. 258, 179

This neutralization of potential competitors is not limited

in time. A number of courts have held that once a person

learns “trade secret” information, he may never put that

information to his own use even though the rest of the

world can freely use the same information. Franke, 209

F.2d at 496; Kamin, 374 P.2d at 921-922.

The protection of publicly disclosed information as trade

secrets is thus anticompetitive and undercuts the United

States Patent system.

3. Protecting Public Information As Trade Secrets Pro-

vides A Disincentive To Use Of The U.S. Patent Sys-

tem By Providing Equivalent Or Even Superior

Protection.

Protecting public information as trade secrets, interferes

under the United States Patent Laws is presented by law

under which a published patent application does not de-

stroy trade secrets fully disclosed within the application.’

An example of a disincentive to use of the U.S. patent

system is the following. An inventor devises a new prod-

uct, such as a new drug formulation, which includes sig-

nificant trade secrets and is patentable. The inventor’s

United States competitors cannot manufacture in the

United States because of trade secret agreements.

The inventor can obtain appropriate foreign patents and

prevent foreign manufacturers from manufacturing his

‘2 It would appear that the Michigan Court cf Appeals holding in this

case may not go so far as to hold that U.S. patents do not destroy

trade secrets, unlike some cases in other jurisdictions which have so

held. Franke, 209 F.2d at 495, Kamin, 374 P.2d at 922.

product without his permission. By his trade secret and

confidentiality agreements, he can keep those in the United

States from manufacturing, using and selling his invention

at least insofar as he can litigate or threaten litigation in

jurisdictions following the approach of the Michigan Court

of Appeals in this action. The inventor’s “‘protection”’ in

the United States would not be limited by patent claims

or prior art or an expiration date.

Under Michigan law as applied in the instant case, for-

eign patents, would have no effect on the trade secrets.

Thus, the benefits of a U.S. patent would he of less ccn-

sequence to an inventor, than his trade secret and super-

fiuous in many instances. In contrast to a U.S. patent,

trade secret rights would be unlimited both geographically

and in duration. The inventor clearly would follow his best

interest and not obtain a U.S. patent.

Similarly, under Michigan law as applied in the instant

case, U.S. employees could remain bound indefinitely on

trade secrets in a process invention patented and practiced

only in foreign countries; even though products of the

process were sold in the U.S.

Furthermore, employers could routinely disclose to em-

ployees, under confidentiality agreements, the contents of

foreign patent applications, whether of their own origin

or not, thereby protecting an entire body of public knowl-

edge.

Lastly, a foreign inventor has a disincentive to practice

his invention in the U.S., since he cannot rely upon his

published foreign patent and must compete in the United

States market wary of any trade secret agreements exe-

cuted prior to his entry into the U.S. market.

As these examples indicate, any distinction in trade se-

cret law between the effect of U.S. and foreign patent

publications undercuts U.S. patent laws and provides a

disincentive to use of the U.S. patent system.

4. The Protection Of Public Information As Trade Se-

crets Does Not Protect Commercial Morality, Equity

Or Confidential Relationships.

The purpose of trade secret law is the maintenance of

standards of commercial ethics and the encouragement of

invention. Kewanee Oil Co. v. Bicron Corp., 416 U.S. at

481. The authors of the first Restatement of Torts stated:

“{Tyhe tendency of the law, both legislative and com-

mon, has been in the direction of enforcing increas-

ingly higher standards of fairness or commercial

morality in trade.” Ch. 35, p. 540 (1938).

Protecting information that is actually secret prevents

misappropriators from unethically obtaining an unfair ad-

vantage over third parties at the “secret” holder’s ex-

pense. Protecting information that is not secret, but rather

public, does not prevent alleged misappropriators from ob-

taining an unfair advantage over others, since all others

have the same access to the public information. Protecting

public information rather allows the “secret” holder to

place his exemployees or exassociates at an disadvantage

in comparison to the rest of the industry. The issue is not

the exempioyee’s or exassociate’s commercial morality but

rather the morality of the “secret’’ holder:

“Under our current ideas of morality, where one

agrees to accept information in secret and then pro-

ceeds to divulge the secret to the detriment of the

disclosee, we hold the breach to be immoral if the

“secret’’ has a special character that distinguishes it

from common law knowledge. We do not hold the

breach to be immoral where the “secret’’ information

is in fact generally known to the public or can easily

be ascertained, rather, the odium is upon the discloser

for not knowing that his ‘“‘secret’’ is no secret at all,

or where he is aware of that fact, for attempting to

perpetuate a fraud on the disclosee.’’ Orenbuch,

“Trade Secrets And The Patent Laws”, 52 J.P.0.S.

638, 654-655 (1970).

Cases reciting a higher standard of ‘‘commercial mo-

rality” emphasize a breach of confidence reposed in the

defendant, rather than the existence of trade secrets. As

the court stated in, Vulcan Detinning Co. v. American Can

Co., 72 N.J. Eq 387, 67 A 389, 348 (1907):

‘“{T]oo much emphasis has perhaps been placed upon

the element of absolute secrecy in the process, and

that not enough stress has been laid upon the ine-

quitable character of the defendant’s conduct in mak-

ing a use of such process that was inimical to the

complaint’s interest. * * * [TJhe secrecy with which a

court of equity deals is not necessarily that absolute

secrecy that inheres in discovery, but that qualified

secrecy that arises from mutual understanding, and

that is required alike by good faith and good morals.”’

(cited with approval in Kamin, 374 P.2d at 918.

In Kamin and similar cases, ‘commercial morality’ and

“secrecy” are legal fictions and a “breach of confidence”’

is a euphemism for breach of company loyalty, that is,

breach of a duty not to compete.

This is a badly misplaced duty absent a fairly negotiated

non-competition agreement. It is not proper for the courts

to protect the status quo in the name of commercial mo-

rality to the detriment of ethical competition and the U.S.

patent system. See Stern, supra p. 970-972.

Some courts justify the protection of public information

as trade secrets, on the basis that it is not the invention

that is being protected but rather the confidential rela-

tionship. In other words, if there was once a secret or

then there is, indefinitely, a confidential re-

lationship. This has been referred to as trade secret es-

toppel, a counter-part of the former equitable doctrine of

patent licensee estoppel:

“If it appears that [the information] has been obtained

through disclosures * * * in defiance of his contract,

it might make no difference that [the information] was

a part of the prior art, because there would be an

estoppel as between these parties, which would pre-

vent the defendant from questioning that the process

was secret, and would prevent its use by the

defendant. I can see much similarity in this respect

ser: Hee i ey el Tower Man-

Corp. v. Atlantic Metals, Inc., 172 Tah

595, 611 (Mass. Super.Ct. Nov. 11, 1971).

There is even less support for trade secret estoppel pro-

tection of a confidential relationship than there was for

patent licensee estoppel. In Lear, Inc., 395 U.S at 670,

the United States Supreme Court eliminated patent licen-

see estoppel because it opposed “the important public in-

terest in permitting full and free competition in the use

of ideas which are in reality a part of the public domain.”’

id so despite arguments that patent licensee

estoppel was necessary to support the principle that con-

tract law forbids a purchaser from repudiating his prom-

ises simply because he later becomes dissatisfied with the

bargain he has made and despite the fact that under li-

censee estoppel the licensee may contest validity of the

patent if he continues to pay royalties, Lear, Inc., 395

Trade secret estoppel protection of a confidential rela-

tionship in public information is opposed to:

“The important public interest in permitting full and

free competition in the use of ideas which are in real-

ity a part of the public domain.” Lear, Inc., 395 U.S.

at 670.

Trade secret estoppel does not have support in contract

law, which requires additional compensation to support

even a limited non-competition agreement. In trade secret

estoppel there is no requirement that the former employee

or associate have received anything more than ordinary

compensation in exchange for the loss of the right to use

particular public information for an indefinite period. Un-

like patent licensee estoppel, the party bound by trade

secret estoppel may not contest the status of the infor-

mation since the former employee or associate remains

bound even after the information becomes freely available

to the public. Tower, 20 F.2d at 387.

Protection of a confidential relationship in former se-

crets made public is also not supported by the concept of

a confidentiality. If secrecy is lost there is no longer a.

confidential relationship, since there is no longer any con-

fidentiality. Wesley-Jessen, 182 U.S.P.Q. at 145. If a for-

mer employee or associate destroyed the confidentiality by

his own wrongdoing he remains liable for breach of the

confidential relationship, however, if the confidentiality was

already destroyed by other events, such as in this litigation

by the deliberate actions of the secret holder, then no

breach of the confidential relationship ean occur after it

is destroyed.

None of this denies the trade secret holder the benefits

of the confidential relationship. The former employee or

associate is bound only as long as confidentiality exists.

A trade secret hoider assumes the risk of destruction of

his trade secret and a confidential relationship based upon

that trade secret by maintaining the information as trade

secret. This risk is required by the patent laws and in-

terference with this risk is interference with the patent

laws.

II. CONCLUSION

For the above reasons, Petitioner prays that this Petition

For Writ Of Certiorari be granted.

Respectfully submitted,

ROBERT LUKE WALKER

LUNDY AND WALKER

1020 Anthony Wayne Bk. Bldg.

Fort Wayne, IN 46802

(219)422-1534

Counsel of Record:

Davip A. LUNDY

LUNDY AND WALKER

1020 Anthony Wayne Bk. Bldg.

Fort Wayne, IN 46802

(219)422-1534

Counsel for Petitioners

APPENDIX

APPENDIX A

CONSTITUTION OF THE UNITED STATES OF

AMERICA

ART 1, SEC. 8., CL. 8. The Congress shall have

UNITED STATES CODE

TITLE 35—PATENTS

$ 100 Definitions

When used in this title unless the context otherwise

indicat

(a) The term “invention’”’ means invention or discovery.

(b) The term “process” means process, art or method,

and includes a new use of a known process, machine, man-

ufacture, composition of matter, or material.

the United States of America, its territories and posses-

sions.

(d) The word “patentee” includes not only the patentee

to whom the patent was issued but also the successors in

title to the patentee.

(July 19, 1952, ch. 950, 66 Stat. 797.)

§ 101 Inventions patentable

Whoever invents or discovers any new and useful proc-

ess, machine, manufacture, or composition of matter, or

any new and useful improvement thereof, may obtain a

patent therefor, subject to the conditions and requirements

of this title.

(July 19, 1952, ch. 950, 66 Stat. 797.)

§ 102 Conditions for patentability; novelty and loss of

right to patent

A person shall be entitled to a patent unless—

(a) the invention was known or used by others in this

country, or patented or described in a printed publication

in this or a foreign country, before the invention thereof

by the applicant for patent, or

(b) the invention was patented or described in a printed

publication in this or a foreign country or in public use

or on sale in this country, more than one year prior to

the date of the application for patent in the United States,

an 3

(d) the invention was first patented or caused to be

patented, or was the subject of an inventor’s certificate,

by the applicant or his legal representatives or assigns in

a foreign country prior to the date of the application for

patent in this country on an application for patent or in-

ventor’s certificate filed more than twelve months before

the filing of the application in the United States, or

(e) the invention was described in a patent granted on

an application for patent by another filed in the United

States before the invention thereof by the applicant for

patent, or on an international application by another who

has fulfilled the requirements of paragraphs (1), (2), and

(4) of section 371(c) of this title before the invention thereof

by the applicant for patent, or

(f) he did not himself invent the subject matter sought

to be patented, or

(g) before the applicant’s invention thereof the invention

was made in this country by another who had not aban-

Stat. 797; July 28, 1972,

A patent may not be obtained though the invention is

not identically disclosed or described as set forth in § 102

title, if the differences between the subject matter

the

Subject matter developed by another person, which qual-

ifies as prior art only under subsection (f) or (g) of § 102

of this title, shall not preclude patentability under this

section where the subject matter and the claimed invention

(July 19, 1952, ch. 950, 66 Stat. 797; Nov. 8, 1984, Pub.

L. 98-622, § 103)

§ 104 Invention made abroad

In proceedings in the Patent and Trademark Office and

in the courts, an applicant for a patent, or a patentee,

thereto, in a foreign country, except as provided in sec-

Hel

this title

serving in

, iy. or

entitled to

invention

States

such

365

@ person,

and

yet

with

ch. 950, 66 Stat. 797; Jan. 2, 197

’

5, Pub.

