Amicus Curiae Brief — Kewanee Oil Co. v. Bicron Corp.

LIBRARY

SUPREME COURT, U. Ss.

U Is/2 )

wu No. ¢ 3 ~*~ ia

MOTION FILED

IN THE

Supreme Court of the United States

‘KEWANEE OIL COMPANY,

Petitioner,

Vv.

BICRON CORPORATION et al.,

tan

a “ON PETITION | FOR ‘WRIT OF > CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

SIXTH CIRCUIT

MOTION FOR LEAVE TO FILE BRIEF

AMICUS CURIAE

and °

BRIEF AMICUS CURIAE OF THE PATENT LAW

ASSOCIATION OF CHICAGO SUPPORTING PETITION

FOR CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SIXTH CIRCUIT

The Patent Law Association of Chicago

Patrick H. Hume, President

One First National Plaza

Chicago, Illinois 60670

Ciype F. WiLLIAN

Raymonnp P. Niro

One First National Plaza

Chicago, Tlinois 60670

July 30, 1973 Counsel to the Association

eee

TWENTIETH CENTURY PRESS, CHICAGO 60606

~~

a |

;

CONTENTS

MOTION FOR LEAVE TO FILE BRIEF

Ree CUMIAS ce ck. 1

BRIEF AMICUS CURIAE OF THE PATENT

LAW ASSOCIATION OF CHICAGO SUPPORT-

ING PETITION FOR CERTIORARI ........... 3

I. QUESTIONS PRESENTED ............... 3

II. INTEREST IN AMICUS CURIAE ........ 3

III. REASONS FOR GRANTING WRIT OF

ER RGR any Bi ae RS “ae ly See 4

Dc EE WEE TG CARIES nono ois c's cap han edad 5

me See GR CNIS 6 in cis esta iyi 6

3. Conflict with Congress and this Court ......... 7

oe er ery ey er ere eer 9

ii

TABLE OF AUTHORITIES

CasrEs

Dekar Industries, Inc. v. Bissett-Berman Corp., 434

F.2d 1304 (9th Cir, 1970) 2.0... cece ee eee eee eee

Dr. Miles Medical Co. v. Park & Sons Co., 220 U.S. 373

BIER hs cbate betis as unser eee

E. I. du Pont de paar Powder Co. v. Masland, 244

SE a ee er ree eee re

E. I. du Pont de Nemours & Co. v. United States, 288

F.2d 904 (Ct. CL. 1961) 2... cece eee eee eines

Fowle v. Park, 131 U.S. 88 (1889) ...........0.e eee ee

Goldstein v. California, .... U.S. .... (19738); 178

Up Re | Be rer rrr Cee ote

Lear v. Adkins, 395 U.S. 658 (1969) ......:. ee

Painton & Co. v. Boyrns, Inc., 442 F.2d 216 (2d Cir.

WT Si es etree st ay

Patterson v. Kentucky, 97 U.S. 501 (1878) ........---

Pickren v. United States, 378 F.2d 595 (5th Cir. 1967).

Servo Corp. of America v. General Electric Co., 337

F.2d 716 (4th Cir. 1964) .........ccececcewebonees

Water Services, Inc. v. Tesco Chemicals, Inc., 410 F.2d

168 (Sth Cir, 1068). ieee ried cee wereenceectetys

SraTuTEs AND REGULATIONS

Wy, &. Comat, Ave 0s 6G icone oi avds Pe taee

The Freedom of Information Act, 5 U.S.C. § 552