. L. 94

98-622

975, Pub

691; Nov. 8, 1984, Pub.

88 Stat. 1949; Nov. 14, 1

oseeekBSEeaSEueegi g =.

fancier: i

tf ali] anes al

i alba + is A

ELUTE Hn nes, |

HPs ell a

iat 1 ipa? att

ii file a 2.

ah itnin a lie e

contemplated by the inventor of carrying out his invention.

The specification shall conclude with one or more claims

particularly pointing’ cut and distinctly claiming the subject

matter which the applicant regards as his invention.

A claim may be written in independent or, if the nature

of the case admits, in dependent or multiple dependent

form.

Subject to the following paragraph, a claim in dependent

form shall contain a reference to a claim previously set

forth and then specify a further limitation of the subject

matter claimed. A claim in dependent form shall be con-

strued to incorporate by reference ali the limitations of

the claim to which it refers.

A claim in multiple dependent form shall contain a ref-

erence, in the alternative only, to more than one claim

previously set forth and then specify a further limitation

of the subject matter claimed. A multiple dependent claim

shall net serve as a basis for any other multiple dependent

claim. A multiple dependent claim shall be construed to

incorporate by reference all the limitations of the partic-

ular claim in relation to which it is being considered.

An element in a claim for a combination may be ex-

pressed as a means or step for performing a specified

function without the recital of structure, material, or acts

in support thereof, and such claim shall be construed to

cover the corresponding structure, material, or acts de-

scribed in the specification and equivalents thereof.

(July 19, 1952, ch. 950, 66 Stat. 798; July 24, 1965,

Pub. L. 89-83, §9, 79 Stat. 261; Nov. 14, 1975, Pub. L

94-131, §7, 89 Stat. 691.)

Sherman Antitrust Act.

(15 USC § 1-7, codifying the Sherman Antitrust Act, July

2, 1890, 26 Stat 209, as amended)

§ 1 Trusts, etc., in restraint of trade illegal; penalty.

Every contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or commerce

among the several States, or with foreign nations, is de-

clared to be illegal. Every person who shall make ary

contract or engage in any combination or conspiracy her-

eby declared to be illegal shall be deemed guilty of a

felony, and, on conviction thereof, shall be punished by

fine not exceeding one million dollars if a corporation, or,

if any other person, one hundred thousand dollars, or by

imprisonment not exceeding three years, or by both said

punishments, in the discretion of the court.

(July 2, 1890, ch 647, §1, 26 Stat 209; Aug. 17, 1937,

ch 690, title VIII, 50 Stat 693; July 7, 1955, ch 281, 69

Stat 282; Dec. 21, 1974, Pub L 93-528, § 3, 88 Stat 1708;

Dec. 12, 1975, Pub L 94-145, § 2, 89 Stat 801.)

§ 2 Monopolizing trade a felony; penalty.

Every person who shall monopolize, or attempt to mo-

nopolize, or combine or conspire with any other person or

persons, to monopolize any part of the trade or commerce

among the several States, or with foreign nations, shall

be deemed guilty of a felony, and, on conviction thereof,

shall be punished by fine not exceeding one million dollars

if a corporation, or, if any other person, one hundred

thousand dollars, or by imprisonment not exceeding three

years, or by both said punishments, in the discretion of

the court.

(July 2, 1890, ch 647, §2, 26 Stat 209; July 7, 1955,

ch 281, 69 Stat 282; Dec. 21, 1974, Pub L 93-528, § 3, 88

Stat 1708.)

$3 Trusts in Territories or District of Columbia illegal;

combination a felony.

Every contract, combination in form of trust or other-

wise, or conspiracy, in restraint of trade or commerce in

any Territory of the United States or of the District of

Columbia, or in restraint of trade or commerce between

any such Territory and another, or between any such Ter-

ritory or Territories and any State or States or the District

of Columbia, or with foreign nations, or between the Dis-

trict of Columbia and any State or States or foreign na-

tions, is deciared illegal. Every person who shall make any

such contract or engage in any such combination or con-

spiracy, shall be deemed giaity of a felony, and, on con-

viction thereof, shall be punished by fine not exceeding

one million dollars if a corporation, or, if any other person,

one hundred thousand dollars, or by imprisonment not ex-

ceeding three years, or both said punishments, in the dis-

cretion of the court.

(July 2, 1890, ch 647, $3, 26 Stat 209; July 7, 1955,

ch 281, 69 Stat 282; Dec. 21, 1974, Pub L 98-528, §3, 88

Stat 1708.)

§ 4 Jurisdiction of courts; duty of United States attorneys;

procedure.

The several district courts of the United States are in-

vested with jurisdiction to prevent and restrain violations

of sections 1 to 7 of this titie; and it shall be the duty of

the several United States attorneys, in their respective

districts, under the direction of the Attorney General, to

institute proceedings in equity te prevent and restrain such

violations. Such proceedings may be by way of petition

setting forth the case and praying that such violation shall

be enjoined or otherwise prohibited. When the parties com-

plained of shall have been duly notified of such petition

the court shall proceed, as soon as may be, to the hearing

and determination ef the case; and pending such petition

and before final decree, the court may at any time make

“

such temporary restraining order or prohibition as shall

be deemed just in the premises.

(July 2, 1890, ch 647, §4, 26 Stat 209; Mar. 3, 1911,

ch 231, § 291, 36 Stat 1167; June 25, 1948, ch 646, §1,

62 Stat 909.)

§ 5 Bringing in additional parties. .

Whenever it shall appear to the court before which any

proceediaaa g under section 4 of this title ma

that the ends of justice require that other parties should

be brought before the court, the court may cause them to

be summoned, whether they reside in the district in which

the court is held or not; and subpoenas to that end may

be served in any district by the marshal thereof.

(July 2, 1890, ch 647, §5, 26 Stat 216.)

§6 Forfeiture of property in transit.

Anv property owned under any contract or by any com-

bination, or pursuant to any conspiracy (and being the

subject thereof) mentioned in section 1 of this title, and

being in the course of transportation from one State to

another, or to a foreign country, shail be forfeited to the

OO eee ee ee ee

proceedings as those provided by law for the forfeiture,

seizure, and condemnation of property imported into the

United States contrary to law.

(July 2, 1890, ch 647, §6, 26 Stat 210.)

§ 6a Conduct involving trade or commerce with foreign

nations.

Sections 1 to 7 of this title shall not apply to conduct

involving trade or commerce (other than import trade or

impert commerce) with foreign nations unless—

(1) such conduct has a direct, substantial, and reasonably

foreseeable effect—

(A) on trade or commerce which is not trade or com-

merce with foreign nations, or on import trade or import

commerce with foreign nations; or

(B) on export trade or export commerce with foreign

nations, of a person engaged in such trade or commerce

in the United States; and

gives rise to a claim under the provisions

7 of this title, other than this section.

7 of this title apply to such conduct only

because of the operation of paragraph (1XB), then sections

of this title shall apply to such conduct only for

injury to export business in the United States.

(Juiy 2, 1890, ch 647, $7, as added Oct. 8, 1982, Pub

L 97-290, title IV, § 402, 96 Stat 1246.)

$7 “Person” defined.

The word “person”, or “persons”, wherever used in

sections i to 7 of this title shall be deemed to include

corporations and associations existing under or authorized

by the laws of either the United States, the laws of any

of the Territories, the laws of any State, or the laws of

any foreign country.

(July 2, 1890, ch 647, §8, 26 Stat 210.)

Clayten Antitrust Act.

(15 USC §§ 12-27 and 29 USC §52, codifying the Clayton

Antitrust Act, Oct. 15, 1914, ch 323, 38 Stat 730, as

amended)

An Act to supplement existing laws against unlawful re-

straints and monopolies, and for other purposes.

§ 12 Words defined; short title.

(a) “Antitrust laws,’’ as used herein, includes the Act

entitled “An Act to protect trade and commerce against

10a

unlawful restraints and monopolies,” approved July second,

eighteen hundred and ninety; sections seventy-three to sev-

enty-seven, inclusive, of an Act entitled “An Act to reduce

taxation, to provide revenue for the Government, and for

other purposes,” of August twenty-seventh, eighteen

hundred and ninety-four; and Act entitled “An Act to amend

sections seventy-three and seventy-six of the Act of August

twenty-seventh, eighteen hundred and ninety-four, entitled

‘An Act to reduce taxation, to provide revenue for the

Government, and for other purposes,’ ”’ approved February

twelfth, nineteen hundred and thirteen; and also this Act.

“Commerce,” as used herein, means trade or commerce

among the several States and with foreign nations, or be-

tween the District of Columbia or any Territory of the

United States and any State, Territory, or foreign nation,

or between any insular possessions or other places under

the jurisdiction. of the United States; or between any such

possession or place and any State or Territory of the United

States or the District of Columbia or any foreign nation,

or within the District of Columbia or any Territory or any

insular possession or other place under the jurisdiction of

the United States; Provided, That nothing in this Act con-

tained shall apply to the Phillippine Islands.

The word “person” or “‘persons” wherever used in this

Act shall be deemed to include corporations and associa-

tions existing under or authorized by the laws of either

the United States, the laws of any of the Territories, the

laws of any State, or the laws of any foreign country.

(b) This Act may be cited as the “Clayton Act’.

(Oct. 15, 1914, ch 323, § 1, 38 Stat 730; Sept. 30, 1976,

Pub L 94-435, title Ill, § 305(b), 90 Stat 1397.)

§ 13 Discrimination in price, services, or facilities.

(a) Price; selection of customers.

It shall be unlawful for any person engaged in com-

merce, in the course of such commerce, either directiy or

lla

indirectly, to discriminate in price between different pur-

chasers of commodities of like grade and quality, where

either or any of the purchases involved in such discrimi-

nation are in commerce, where such commodities are sold

for use, consumption, or resale within the United States

or any Territory thereof or the District of Columbia or

any insular possession or other place under the jurisdiction

of the United States, and where the effect of such dis-

crimination may be substantially to lessen competition or

tend to create a monopoly in any line of commerce, or to

injure, destroy, or prevent competition with any person

who either grants or knowingly receives the benefit of

such discrimination, or with customers of either of them:

Provided, That nothing herein contained shall prevent dif-

ferentials which make only due allowance for differences

in the cost cf manufacture, sale, or delivery resulting from

the differing.methods or quantities in which such com-

modities are to such purchasers sold or delivered: Pro-

vided, however, That the Federal Trade Commission may,

after due investigation and hearing to all interested par-

ties, fix and establish quantity limits, and revise the same

as it finds necessary, as to particular commodities or

classes of commodities, where it finds that available pur-

chasers in greater quantities are so few as to render dif-

ferentials on account thereof unjustly discriminatory or

promotive of monopoly in any line of commerce; and the

foregoing shall then not be construed to permit the dif-

ferentials based on differences in quantities greater than

those so fixed and established: And provided further, That

nothing herein contained shall prevent persons engaged in

selling goods, wares, or merchandise in commerce from

selecting their own customers in bona fide transactions

and not in restraint of trade: And provided further, That

nothing herein contained shaii prevent price changes from

time to time where in response to changing conditions

affecting the market for or the marketability of the goods

concerned, such as but not limited to actual or imminent

Hit

12a

deterioration of perishable goods, obsolescence of seasonal

goods, distress sales under court process, or sales in good

faith in discontinuance of business in the goods concerned.

Onan inafecke case of deertditett

made, at any

that has

facilities

case thus

the person

FH PH TT ee E

sitin 4 atl ia

Ai | jist: f

tate | us aE il

ele

AH TE

LETH EAT BEA

It shall be unlawful for any person engaged in com-

merce, in the course of such commerce, knowingly to in-

(Oct. 15, 1914, ch 323, § 2, 38 Stat 730; June 19, 1936,

ch 592, $1, 49 Stat 1526.)

$14 Sale, etc., on agreement not to use goods of com-

petitor.

It shall be unlawful for any person engaged in com-

merce, in the course of such commerce, to lease or make

machinery, supplies, or other commodities, whether pat-

ented or unpatented, for use, consumption, or resale within

the United States or any Territory thereof or the District

Hani ;

giocis

igh:

HLH EE

(Oct. 15, 1914, ch cae § 3, 38 Stat 731.)

§ 15 Suits by persons injured.

(a) Amount of recovery; prejudgment interest.

rene tng tata ah

pease who shall be

Hib

elite

il;

Bul

He if

Athy

15a

or representative acted intentionally for delay, or other-

wise acted in bad faith;

(2) whether, in the course of the action involved, such

person or the opposing party, or either party’s represent-

ative, violated any applicable rule, statute, or court order

(b) Amount of damages payable to foreign states and in-

strumentalities of foreign states.

{: Gl Seaas Se merenetse. Rassereph (2), any person who

ira RAL cnceet of tes tun. damages

(2) Paragraph (1) shall not appiy to a foreign state if—

(A) such foreign state would be denied, under section

1605(aX2) of title 28, immunity in a case in which the

action is based upon a commercial activity, or an act, that

is the subject matter of its claim under this section;

(B) such foreign state waives all ‘efenses based upon

or arising out of its status as a foreign state, to any claims

brought against it in the same action;

activities; and

(D) such foreign state does not function, with respect

to the commercial activity, or the act, that is the subject

matter of its claim under this section as a procurement

entity for itself or for another foreign state.

For purposes of this section—

(1) the term “commercial activity’ shall have the mean-

ing given it in section 1603(d) of title 28, and

(2) the term “foreign state” shall have the meaning

given it in section 1603(a) of title 28.

(Oct. 15, 1914, ch 328, § 4, 38 Stat 731; Sept. 12, 1980,

Pub L 96-349, § 4(aX(1), 94 Stat 1156; Dec. 29, 1982, Pub

L 97-398, 96 Stat 1964.)

(Oct. 15, 1914, ch 323, § 4A, as added July 7, 1955,ch

283, § 1, 69 Stat 282, and amended Sept. 12, 1980, Pub

L 96-349, § 4(aX2), 94 Stat 1156.)

§ 15b Limitation of actions

Any action to enforce any cause of action under sections

15, 15a, or 15c of this title shall be forever barred unless

commenced within four years after the cause of action

accrued. No cause of action barred under existing law on

the effective date of this Act shall be revived by this Act.

(Oct 15, 1914, ch 323, §4B, as added July 7, 1955, ch

283, §1, 69 Stat 283, and amended Sept. 30, 1976, Pub

L 94-435, title III, § 302(1), 90 Stat 1396.)

§ 15¢ Actions by State attorneys general.

(a) Parens patriae; monetary relief; damages; prejudgment

interest.

(1) Any attorney general of a State may bring a civil

action in the name of such State, as parens patriae on

behalf of natural persons residing in such State, in any

i court

18a

(A) whether such State or the opposing party, or either

party’s representative, made motions or asserted claims

or defenses so lacking in merit as to show that such party

or representative acted intentionally for delay or otherwise ~

acted in bad faith;

(B) whether, in the course of the action involved, such

State or opposing party, or either party’s representative,

violated any applicable rule, statute, or court order pro-

viding for sanctions for dilatory behavior or otherwise pro-

viding for expeditious proceedings; and

party’s representative, engaged in conduct primarily for

the purpose of delaying the litigation or increasing the

cost thereof.

mine he

§£22 a

SaoBR 8 69S8e

Pa Ht

nel (Hh

nai | 1g

1: | 4H

AnH x i a

22104! ie

eciidi = 2iat

(2) the court may, in its discretion, award a reasonable

attorney’s fee to a prevailing defendant upon a finding

(1) the amount of the plaintiffs’ attorney’s fee, if any,

In any action under subsection (a) of this section—

shall be determined by the court; and

(d) Attorney’s fees.

20a

that the State attorney general has acted in bad faith,

vexatiously, wantonly, or for oppressive reasons.

(Oct. 15, 1914, ch 323, §4C, as added Sept. 30, 1976,

Pub L 94-435, title III, § 301, 90 Stat 1394, and amended

Sept. 12, 1980, Pub L 96-349, § 4(aX3), 94 STat 1157.)

§ 15d Measurement of damages.

In any action under section 15c({aX1) of this title, in

which there has been a determination that a defendant

mrp tee. 2. Lr pla fpsaiensry hy hoy

(Oct. 15, 1914, ch 328, § 4D, as added Sept. 30, 1976,

Pub L 94-435, title Il, § 301, 90 Stat 1395.)

§ 15e Distribution of damages.

Monetary relief recovered in an action under section

15¢e(aX1) of this title shall—

(1) be distributed in such manner as the district court

in its discretion may authorize; or

(2) be deemed a civil penalty by the court and deposited

with the State as general revenues; subject in either case

to the requirement that any distribution procedure adopted

afford each person a reasonable opportunity to secure his

appropriate portion of the net monetary relief.

(Oct. 15, 1914, ch 328, §4E, as added Sept. 30, 1976,

Pub L 94-435, title Ill, § 301, 90 Stat 1295)

§ 15f Actions by Attorney General.

(a) Notification to State attorney general.

2la

Whenever the Attorney General of the United States

an action under the antitrust laws, and he

(b) Availabitity of files and other materials.

To assist a State atterney general in evaluating the

notice or in bringing any action under this Act, the

Attaraiy Cabital of the United States shal upon request

by auch Hate sthecoay ghiatll, Genk orale 46tim, ©

the extent permitted by law, any investigative files or

other materials which are or may be relevant or material

to the actual or potential cause of action under this Act.

(Oct. 15, 1914, ch 323, § 4F, as added Sept. 30, 1976,

Pub L 94-435, title III, § 301, 90 Stat 1395.)

§ 15g Definitions.

For the purposes of sections 15c, 15d, 15e, and 15 f of

this title:

(1) The term “State attorney general’’ means the chief

legal officer of a State, or any other person authorized by

State law to bring actions under section 15c of this title,

and includes the Corporation Counsel of the District of

Columbia, except that such term does not include any per-

son employed or retained on—

(A) contingency fee based on a percentage of the mon-

etary relief awarded under this section; or

(B) any other contingency fee basis, unless the amount

of the award of a reasonable attorney’s fee to a prevailing

plaintiff is determined by the court under section 15c(d\1)

of this title.

22a

(2) The term “State” means a State, the District of

Columbia, the Commonwealth of Puerto Rico, and any

other territory or possession of the United States.

(3) The term “natural persons” does not include pro-

prietorships or partnerships.

(Oct. 15, 1914, ch 323, §4G, as added Sept. 30, 1976,

Pub L 94-436, title III, $301, 90 Stat 1396.)

§ 15h Applicability of parens patriae actions.

Sections 15c, 15d, 15e, 15f, and 15g of this title shall

apply in any State, unless such State provides by law for

its nonapplicability in such State.

(Oct. 15, 1914, ch 323, § 4H, as added Sept. 30, 1976,

Pub L, 94-435, title II, § 301, 90 Stat 1396.)

§ 16 Judgments.

(a) Prima facie evidence; collateral estoppel.

A final judgment or decree heretofore or hereafter ren-

dered in any civil or criminal proceeding brought by or

on behalf of the United States under the antitrust laws

to the effect that a defendant has violated said laws shall

be prima facie evidence against such defendant in any

action or proceeding brought by any other party against

such defendant under said laws as to all matters respecting

which said judgment or decree would be an estoppel as

between the parties thereto: Provided, That this section

shall not apply to consent judgments or decrees entered

before any testimony has been taken. Nothing contained

in this section shall be construed to impose any limitation

on the application of collateral estoppel, except that, in

any action or proceeding brought under the antitrust laws,

collateral esteppel effect shall not be given to any finding

made by the Federal Trade Commission under the anti-

trust laws or under section 45 of this title which could

give rise to a.claim for relief under the antitrust laws.

ts relating to such proposal and any responses by the

}

ithi -day period. Copies of such pro-

and any other materials and documents which the

i considered determinative in formulating such

, Shall also be made available to the public at the

istrict court and in such other districts as the court may

direct. Simultaneously with the filing of such

, unless otherwise instructed by the court, the

United States shall file with the district court, publish in

the Federal Register, and thereafter furnish to any person

upon request, a competitive impact statement which shall

recite—

(i) the nature and purpose of the proceeding;

(2) a description of the practices or events giving rise

to the alleged violation of the antitrust laws;

(3) an explanation of the proposal for a consent judg-

ment, including an explanation of any unusual circum-

stances giving rise to such proposal or any provision

contained therein, relief to be obtained thereby, and the

anticipated effects on competition of such relief; —

(4) the remedies available to potential private plaintiffs

damaged by the alleged violation in the event that such

TEE

24a

proposal for the consent judgment is entered in such pro-

ceeding;

(5) a description of the procedures available for modi-

fication of such proposal; and

(6) a description and evaluation of alternatives to such

proposal actually considered by the United States.

The United. States shall also cause to be published,

commencing at least 60 days prior to the effective date

of the judgment described in subsection (b) of this section,

for 7 days over a period of 2 weeks in newspapers of

general circulation of the district in which the case has

been filed, in the District of Columbia, and in such other

districts as the court may direct—

(i) a summary of the terms of the proposal for consént

judgment,

(ii) a summary of the competitive impact statement filed

under subsection (b) of this section,

(iii) and a list of the materials and documents under

subsection (b) of this section which the United States shal

make available for purposes of meaningful public comment,

and the place where such materials and documents are

available for public inspection.

(d) Consideration of public comments by Attorney General

and publication of response.

During the 60-day period as specified in suvsection (b)

of this section, and such additional time as the United

States may request and the court may grant, the United

States shall receive and consider any written comments

relating to the proposal for the consent judgment submit-

ted under subsection (b) of this section. The Attorney Gen-

eral or his designee shall establish procedures to carry out

the provisions of this subsection, but such 60-day time

25a

period shall not be shortened except by order of the dis-

trict court upon a showing that (1) extraordinary circum-

stances require such shortening and (2) such shortening is

not: adverse to the public interest. At the close of the

peried during which such comments may be received, the

United States shall file with the district court and cause

to be published in the Federal Register a response to such

comments.

(e) Public interest determination.

Before entering any consent judgment proposed by the

United States under this section, the court shall determine

that the entry of such judgment is in the public interest.

For the purpose of such determination, the court may

consider—

(1) the competitive impact of such judgment, including

termination of alleged violations, provisions for enforce-

ment and modification, duration or relief sought, antici-

pated effects of alternative remedies actually considered,

and any other considerations bearing upon the adequacy

of such judgment;

(2) the impact of entry of such judgment upon the public

generally and individuals alleging specific injury from the

violations set forth in the complaint including consideration

of the public benefit, if any, to be derived from a deter-

mination of the issues at trial.

) Procedure for public interest determination.

In making its determination under subsection (e) of this

section, the court may—

(1) take testimony of Government officials or experts or

such other expert witnesses, upon motion of any party or

’ participant or upon its own motion, as the court may deem

appropriate;

(2) appoint a special master and such outside consultants

or expert witnesses as the court may deem appropriate;

iby 4 bet wie see

’ ee 7

;

‘

“4

sty

with the United States under subsection (d) of this section

concerning the proposed judgment and the responses of

the United States to such comments and

; and

(5) take such other action in the public interest as the

gra22218

hii:

fit Hay!

Not later than 10 days following the date of the filing

shall file with

27a

aah

fen

and

the

or which the defendant reasonably should have known.

5a of

an eee

that such filing

description of such communications known to

peagaye

tial

i 2 : iin

iene

any 3

aH chk HE!

(Oct. 15, 1914, ch 323, $5, 38 Stat 731; July 7, 1955,

ch 283, §2, 69 Stat 283; Dec. 21, 1974, Pub L 93-528,

§ 2, 88 Stat 1706; Sept. 30, 1976, Pub L 94-435, title III,

§ 302(2), 90 Stat 1396; Sept 12, 1980, Pub L 96-349, § 5(a),

94 Stat 1157.)

(Oct. 15, 1914, ch 323, §6, 38 Stat 731.)

§ 18 Acquisition by one corporation of stock of another.

No person engaged in commerce or in any activity af-

fecting commerce shall acquire, directly or indirectly, the

assets of another engaged also in commerce or in

any activity affecting commerce, where in any line of com-

merce or in any affecting commerce in any

‘

activity i

of the country, the effect of such acquisition may

stantially to lessen competition, or to tend to

5 i g .

Tay

[ie al

Hie

‘

;

ttl

Hye

HLTH

owning all or any part of the stock of a

or short line constructed by an independent com-

there is no substantial competition between

company owning the branch line so constructed and

lines, nor to prevent any such common carrier from

and

Nor shall anything herein contained be construed to pro-

acquiring or owning all or any part of the stock of such

acquisition of stock or otherwise of any other common

carrier where there is no substantial competition between

or an interest therein, nor to prevent such common carrier

from extending any of its lines through the medium of the

the company extending its lines and the company whose

stock, property, or an interest therein is so acquired.

(Oct. 15, 1914, ch 323, §7, 38 Stat 731; Dec. 29, 1950,

ch 1184, 64 Stat 1125; Sept. 12, 1980, Pub L 96-349, § 6(a),

94 Stat 1157.)

subsection (bX(1) of this section has expired, if—

(1) the acquiring person, or the person whose voting

securities or assets are being acquired, is engaged in com-

merce or in any activity affecting commerce;

(2XA) any voting securities or assets of a person en-

gaged in manufacturing which has annual net sales or total

(A) 15 per centum or more of the voting securities or

assets of the acquired person, or

(B) an aggregate total amount of the voting securities

and assets of the acquired person in excess of $15,000,000.

In the case of a tender offer, the person whose voting

securities are sought to be acquired by a person required

to file notification under this subsection shall file notifi-

cation pursuant to rules under subsection (d) of this sec-

tion.

(b) Waiting period; publication; voting securities.

(1) The waiting period required under subsection (a) of

this section shall—

(A) begin on the date of the receipt by the Federal Trade

Commission and the Assistant Attorney General in charge

of the Antitrust Division of the Department of Justice

(hereinafter referred to in this section as the “Assistant

Attorney General’’) of —

(i) the completed notification required under subsection

(a) of this section, or

(1) acquisitions of goods or realty transferred in the

ordinary course of business;

(2) acquisitions of bonds, mortgages, deeds of trust, or

other obligations which are not voting securities;

33a

(3) acquisitions of voting securities of an issuer at least

suadaainanies amomrenigtaaredl ances dened

by the acquiring person prior to such acquisition;

(4) transfers to or from a Federal agency or a State or

political subdivision t? zreof;

(5) transactions specifically exempted from the antitrust

laws by Federal statute;

Bc or sommes g. hea x angie stadt penance

laws by Federal statute if approved by a Federal agency,

if copies of all information and documentary material filed

with such agency are contemporaneously filed with the

Federal Trade Commission and the Assistant Attorney

General;

(7) transactions which require agency approval under

section 1828(c) of title 12, or section 1842 of title 12;

(8) transactions which require agency approval under

section 1843 of title 12, section 1726 or 1730a(e) of title

12, or section 1464 of title 12, if copies of all information

and documentary material filed with any such agency are

contemporaneously filed with the Federal Trade Commis-

sion and the Assistant Attorney General at least 30 days

prior to consummation of the proposed transaction;

(9) acquisitions, solely for the purpose of investment, of

voting securities, if, as a result of such acquisition, the

securities acquired or held do not exceed 10 per centum

of the outstanding voting securities of the issuer;

(10) acquisitions of voting securities, if, as a result of

such acquisition, the voting securities acquired do not in-

crease, directly or indirectly, the acquiring person’s per

centum share of outstanding voting securities of the issuer;

(11) acquisitions, solely for the purpose of investment,

by any bank, banking association, trust company, invest-

ment company, or insurance company, of (A) voting se-

34a

curities pursuant to a plan of reorganization or dissolution;

or (B) assets in the ordinary course of its business; and

(12) such other acquisitions, transfers, or transactions,

as may be exempted under subsection (dX2\B) of this sec-

tion.

(d) Commission rules.

The Federal Trade Commission, with the concurrence

of the Assistant Attorney General and by rule in accord-

ance with section 553 of title 5, consistent with the pur-

poses of this section—

(1) shall require that the notification required under sub-

section (a) of this section be in such form and contain such

documentary material and information reievant to a pro-

posed acquisition as is necessary and appropriate to enable

the Federal Trade Commission and the Assistant Attorney

General to determine whether such acquisition may, if con-

summated, violate the antitrust laws; and

(2) may—

(A) define the terms used in this section;

(B) exempt, from the requirements of this section, classes

of persons, acquisitions, transfers, or transactions which

are not likely to violate the antitrust laws; and

appropriate to carry out the purposes of this section.

(e) Additional information; waiting period extensions.

(1) The Federal Trade Commission or the Assistant

Attorney General may, prior to the expiration of the 30-

day waiting period (or in the case of a cash tender offer,

the 15-day waiting period) specified in subsection (bX1) of

this section, require the submission of additional infor-

mation or documentary material relevant to the proposed

acquisition, from a person required to file notification with

respect to such acquisition under subsection (a) of this

35a

section prior to the expiration of the waiting period spec-

ified in subsection (bX1) of this section, or from any officer,

director, partner, agent, or employee of such person.

(2) The Federal Trade Commission or the Assistant

Attorney General, in its or his discretion, may extend the

30-day waiting period (or in the case of a cash tender

offer, the 15-day waiting period) specified in subsection

(bX1) of this section for an additional period of not more

than 20 days (or in the case of a cash tender offer, 10

days) after the date on which the Federal Trade Com-

mission or the Assistant Attorney General, as the case

may be, receives from any person to whom a request is

made ~nder paragraph (1), or in the case of tender offers,

the quiring person, (A) all the information and docu-

mentary material required to be submitted pursuant to

such a request, or (B) if such request is not fully complied

with, the information and documentary material submitted

and a statement of the reasons for such noncompliance.

Such additional period may be further extended only by

the United States district court, upon an application by

the Federal Trade Commission or the Assistant Attorney

General pursuant to subsection (g\2) of this section.

() Preliminary injunctions; hearings.

If a proceeding is instituted or an action is filed by the

Federal Trade Commission, alleging that a proposed ac-

quisition violates section 18 of this title, or section 45 of

this title, or an action is filed by the United States, al-

leging that a proposed acquisition violates such section 18

of this title, or section 1 or 2 of this titie, and the Federal

Trade Commission or the Assistant Attorney General (1)

files a motion for a preliminary injunction against consum-

mation of such acquisition pendente lite, and (2) certifies

to the United States district court for the judicial district

within which the respondent resides or carries on business,

or in which the action is brought, that it or he believes

36a

that the public interest requires relief pendente lite pur-

suant to this subsection—

(1) Any person, or any officer, director, or partner

thereof, who fails to comply with any provision of this

section shall be liable to the United States for a civil

penalty of not more than $10,000 for each day during

which such person is in violation of this section. Such

penalty may be recovered in a civil action brought by the

United States.

(2) If any person, or any officer, director, partner, agent,

or employee thereof, fails substantially to comply with the

notification requirement under subsection (a) of this section

or any request for the submission of additional information

or documentary material under subsection (eX1) of this

section within the waiting period specified in subsection

(bX1) of this section and as may be extended under sub-

section (eX%2) of this section, the United States district

court-—

(A) may order compliance;

(B) shall extend the waiting period specified in subsec-

tion (bX1) of this section and as may have been extended

87a

under subsection (e2) of this section until there has been

substantial compliance, except that, in the case of a tender

offer, the court may not extend such waiting period on

the basis of a failure, by the person whose stock is sought

to be acquired, to comply substantially with such notifi-

cation requirement or any such request; and

in its discretion determines necessary or appropriate, upon

application of the Federal Trade Commission or the As-

sistant Attorney General.

(h) Disclosure exemption.

Any information or documentary material filed with the

Assistant Attorney General or the Federal Trade Com-

mission pursuant to this section shall be exempt from dis-

closure under section 552 of ‘title 5, and no such

information or documentary material may be made public,

except as may be relevant to any administrative or judicial

action or proceeding. Nothing in this section is intended

to prevent disclosure to either body of Congress or to any

duly authorized committee or subcommittee of the Con-

gress.

(i) Construction with other laws.

(1) Any action taken by the Federal Trade Commission

or the Assistant Attorney General or any failure of the

Federal Trade Commission or the Assistant Attorney Gen-

eral to take any action under this section shall not bar

any proceeding or any action with respect to such acqui-

sition at any time under any other section of this Act or

any other provision of law.

(2) Nothing contained in this section shall limit the au-

thority of the Assistant Attorney General or the Federal

Trade Commission to secure at any time from any person

documentary material, oral testimony, or other information

under the Antitrust Civil Process Act {15 USC 1311 et

38a

seq.|, the Federal Trade Commission Act [15 USC 41 et

seq.], or any other provision of law.

(j) Report to Congress; legislative recommendations.

Beginning not later than January 1, 1978, the Federal

Trade Commission, with the concurrence of the Assistant

Attorney General, shall annually report to the Congress

on the operation of this section. Such report shall include

an assessment of the effects of this section, of the effects,

purpose, and need for any rules promulgated pursuant

thereto, and any recommendations for revisions of this

section.

(Oct. 15, 1914, ch 523, § 7A, as added Sept. 30, 1976,

Pub L 94-435, title II, § 201, 90 Stat 1390.)

§ 19 Interlocking directorates and officers.

No private banker or director, officer, or employee of

any member bank of the Federal Reserve Sytem or any

branch thereof shall be at the same time a director, officer,

or employee of any other bank, banking association, sav-

ings bank, or trust company organized under the National

Bank Act [12 USC 21 et seq.] or organized under the laws

of any State or of the District of Columbia, or any branch

thereof, except that the Board of Governors of the Federal

Reserve System may by regulation permit such service as

a director, officer, or employee of not more than one other

such institution or branch thereof; but the foregoing pro-

hibition shall not apply in the case of any one or more of

the following or any branch thereof:

(1) A bank, banking association, savings bank, or trust

co.upany, more than 90 per centum of the stock of which

is -wned directly or indirectly by the United States or by

aity corporation of which the United States directly or

indirectly owns more than 90 per centum of the stock.

(2) A bank, banking association, savings bank, or trust

company which has been placed formally in liquidation or

39a

which is in the hands of a receiver, conservator, or other

official exercising similar functions.

(3) A corporation, principally engaged in international

or foreign banking or banking in a dependency or insular

possession of ihe United States which has entered into an

agreement with the Board of Governors of the Federal

Reserve System pursuant to section 25 of the Federal

Reserve Act, as amended [12 USC 601 et seq.]}

(4) A bank, banking association, savings bank, or trust

company, more than 50 per centum of the common stock

of which is owned directly or indirectly by persons who

own directly or indirectly more than 50 per centum of the

common stock of such member bank.

(5) A bank, banking association, savings bank, or trust

company not located and having no branch in the same

city, town, or village as that in which such member bank

or any branch thereof is located, or in any city, town, or

village contiguous or adjacent thereto.

(6) A bank, banking association, savings bank, or trust

company not engaged in a class or classes of business in

which such member bank is engaged.

(7) A mutual savings bank having no capital stock.

Until February 1, 1939, nothing in this section shall

prohibit any director, officer, or employee of any member

bank of the Federal Reserve System, or any branch

thereof, who is lawfully serving at the same time as a

private banker or as a director, officer, or employee of

any other bank, banking association, savings bank, or trust

company, or any branch thereof, on August 28, 1935, from

continuing such service.

The Board of Governors of the Federal Reserve System

is authorized and directed to enforce compliance with this

section, and to prescribe such rules and regulations as it

deems necessary for that purpose.

Hay

uy AIP

livitlis

fe le F i

i aa

ri st Ll iH

RALPH RH

R2CETBS es

Re EYE Hi

JH aH

a4)

Stat 722; May 15, 1916,

26, 1920, ch 206, 41 Stat 626;

Stat 253; Mar. 2, 1929, ch 581,

, ch 614, $329, 49 Stat 717.)

323

May

xg°8

“sis

4la

‘RU Reeser te enced camctate ia: cant eh latin todting

directorates, etc.

No common carrier engaged in commerce shall have any

dealings in securities, supplies, or other articles of com-

EET ELLY ee eae

nitleetistid ie iil i

in il AWE - if He iy

merce, or shall make or have any contracts for construc

Go ee ee cs ce oe a

Rg Fs, |

tile 2 i ue at

5 s¢

: fi: 1 ih ihe East

not exceding $5,000 or confined in jail not exceeding one

year, or both, in the discretion of the court.

(Oct. 15, 1914, ch 323, § 10, 38 Stat 734.)

of title 49; in the Federal Communications Commission

where applicable to common carriers engaged in wire or

radio communication or radio transmission of energy; in

the Civil Aeronautics Board where applicable to air car-

riers and foreign air carriers subject to the Civil Aero-

nautics Act of 1938; in the Board of Governors of the

Federal Reserve System where applicable to banks, bank-

ing associations, and trust companies; and in the Federal

Trade Commission where applicable to all other character

of commerce to be exercised as follows:

fal

aia

s3gs

ffeil (ute

HTH Hite Ay:

Hae

HHH

tape

Hy eee

HiGHu Le AT

ages st!

hype

person an 0

from such vi

other share

directors

i and 1 9 of t

teenage

iration of the time

no such petition

time, or, if a petition for

aisgies

Hise

time then until the re-

_ a

2 bes

ae i et

, HE ie ena

g Ssky : E 2 & its aoe 5

settling gate (iti

aie bie cl Ph

Hiealint iRa

EHH TEER EHH

Hib Whe |

Hg a

: ae

hil rata lin

: ae agi :

Gee it | ut itd

: aH Hien! Het

HAY HAT

, itt Fer

46a

Upon the filing of the record with its jurisdiction of the

court of appeals to affirm, enforce, modify, or set aside

orders of the commission or board shall be exclusive.

(e) Preference; liability under antitrust laws.

Such proceedings in the court of appeals shall be given

precedence over other cases pending therein, and shall be

in every way expedited. No order of the commission or

board or judgment of the court to enforce the same shall

in anywise relieve or absolve any person from any liability

under the antitrust laws.

(f) Service of complaints, orders and other processes.

Complaints, orders, and other processes of the commis-

sion or board under this section may be serviced by anyone

duly authorized by the commission or board, either (1) by

delivering a copy thereof to the person to be served, or

to a member of the partnership to be served, or to the

president, secretary, or other executive officer or a direc-

tor of the corporation to be served; or (2) by leaving a

copy thereof at the residence or the principal office or

place of business of such person; or (3) by mailing by

registered or certified mail a copy thereof addressed to

such person at his or its residence or principal office or

place of business. The verified return by the person so

serving said complaint, order, or other process setting forth

the manner of said service shall be proof of the same, and

the return post office receipt for said complaint, order, or

other process mailed by registered or certified mail as

aforesaid shall be proof of the service of the same.

(g) Finality of orders generally.

Any order issued under subsection (b) of this section

shall become final—

(1) upon the expiration of the time allowed for filing a

petition for review, if no such petition has been duly filed

within such time; but the commission or board may there-

Pris

ATH

Ply Leal

ij + sail TBE al a

udp iS: EE iat

HT HI it HiT

- yeey by Ease i iui! dill

i rll. Uh allah ie a

82. tas] 053 : Be ‘ nH i 4 : s

is 7] :

i if io EA

5 rj feat STEER

Hal ie

HEHE

48a

the expiration of thirty days from the time such order of

the commission or board was rendered, unless within such

thirty days either party has instituted proceedings to have

such order corrected so that it will accord with the man-

of Appeals or Supreme Court.

If the Supreme Court orders a rehearing; or if the case

is remanded by the court of appeals to the commission or

board for a rehearing, and if (1) the time allowed for filing

a petition for certiorari has expired, and no such petition

has been duly filed, or (2) the petition for certiorari has

been denied, or (3) the decision of the court has been

affirmed by the Supreme Court, then the order of the

commission or board rendered upon such rehearing shall

become final in the same manner as though no prior order

of the commission or board had been rendered.

(k) Definition of mandate.

As used in this section the term “mandate’’, in case a

mandate has been recalled prior to the expiration of thirty

days from the date of issuance thereof, means the final

mandate.

() Penalties.

Any person who violates any order issued by the com-

mission or board under subsection (b) of this section after

such order has become final, and while such order is in

effect, shall forfeit and pay to the United States a civil

penalty of not more than $5,000 for each violation, which

shall accrue to the United States and may be recovered

in a civil action brought by the United States. Each sep-

arate violation of any such order shall be a separate of-

fense, except that in the case of a violation through

continuing failure or neglect to obey a final order of the

49a

commission or board each day of continuance of such fail-

ure or neglect shall be deemed a separate offense.

(Oct, 15, 1914, ch 323, § 11. 38 Stat 734; June 19, 1934,

ch 652, §602(d), 48 Stat 1102; Aug. 23, 1985, ch 614,

§ 208(a), 49 Stat 704; June 28, 1988, ch 601, § 1107(g), 52

Stat 1028; June 25, 1948, ch 646, § 32(a), 62 Stat 991;

May 24, 1949, ch 189, § 127, 63 Stat 107; Dec. 29, 1950,

ch 1184, 64 Stat 1125; Aug. 28, 1958 Pub L 85-726, title

XIV, § 1401(b), 72 Stat 806; Aug. 28, 1958, Pub L 85-791,

$4, 72 Stat 948; July 23, 1959. Pub L 86-107, § 1, 73 Stat

243.)

§ 22 District in which to sue corporation.

Any suit, action, or proceeding under the antitrust laws

against a corporation may be brought not only in the ju-

diciai district whereof it is an inhabitant, but also in any

_ district wherein it may be found or transacts business; and

all process in such cases may be served in the district of

which it is an inhabitant, or wherever it may be found.

(Oct. 15, 1914, ch 323, § 12, 38 Stat 736.)

§ 23 Suits by United States; subpoenas for witnesses.

In any suit, action, or proceeding brought by or on

behalf of the United States subpoenas for witness who are

ired to attend a court of the United States in any

judicial district in any case, civil or criminal, arising under

the antitrust laws may run into any other district: Pro-

vided, That in civil cases no writ of subpoena shall issue

for witnesses living out of the district in which the court

is held at a greater distance than one hundred miles from

the place of holding the same without the permission of

the trial court being first had upon proper application and

cause shown.

(Oct. 15, 1914, ch 323, § 13, 38 Stat 736.)

§ 24 Liability of directors and agents of corporation.

50a

Whenever a corporation shall violate any of the penal

provisions of the antitrust laws, such violation shall be

deemed to be also that of the individual directors, officers,

or agents of such corporation who shall have authorized,

ordered, or done any of the acts constituting in whole or

in part such violation’, and such violation shall be deemed

a misdemeanor, and upon conviction therefor of any such

director, officer, or agent he shall be punished by a fine

of not exceeding $5,000 or by imprisonment for not ex-

ceeding one year, or by both, in the discretion of the court.

(Oct. 15, 1914, ch 323, § 14, 38 Stat 736.)

§ 25 Restraining violations; procedure.

The several district courts of the United States are in-

vested with jurisdiction to prevent and restrain violations

of this Act, and it shall be the duty of the several United

States attorneys, in their respective districts, under the

direction of the Attorney General, to institute proceedings

in equity to prevent and restrain such violations. Such

proceedings may be by way of petition setting forth the

case and praying that such violation shail be enjoined or

otherwise prohibited. When the parties complained of shall

have been duly notified of such petition, the court shall

proceed, as soon as may be, to the hearing and deter-

mination of the case; and pending such petition, and before

final decree, the court may at any time make such tem-

porary restraining order or prohibition as shall be deemed

just in the premises. Whenever it shall appear to the court

before which any such proceeding may be pending that

the ends of justice require that other parties should be

brought before the court, the court may cause them to be

summoned whether they reside in the district in which the

court is heid or not, and subpoenas to that end may be

served in any district by the marshal thereof.

(Oct. 15, 1914, ch 323, § 15, 38 Stat 736; June 25, 1948,

ch 646,, §1, 62 Stat 909.)

5la

§ 26 Injunctive relief for private parties; exception; costs.

Any person, firm, corporation, or association shall be

entitled to sue for and have injunctive reiief, in any court

of the United States having jurisdiction over the parties,

against threatened loss or damage by a violation of the

antitrust laws, including sections 13, 14, 18, and 19 of this

title, when and under the same conditions and principles

as injunctive relief against threatened conduct that will

cause loss or damage is granted by courts of equity, under

the rules governing such proceedings, and upon the exe-

cutior of proper bond against damages for an injunction

improvidently granted and a showing that the danger of

- irreparable Joss or damage is immediate, a preliminary

injunction may issue: Provided, That nothing herein con-

tained shall be construed to entitle any person, firm, cor-

poration, or association, except the United States, to bring

suit in equity for injunctive relief against any common

carrier subject to the provisions of subtitle IV of title 49,

in respect of any matter subject to the regulation, super-

vision, or other jurisdiction of the Interstate Commerce

Commission. In any action under this section in which the

plaintiff substantially prevails, the court shall award the

cost of suit, including a reasonable attorney’s fee, to such

plaintiff.

(Oct. 15, 1914, ch 323, § 16, 38 Stat 737; Sept. 30, 1976,

Pub L, 94-435, title III, § 302(3), 90 Stat 1396.)

§ 52 Statutory restriction of injunctive relief.

No restraining order or injunction shall be granted by

any court of the United States, or a judge or the judges

thereof, in any case between an employer and employees,

or between employers and employees, or between employ-

ees, or between persons employed and persons seeking

employment, involving, or growing out of, a dispute con-

cerning terms or conditions of employment, unless nec-

essary to prevent irreparable injury to property, or to a

property right, of the party making the application, for

52a

which injury there is no adequate remedy at law, and such

property or property right must be described with partic-

ularity in the application, which must be in writing and

sworn to by the applicant or by his agent or attorney.

And no such restraining order or injunction shall pro-

hibit any person or persons, whether singly or in concert,

from terminating any relation of employment, or from

ceasing to perform any work or labor, or from recom-

mending, advising, or persuading others by peaceful means

so to do; or from attending at any place where any such

person or persons may lawfully be, for the purpose of

peacefully obtaining or communicating information, or from

peacefully persuading any person to work or to abstain

from working; or from ceasing to patronize or to employ

apy party to such dispute, or from recommending, advis-

ing, or persuading others by peaceful and lawful means

so to do; or from paying or giving to, or withholding from,

any person engaged in such dispute, any strike benefits

or other moneys or things of value; or from peaceabiy

assembling in a lawful manner, and for lawful purposes;

or from doing any act or thing which might lawfully be

done in the absence of such dispute by any party thereto;

nor shall any ef the acts specified in this paragraph be

considered or held to be violations of any law of the United

States.

(Oct. 15, 1914, ch 323, § 20, 38 Stat 738.)

§ 26a Restrictions on the purchase of gasohol and synthetic

motor fuel. si

(a) Limitations on the use of credit instruments; sales,

resaies, and transfers.

Except as provided in subsection (b) of this section, it

shall be unlawful for any person engaged in commerce, in

the course of such commerce, directly or indirectly to im-

pose any condition, restriction, agreement, or understand-

ing that—

sia

(1) limits the use of credit instruments in any transaction

concerning the sale, resale, or transfer of gasohol or other

synthetic motor fuel of equivalent usability in any case in

which there is no similar limitation on transactions con-

cerning such person’s conventional motor fwel; or

(2) otherwise unreasonably discriminates against or un-

reasonably limits the sale, resale, or transfer of gasohol

or other synthetic motor fuel of equivalent usability in any

case in which such synthetic or conventional motor fuel is

sold for use, consumption, or resale within the United

States.

(b) Credit fees; equivalent conventional motor fuel sales;

labeling of pumps; product liability disclaimers; advertising

support; furnishing facilities.

(1) Nothing in this section or in any other provision of

law in effect on December 2, 1980, which is specifically

applicable to the sale of petroleum products shall preclude

any person referred to in subsection (a) of this section

from imposing a reasonable fee for credit on the sale,

resale, or transfer of the gasohol or other synthetic motor

fuel referred to in subsection (a) of this section if such fee

equals no more than the actual costs to such person of

extending that credit.

(2) The prohibitions in this section shall not apply .o

any person who makes available sufficient supplies of ga-

sohol and other synthetic motor fules of equivalent usa-

bility to satisfy his customers’ needs for such products, if

the gasohol and other synthetic fuels are made available

on terms and conditions which are equivalent to the terms

and conditions on which such persons’ conventional motor

fuel products are made available.

(3) Nothing in this section shall—

(A) preclude any person referred to in subsection (a) of

this section from requiring reasonable labeling of pumps

dispensing the gasoho} other synthetic motor fuel re-

54a

ferred to in subsection (a) of this section to indicate, as

appropriate, that such gasohol or other synthetic motor

fuel is not manufactured, distributed, or sold by such per-

for the gasohol or other synthetic motor fuel; or

(D) require such person to furnish or provide, at such

person’s own expense, any additional pumps, tanks, or

other related facilities required for the sale of the gasohol

or other synthetic motor fuel.

(ce) Definition.

As used in this section, “United States’ includes the

several State, the District of Columbia, any territory of

the United States, and any insular possession or other

place under the juriediction of the United States.

(Oct. 15, 1914, ch 323, § 26, as added Dec. 2, 1980, Pub

L 96-493, § 2, 94 Stat 2568.)

$27 Effect of partial invalidity.

55a

Patent Cooperation Treaty

Done at Washington on June 19, 1970,

amended on October 2, 1979,

and modified on February 3, 1984

ARTICLE 17

Procedure before the International Searching Authority

(1) Procedure before the International Searching Au-

(ii) that the description, the claims, or the drawings, fail

to comply with the prescribed requirements to such an

extent that a meaningful search could not be carried out,

Authority shall so declare and shall notify the

(3a) If the International Searching Authority considers

that the international application does not comply with the

requirement of unity of invention as set forth in the Reg-

ulations, it shall invite the applicant to pay j fees.

The International Searching Authority shall ish the

56a

international search report on those parts of the inter-

national application which relate to the invention first men-

tioned in the claims (“main invention”) and, provided the

required additional fees have been paid within the pre-

scribed time limit, on those parts of the international ap-

plication which relate to inventions in respect of which the

said fees were paid.

(b) The national law of any designated State may provide

that, where the national Office of that State finds the

invitation, referred to in subparagraph (a), of the Inter-

persona Pasa. Sp ys dipole vem ge

plicant has not paid all additional fees, those parts of the

international application which consequently have not been

searched shall, as far as effects in that State are con-

cerned, be considered withdrawn unless a special fee bo

paid by the applicant to the national Office of that Sta

ARTICLE 19

Amendment of the Claims before the International

Bureau

(1) The applicant shall, after having received the inter-

national search report, be entitled to one opportunity to

amend the claims of the international application by filing

amendments with the International Bureau within the pre-

scribed time limit. He may, at the same time, file a brief

statement, as provided in the Regulations, explaining the

amendments and indicating any impact that such amend-

ments might have on the description and the drawings.

(2) The amendments shali ne’ go beyond the disclosure

in the international application as filed.

(3) If the national law of any designated State permits

amendments to go beyond the said disclosure, failure to

comply with paragraph (2) shall have no consequence in

that State.

57a

ARTICLE 20

Communication to Designated Offices

(1Xa) The international application, together h the in-

referred

ternational search report (including any i

to in Article 17(2Xb)) or the declaration referred to in

Office, as provided in the Regulations, unless the desig-

nated Office waives such requirement in its entirety or in

part.

(b) The communication shall include the translation (as

prescribed) of the said report or declaration.

(2) If the claims have been amended by virtue of Article

191), the communication shall either contain the full text

of the claims both as filed and as amended or shall contain

the full text of the claims as filed and specify the amend-

ments, and shall include the statement, if any, referred to

in Article 11).

(3) At the request of the designated Office or the ap-

plicant, the International Searching Authority shall send

to the said Office or the applicant, respectively, copies of

the documents cited in the international search report, as

ee ae

ARTICLE 22

Copy, Translation, and Fee, to Designated Offices

(1) The applicant shall furnish a copy of the international

application (unless the communication provided for in Ar-

ticle 20 has already taken place) and a translation thereof

(as prescribed), and pay the national fee (if any), to each

Office not later than at the expiration of 20

months from the priority date. Where the national law of

the designated State requires the indication of the name

of and other prescribed data concerning the inventor but

allows that these indications be furnished at a time later

ARTICLE 29

application shall, subject to the provisions of paragraphs

(2) to (4), be the same as those which the national law of

the designated State provides for the compulsory national

publication of unexamined national applications as such.

(2) If the language in which the international publication

has been effected is different from the language in which

publications under the national law are effected in the

designated State, the said national law may provide that

the effects provided for in paragraph (1) shall be applicable

only from such time as:

(i) a translation. into the latter language has been pub-

lished as provided by the national law, or

59a

(ii) a translaticn into the latter language has been made

(iii) a translation into the latter language has been trans-

mitted by the applicant to the actual or perspective un-

authorized user of the invention claimed in the international

application, or

(iv) both the acts described in (i) and (iii), or both the

acts described in (ii) and (iii), have taken place.

(3) The national law of any designated State may provide

that, where the international publication has been effected,

(1) Administrative tasks concerning the Union shall be

performed by the International Bureau.

(2) The International Bureau shail provide the secretar-

iat of the various organs of the Union.

(3) The Director General shall be the chief executive of

the Union and shall represent the Union.

ce Gas a kee

other publications provided for by the Regulations or re-

quired by the Assembly.

60a

(5) The Regulations shall specify the services that na-

tional Offices shall perform in order to assist the Inter-

national Bureau and the International Searching and

Preliminary Examining Authorities in carrying out their

tasks under this Treaty.

(6) The Director General and any staff member desig-

nated by him shall participate, without the right to vote,

in all meetings of the Assembly, the Executive Committee

and any other committee or working group established

under this Treaty or the Regulations. The Director Gen-

eral, or a staff member designated by him, shall be ex

officio secretary of these bodies.

(7Xa) The International Bureau shali, in accordance with

the directions of the Assembly and in cooperation with the

Executive Committee, make the preparations for the re-

vision conferences.

(b) The International Bureau may consult with inter-

governmental and international non-governmental organi-

zations concerning preparations for revision conferences.

shall take part, without the right to vote, in the discussions

at revision conferences.

(8) The International Bureau shall carry out any other

tasks assigned to it.

ARTICLE 64

Reservations

(1a) Any State may declare that it shall not be bound

by the provisions of Chapter II.

(b) States making a declaration under subparagraph (a)

shall not be bound by- the provisions of Chapter II and

the corresponding provisions of the Regulations.

(24a) Any State not having made a declaration under

paragraph (1a) may declare that:

6la

(i) it shall not be bound by the provisions of Article

39(1) with respect to the furnishing of a copy of the in-

ternational application and a translation thereof (as pre-

scribed),

(ii) the obligation to delay national processing, as pro-

vided for under Article 40, shall not prevent publication,

by or through its national Office, of the international ap-

plication or a translation thereof, it being understood, how-

ever, that it is not exempted from the limitations provided

for in Articles 36 and 38.

(b) States making such a declaration shall be bound ac-

cordingly.

(3Xa) Any State may declare that, as far as it is con-

cerned, international publication of international applica-

tions is not required.

(b) Where, at the expiration of 18 months from the

priority date, the international application contains the des-

ignation only of such States as have made declarations

under subparagraph (a), the international] application shall

not be published by virtue of Article 21(2).

international application shall nevertheless be published by

the International Bureau:

(i) at the request of the applicant, as provided in the

Regulations,

(ii) when a national application or a patent based on the

international application is published by or on behalf of

the national Office of any designated State having made

a declaration under subparagraph (a), promptly after such

publication but not before the expiration of 18 months

from the priority date.

(4Xa) Any State whose national law provides for prior

art effect of its patents as from a date before publication,

but does not equate for prior art purposes the priority

et SR a eee nea

ee eid * oe

sense Henge eae

nce eaentlegren pie Nepean 5 nanos a

62a

date claimed under the Paris Convention for the Protection

of Industrial Property to the actual filing date in that

State, may declare that the filing outside that State of an

international application designating that State is not

equated to an actual filing in that State for prior art

purposes.

(b) Any State making a declaration under subparagraph

’ (a) shall to that extent not be bound by the provisions of

Article 11(8).

(a) shall, at the same time, state in writing the date from

which, and the conditions under which, the prior art effect

of an international application designating that State be-

comes effective in that State. This statement may be mod-

ified at any time by notification addressed to the Director

General.

(5) Each State may declare that it does not consider

itself bound by Article 59. With regard to any dispute

between any Contracting State having made such a dec-

laration and any other Contracting State, the provisions

of Article 59 shall not apply.

(6a) Any dec aration made under this Article shall be

made in writing. It may be made at the time of signing

this Treaty, at the time of depositing the instrument of

ratification or accession, or, except in the case referred

to in paragraph (5), at any later time by notification ad-

dressed to the Director General. In the case of the said

notification, the declaration shall take effect six months

after the day on which the Director General has received

the notification, and shall not affect international appli-

cations filed prior to the expiration of the said six-month

period.

(b) Any declaraticn made under this Article may be with-

drawn at any time by notification addresed to the Director

General. Such withdrawal shall take effect three months

63a

after the day on which the Director General has received

the notification and, in the case of the withdrawal of a

declaration made under paragraph (3), shall not affect in-

ternational applications filed prior to the expiration of the

said three-month period.

(7) No reservations to this Treaty other than the re-

servations under paragraphs (1) to (5) are permitted.

agi oe tbe ae ere cineem mn dl nada a allt

IN Py a fli ab, yi TO OR aaa rr errr eee

64a

APPENDIX B

STATE OF MICHIGAN

IN THE CIRCUIT COURT FOR THE COUNTY OF

LENAWEE

FILE 82-10-1709-CZ

LAURENE QO. PATERSON and MuLtTI-TEC, INCORPORATED, a

Michigan corporation, jointly and severally,

3 Plaintiffs,

CHEMICAL ENGINEERING CORPORATION, an Indiana corpo-

ration; ROBERT M. WILFONG, RupDy WILFONG, and

LAWRENCE D. GORDON: HILLSDALE Pump AND Suppty Co.,

a Michigan corporation; and CLYMER’s GEOTHERMAL

HEATING AND COOLING, a Michigan corporation, jointly and

severally,

Defendants.

PRETRIAL STATEMENT

before THE HONORABLE JOHN C. TIMMS, Circuit Judge,

at the Rex B Martin Judicial Building, in the City of Adrian,

Michigan, on March 30, 1983.

APPEARANCES:

DEE EDWARDS, ESQ.

On behalf of Plaintiffs.

DAVID A. LUNDY, ESQ.

On behalf of Defendants.

Rodney J. Skow, CSR-0275

Circuit Reporter

AE I es = AE Lt

COURT: We have discussed trial procedure. We

of liability on both the complaint

66a

APPENDIX C

STATE OF MICHIGAN

IN THE CIRCUIT COURT FOR THE COUNTY OF

LENAWEE

File No. 82-1709 CZ

LAURENE O. PATERSON and MuLtI-TEc, INCORPORATED, A

Michigan Coporation jointly and severally,

Plaintiffs

CHEMICAL ENGINEERING Corp. an Indiana Corporation;

RoBERT M. WILFONG, Rupy WILFONG, and LAWRENCE D.

GORDON: HILLSDALE Pump AND SUPPLY Co., a Michigan

Corporation, and CLYMER’s GEOTHERMAL HEATING AND

CooLING, a Michigan Corporation, jointly and severally,

Defendants

DEFENDANTS’ POST TRIAL BRIEF

s* *

In order to recover damages, Plaintiffs must additionally

prove the existence of the trade secrets both (1) when the

trade secret information was disclosed to Defendants and

(2) when Defendants allegedly misappropriated the trade

secret information. Kubik v. Hull, 56 Mich. App. 335, 224

N.W. 2nd 80, (1974). If the information disclosed to

Defendants was not trade secret either when it- was dis-

closed to Defendants or when Defendants alleged misap-

67a

propriated the information, Plaintiffs cannot recover. Lear

v. Adkins, Inc., 395 U.S. 653 (1969); and Kewanee Oil

Company v. Bicron Corp., 416 U.S. 470 (1974) A state

may not make public information subject to its trade secret

law.

Piaintiff cannot have injunctive relief unless Plaintiff

further can prove that the information disclosed to

Defendants is a trade secret now. Kulik, supra,

Here, for reasons more fully explained hereinafter, none

of the information conveyed to Defendants by Plaintiffs is

a trade secret now, nor was a trade secret at the time

Defendants allegedly misappropriated Plaintitfs’ informa-

tion. Any trade secret of Plaintiffs was destroyed by either

by Gerald Greiwahn or by Plaintiffs themselves.

Information that is generally known or readily ascer-

tainable to the trade or public is not trade secret. Kubik,

supra; Arco, supra; Manos, supra; Allis-Chalmers Manu-

facturing Co. v. Continental Aviation and Engineering

Corp., 2554 Supp. 645, (E.D. Mich. 1966); McAlpine v.

Aamco Automatic Transmissions, 461 F. Supp. 1232 (E.D.

Mich. 1978) Russell, supra; Hamilton, supra. It is not trade

secret, even if it is not known to the Defendant prior to

disclosure. Manos, supra; Kubik, supra. The legal rational

is that a state may not make public information subject

to trade secret. Lear, Ine. v. Adkins, supra; Kewanee O1l

Co., supra.

Information which is disclosed in a product or process

being sold cannot be trade secret. Kubik, supra; Allis-

Chalmers, supra; Crown, Industries, supra. Information is

disclosed in a marketed product if the information could

be discovered by disassembling or rendering the product

inoperative and study by an engineer. Crown Industries,

supra.

RP he I ee ts ag i eee eee ™ 4 a A

68a

Information disclosed in a patent or publication cannot

be trade secret. Davis, supra; Dew Chemical, supra;

Manos, supra; Russell, supra; Insealator, supra; Crown

Industries, supra; Kubik, supra. This includes information

disclosed to the public in a patent application, Kubik, su-

pra. This rule may be viewed as another way of stating

the novelty requirement; that is: any information disclosed

in a patent or publication is in the public domain and not

novel. Crown, Industries, supra. It makes no difference

whether the information is disclosed in a patent or in

another publication. Plastic and Metal Fabricators, Inc. v.

Roy, 163 Conn. 257 303 A 2d 725, (1972).

Information which is not novel and which is only a trivial

advance or difference and which does not give a compet-

itive advantage is not trade secret. Davis, supra; Crown

Industries, supra; Kubik, supra; Manos, supra; McAlpine,

supra. The novelty requirement was presented by the

United States Supreme court in Kewanee, supra, however,

this requirement has long been a rule of Michigan trade

secret law. Manos, supra; Russell, supra; Kubik, supra.

Information to be trade secret must differ materially from

prior art. Davis, supra; Nickelson v. General Motors Cory.,

361 F. 2d 196 (7th Cir. 1966). It cannot be a mere me-

‘chanical improvement. Allis-Chalmers, supra; Russell, su-

pra or trivial advance, Nickelson, supra, or variation of a

known general process. Hamilton, supra. the information

cannot be the product of customary experimentation and

testing David, supra. It is not relevant that Plaintiff may

hve produced the product without knowledge of the prior

art. Houser v. Snap-On Tools Corp., 202 F. Supp. 181 (D.

Mary, 1962).

2. At The Time Of Disclosure And Presently Mrs. Pa-

terson filed three applications in the United States Patent

and Trademark Office for Letters Patents. The first is

U.S. Patent Application, Serial Number 103,322 filed on

Ties

a i ae als le ER ah dt thd Ain ge tig 's abe id ee ow 4 iid) ie

December 14, 1979. The second is U.S. Patent Application,

Serial Number 145,657 filed on May 2, 1980. The third is

U.S. Patent Application, Serial Number 210,923 filed on

November 28, 1980. Mrs. Paterson then filed an applica-

tion for a European Letters Patent on December 15, 1980.

Exhibit G. Under the conventions between countries, Mrs.

Paterson incorporated all of the disclosure of each of her

United States Patent Applications into European Patent

Application Serial Number 80107918.7 and claimed prior-

ity. Professor Baumann testified:

“Q. Let me, Dr. Baumann, refer you to Defendants’

Exhibit G. Are you familiar with this document?

A. Yes, I am.

Q. And so that everybody knows what it is, can you

identify it?

A. Yes. Defendants’ Exhibit G is the Rueopan [sic]

Patent Application of Laurene O. Paterson pertaining

to her iron removal unit.

Q. Do you have any awareness of—well, let me ask

you this: Have you had an opportunity to read and

study this document, Exhibit G?

A. Yes, I have.

Q. Do you have any awareness of any other appli-

cations—patent applications that have been filed by

Mrs. Paterson?

A. Yes.

Q. Now, have you read the content of those?

A. Yes, I have.

And do you have any knowledge as to the relationship

of this patent application to all of the others?

A. Yes. The European applications make references

to all prior knowledge which has been contained in

~ M ~ ‘

dh he ghtn gi adae ae as Se ae

yee ee

70a

other patent applications by Mrs. Paterson. Item 30

on the patent application indicates, for example, a

priority date of 14-12-79, U.S. Patent Application

Number 103322; then the date 2-5-80, U.S. Patent

Application Number 145657, and the date 28-11-80,

Q. Those dates then and numbers identify her prior

United States Pate1.t Applications?

A. Yes, sir.”

James Kinzer testified:

“Q. Now, may I refer you to a document that has

been identified as Defendants’ Exhibit G, Mr. Kin-

zer—

The Court: (Handing).

The Witness: Thank you, Your Honor.

A. That is published on the basis of two dates. If the

Tila

Q. Okay. Does the inventor have any control over

when it’s published?

A. No, there’s no contro! over that. Sometimes it can

be an embarassing situation. I’ve been embarassed a

couple of times.

Q. And how do they, if you know, how do they publish

this application?

A. Well, I’m not familiar with their release procedures

or their printing procedures, but again, once the 18-

month period has expired, then it can be expected

that the European Patent Application is going to be

published and available in Munich.

Q. Is it distributed throughout the world, the United

States Application?

A. Again, any interested company who is participating

with the European Patent Office, and which has dis-

tribution centers, they are likely to distribute too,

because these are valuble scientific papers, there’s no

question about it. ,

Q. To your knowledge, Sis ddiin the wel where

you to in search through copies —

A. Undoubtedly the Japanese Patent Office and also

our own.

Q. Now, are there requirements of 2 European Patent

Application as to the contents of the disclosure and

to whom it’s written, or is that similar to the United

States Patent Office, as you understand it?

A. I’m not that thoroughly familiar with the form

regulations as to the content of disclosure, but based

on my experience I know, as a matter of fact, for 31

years the examination in Europe is as rigorous as it

is in the United States. Their requirements for dis-

closure are also rigorous.

72a

Q. Okay.

A. This is particularly true in Germany and Sweden.

Q. From your experience is the disclosure in European

Applications directed to minds skilled in the art?

A. Again, there’s no question about that, but almost

invariably is based on the United States Patent Ap-

plication. I’ve never seen European Application fail

for lack of proper disclosure once it’s been found on

the United States disclosure—which it is found ac-

ceptable.

Q. Does the examiner over in Europe check through

these applications to determine whether or not the

content of the application meets the regulations

A. Absolutely. I, myself, have been questioned through

the associates through whom we work and my own

office has been questioned sometimes, “What do you

mean by this statement, what do you mean by that

statement? Are your parts by weight or are your parts

percentages by volume,” that sort of thing.

Q. Now, Mr. Kinzer, from looking at this document,

can you make a determination as to whez this doc-

ument, Defendants’ Exhibit G was published?

A. This document was published in Europe on June

24, 1981, in the European system it’s marked 24-6-

81.

Mrs. Paterson’s European Patent Application was pub-

lished by the European Patent Office on June 24, 1981 as

Publication No. 0030733. This publication included every-

thing contained in Exhibit G. Plaintiffs have stipulated

that:

Mr. Harness: Everything is in here, ther’s no specific

reference to the Dema valve, Dema injectors as such.

The name Dema—

Mr. Lundy: That stipulation is accepted, Your Honor.

The Court: Very well.”

C. The Paterson Iron Removal System Was Disclosed In

Patents

Mrs. Paterson’s European Patent Application was pub-

lished by the European Patent Office on June 24, 1981 as

Publication No. 0030733. This publication included, every-

thing contained in Exhibit G. Plaintiffs have stipulated

that:

“* * * I’m willing to stipulate that there’s a disclosure

of the injector, disclosure of filter bed and the other

things. There’s disclosure of the ific Dema

valve that

ee alia a

a i

74a

beds which will attract and electrostatically attract

colloidal particles was disclosed in here, and the fact

that this injector makes colloidal particles containing

iron in the water. It’s all in here. To have her sit

here and have her ead this for the next hour or so

is total waste of time. The document speaks for itself.

I’m willing to stipulate to that.

The Court: All right.

Mr. Lundy: That all trade secrets we’re talking about

are in that document?

Mr. Harness: Everything is in here, there’s no specific

reference to the Dema valve, Dema injectors as such.

The name Dema—

Mr. Lundy: That stipulation is accepted, Your Honor.

The Court: Very well.”

Professor Baumann testified, after being present in the

Court Room during all of the testimony of every witness

that:

“Q. To your knowledge, Professor Baumann, has there

been any testimony in this Court with regard to iden-

tifying any portion of the technology of removing iron

originating with Mrs. Paterson that is not found within

this document, Exhibit G?

A. I’m not aware of any.”

Thus, by Mrs. Paterson’s own efforts, all of Mrs. Pater-

son’s information was disclosed in her patent.

75a

APPENDIX D

STATE OF MICHIGAN

IN THE CIRCUIT COURT FOR THE COUNTY OF

LENAWEE

File No. 82-1709 CZ

LAURENE Q. PATERSON and MULTI-TEC, INCORPORATED, A

ree Corporation jointly and severally,

Plaintiffs

Vv.

CHEMICAL ENGINEERING CorP. an Indiana Corporation;

RoBert M. WiLronc, Rupy WILFONG, and LAWRENCE D.

GorRDON: HILLSDALE Pump AND Supply Co., a Michigan

Corporation, and CLYMER’s GEOTHERMAL HEATING AND

COOLING, a Michigan Corporation, jointly and severally,

Defendants

DEFENDANTS’ POST TRIAL REPLY BRIEF

Il. THE EXISTENCE OF TRADE SECRET INFOR-

MATION

Plaintiffs allege that Plaintiffs currently have trade se-

crets. (Post Trial Brief For Plaintiffs, P. 2) They make

that allegation despite their own admission that “‘the trade

secrets have now become available to the public’, (Post

Trial Brief for Plaintiff, p.8) and Michigan law establishing

that any information in the public domain cannot be trade

secret. Kubik, Inc. v. Hull, 56 Mich App. 335, 224 N.W.

2d 80 (1974), Russell v. Wali Wire Products Co., 346 Mich

76a

581, 78 N.W. 2d 149, (1956), Insealator, Inc. v. Wallace,

357 Mich 233, 98 N.W. 2d 648 (1959), Allis-Chalmers Man-

ufacturing Co. v. Continental Aviation and Engineering

Corp, 255 F. Supp. 645 (E.D. Mich. 1966).

Plaintiffs’ allegation of a currently existing trade secret

relies upon a finding of trade secrets in Paterson v. Water

Specialties, Inc. No. 81-02-0181 CZ an earlier action in this

Court involving different parties. Plaintiffs have not and

cannot support their position with law or logic. A Trade

secret, unlike a patent, is not a continuing legal right to

restrict the use of specific information. Kubik, supra It is

rather a determination by the trier of fact based upon the

evidence presented before the Court. Kubik, supra Such

a determination binds only the parties before the Court,

not totally unrelated third parties such as Defendants.

Plaintiffs had the burden in this action of presenting evi-

dence before this Court to establish the existence of their

alleged trade secrets at the times at issue here, not at the

times at issue in Water Specialties. Plaintiffs have faiied

to meet that burden.

Plaintiffs have admitted that they have no trade secrets

now. They have failed to prove that they had trade secrets

when Defendants first conferred with Mrs. Paterson re-

garding iron removal (April 11, 1980), and when

Defendants are alleged to have misappropriated them. The

Findings of the Court in Water Specialties do not support

Plaintiffs in this action. In fact, the opposite is true. The

Court, in Water Specialties ruled that: “The whole system

here has been sold to members of the public. Any buyer

or his assignee can take the system apart and duplicate

the components.”” Under Michigan law any trade secret

disclosed in a product is destroyed by the marketing of

that product. Kubik, Inc., supra; Allis-Chalmers, supra;

Crown Industries, Inc. v. Kawneer, Co., Inc., 335 F. Supp.

749 (Mich. law, N.D. Ill. 1971). See also Defendants Post

Triai Brief, P. 15-69.

77a

However, Plaintiffs burden is not to prove that she took

steps to maintain the secrecy of the information, but rather

to prove that the information was still secret and not read-

ily ascertainable by the public and the trade. No “steps

to guard secrecy” can make information secret once it has

been revealed to the public or if it is readily ascertainable

by the public or the trade. Kubik, supra.

Plaintiffs allege in their Post Trial Brief For Plaintiffs

that ‘Plaintiffs’ trade secret information was not readily

ascertainable’’. (P.6) The proof Plaintiffs presented on this

point was directed to the “average individual”, not to the

point of use water conditioning industry. The requirements

of a trade secret under Michigan law provide that the

trade secret information must not have been readily as-

certainable to the general public including persons in the

trade and Plaintiffs’ competitors. Insealator, Inc. v. Wal-

lace, 357 Mich. 233, 98 N.W. 2d 643 (1959); Kubik, supra.

The issue here is not whether an unskilled person could

understand and duplicate the Paterson system from a mar-

keted unit but rather whether a competitor using skilled

personnel and knowing the prior art, including the McLean

patent could understand and duplicate the Paterson system

from a marketed unit but rather whether a competitor

using skilled personnel and knowing the prior art, includ-

ing the McLean patent could understand and duplicate the

Paterson system from a marketed unit. As Mr. Roger Raje

testified, his cousin who worked in the water treatment

industry described the basics of how the Paterson unit

operated, after just looking at it without even taking it

apart. (TR P. 467-469) See also Professor Baumann’s tes-

timony at P. 31-82 Defendants’ Post Trial Brief and Tr.

P724-725.

Paterson units were sold to the general public on an

unrestricted basis long before the Defendants met Mrs.

Paterson (TR P. 467-469) Plaintiffs’ trade secrets were

78a

also completely disclosed in Mrs. Paterson’s European pat-

ent application. (Tr. P691-692) Plaintiffs have not met their

burden of proving that those units and that patent appli-

cation did not reveal and destroy their trade secrets.

Plaintiffs allege that, although ‘the trade secrets have

now become available to the public’’, “this does not negate

the secrecy of the information to the present Defendants

because they failed to employ legal proper and fair means

in learning the secrets.” (Post Trial Brief For Plaintiff,

P.8) |

79a

APPENDIX E

STATE OF MICHIGAN

IN THE CIRCUIT COURT FOR THE COUNTY OF

LENAWEE

File No. 82-10-1709

LAURENE 0. PATERSON, et al,

Plaintiffs

Vv.

CHEMICAL ENGINEERING, CorP., et ai,

Defendants

ing, for reasons hereinafter stated, shall be collectively

referred to as Engineering.

The court for 2 period of six days heard twelve wit-

nesses comprising nearly a thousand pages of testimony

80a

Summarizing the facts to a degree appropriate for ren-

dering a decision herein, the court would find the follow-

ing.

Since about 1977, Paterson had been engaged in ex-

perimenting with and developing a process for removing

iron from water. In 1979 and ’80, she had produced some

test units, and through one Griewahn, a person who either

worked for here or was an independent contractor engaged

with her, installed several of the prototype units in the

Adrian area. The persons in whose homes the units were

installed were sworn to secrecy and were not to examine

the units nor to have them repaired by anyone other than

an authorized representative of Paterson. Efforts were

made to disguise the content of the units.

In late winter or early spring of 1980, Paterson met

for the first time the Defendant Robert Wolfong at a water

treatment convention in Memphis, Tennessee, at which

they discussed Paterson’s water treatment unit. Wilfong

had been engaged in the water treatment business for

many years prior to this meeting.

On April 11, 1980, Engineering signed an agreement

with Paterson agreeing to hold the confidential information

concerning the iron removal system in confidence. Sub-

sequently on December 10, 1980, both Robert Wilfong and

Lawrence Gordon signed individual agreements with Pa-

terson to keep confidential and not disclose or use any

secret or confidential technology involved in the Paterson

system.

Following the agreement of April 11, 1980, test units

of the Paterson system were installed in several locations

in and around Engineering’s headquarters at Churubusco,

Indiana.

On January 6, 1981, Paterson and Engineering entered

into a consulting agreement under which Mr. Wilfong was

to perform duties as would be assigned by Paterson. The

On May 18, 1981, Engineering purchased from Paterson

twenty-five of the Paterson units.

licensing agreement with one John McLean, who

had a patent on a water treatment process issued by the

United States Patent Office on March 14, 1972.

On August 6, 1981, Wilfong sent Paterson a letter ter-

minating the consulting agreement and on August 13, 1981,

again wrote a letter to Paterson indicating that Engi-

and that Engineering had become the exclusive licensee

under the McLean patent.

In the meantime, in the summer of 1980 Griewahn, who

was referred to earlier, severed ail connections with Pa-

terson and began manufacturing and selling the water sys

tem he had worked on with Paterson earlier. Paterson

then started suit against Griewahn in this court asking

that Griewahn be enjoined from manufacturing and dis

tributing the product, basing her claim for injunctive relief

on a violation of the confidential relationship in using the

trade secret. The case was heard by this court February

and March of 1981, and the relief prayed for by Paterson

was granted. The court in its findings of March 30, 1981,

{

Paterson trade secret “is the novel com-

”

e°%s

aware of the European patent in February or early March,

1983.

Two issues are raised in this matter: (1) did Paterson,

electrical charges and the result of such charges when in

contact with other matter takes it from the realm of prior

known filtering processes commonly used in the field.

The injection of air into water to assist in the removal

of iron has been known and used for many, many years.

ull

He alls Wah

Catal gt TEA

te adtl li fake

ngs iff A siazel

ee altel

stall i pS : :

2%. at 423 i. ie 3°

#3 i ue a2 483 i

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84a

associate commence manufacturing the units based upon

Paterson’s process and immediately thereafter Paterson

son which is the Water Specialties case referred to above.

There was testimony that by reverse engineering the Pa-

terson unit could be duplicated without a great deal of

effort. However, Mr. Wilfong in his testimony in the ear-

85a

years, comprised mainly of volanic [sic] material. It is an

inert material and for that reason has not been used in

_ any great degree as a filter media for iron removal.

It is Engineering’s claim that the units manufactured

by them are not using Paterson’s process but rather are

manufactured and developed under the John McLean pat-

ent of which they are presently the exclusive licensee.

It then becomes necessary to determine whether En-

gineering’s system is produced under the terms of the John

McLean patent.

The primary functions of the McLean system are (1)

removal of natural acidity, (2) simultaneous oxidization and

removal of soluble iron, (3) removal of insoluble iron, silt

86a

Paterson’s system is an electrostatic filtration process

inert material covered by dolomite or calcium carbonate

to raise the pH in the water. Paterson’s system does not

rely upon raising the pH in the water whereas the McLean

system regards that function of upmost importance. Al-

though the outward appearance of the two systems may

be nearly identical, the internal processes are entirely dif-

ferent.

The evidence disclosed that Engineering now uses in its

87a

fil

PAL

August 3, 1980, says, “It is rather interesting that pH

little effect on removal capacity nor does the form of

pg esse gg nar ry Sener emg Ba

was written following the several test installations made

by Engineering in early 1980.

The court would find that the McLean patent neither

incorporates nor contemplates the Paterson process. The

nondisclosure agreements entered into by the parties.

TEMPORARY RESTRAINING ORDER—VIOLATION

On October 20, 1982, this court issued a temporary re-

straining order restraining and enjoining all defendants

named herein from using or in any manner dealing with

any process, apparatus, or system wherein the chemical

nature or component parts of the system were based upon

the confidential information and trade secrets imparted by

88a

Paterson to Engineering. An order to show cause was

issued to all defendants to appear in this court on March

10, 1983, to show cause why they should not be adjudged

in contempt of court for violation of the temporary re-

straining order previously issued.

At a pretrial held on March 10, 1983, the court advised

the parties that because the same issues were present in

both the order to show cause as well as the case in chief,

that it did not appear profitable for anybody to go through

two hearings, and that the order tc show cause should

and would be decided at the same time as the case in

chief. No objection was made to this procedure.

proximately 1700 units since October 20, 1982, which units

the court has already found to be using Paterson’s trade

secrets, the use of which had been enjoined. The court

would find, therefore, that Engineering has violated the

temporary restraining order and that Engineering is in

co~ empt of this court.

INJUNCTIVE RELIEF

Paterson prays for a permanent injunction restraining

Engineering from using the Paterson process in the man-

ufacture of their equipment.

Although there are cases which hold that persons who

breach a confidential relationship should be permanently

enjoined from the use of the secrets they have obtained,

there are other cases which hold that permanent injunctive

relief is inappropriate where the trade secret is available

to the members of the public. As noted in Kubik, Inc v

Hull, 56 Mich App 335 (1974) the Michigan rule appears

to be that equitable relief should bear some reasonable

relationship to the extent of the injuries suffered by the

plaintiff.

Although Paterson’s secret information was not readily

available to the public at the time the nondisclosure agree-

monetary damages for misappropriation of her trade se-

crets. No permanent injunction will issue, and the tem-

porary restraining order is dissolved.

DAMAGES

The purpose of assessing damages obviously is to rea-

sonable [sic] compensate Paterson for the loss she has

sustained as the result of Engineering’s wrongful misap-

propriation of her trade secrets.

As noted before, Paterson spent some 4h, years devel-

secrecy of the process including the time and expense of

the prior lawsuit to obtain injunctive relief. Paterson tes-

Soon after disclosure of trade secrets by Paterson to

Eneiaseing, Rasiestt alll a iaks bern

units, and went into direct competition with Paterson for

the sale of those units. The record discloses that prior to

Further, that after the date of the restraining order En-

gineering had sold approximately 1700 units. Because the

90a

temporary restraining order has been dissolved, Engi-

neering can freely continue to directly compete with Pa-

terson using the Paterson process. This, without

Engineering having spent any time, effort, or money in

development of the process.

The testimony further disclosed that Paterson was to

receive from its exclusive licensee the sum of $18.00 per

unit sold to the licensee for the period ending December

31, 1982, and $15.00 per unit thereafter. The testimony

further disclosed that Engineering is paying to John

McLean for their exclusive license under the patent 5%

of the sales price of each unit sold by them. Their units

sell for approximately $350.00 which would mean that the

royalty payment would be $17.50 per unit. Testimony fur-

ther disclosed that royalty payments are negotiated and

depending upon. the type of invention or modification of

an existing invention, royalty payments varied from 2'/,%

to 5%. Some were even higher.

Although there are other iron removal systems sold,

none are sold with this process nor are they as efficient

as Paterson’s process. It is impossible to determine and

no evidence was introduced to indicate just what portion

Engineering’s sales may have been [sic] taken away the

Paterson sales. However, there was testimony that they

were in direct competition with each other.

This court is convinced that Engineering should not

profit from the misappropriation of Paterson’s trade se-

crets to Paterson’s detriment.

It is proper in determining the amount of damages to

take into account the amount of time, labor, and money

expended by Paterson in designing, fabricating, and test-

ing the product. it is also proper to take into consideration

the profits lost by Paterson as the result of the misap-

propriation of the trade secrets. It is also proper to con-

sider the existence or absence of competitors other than

9ia

the defendant that may be engaged in the sale of other

iron removal equipment.

The court will assess damages in the amount of

$100,000.00 to partially compensate Paterson for the time,

effort, and expense she has gone to in perfecting her proc-

ess. The court will assess damages in the amount of

$64,750.00 for loss of royalty due Paterson upon the sale

of the 3700 units sold by Engineering prior to and after

the date of the preliminary injunctive order. The court will

assess the sum of $60,000.00 as future damages by reason

of the disillusion {sic] of the temporary restraining order.

The dissolution of the temporary restraining order effec-

tively leaves Engineering in a position to immediately com-

pete with Paterson without the delays of research and

development and the costs thereof and further causes Pa-

terson to lose any competitive advantage she had because

of her invention. The bad faith and misappropriation of

the trade secrets should not permit Engineering to im-

mediately profit therefrom.

The court will assess a fine against Engineering for the

flagrant violation of this court’s preliminary injunctive or-

der in the amount of $250.00.

The court would find no cause for action against Hills-

dale Pump and Supply Company and Clymer’s Geothermal

Heating and Cooling. The action is dismissed as to them.

The suppression order heretofore entered is dissolved,

the court

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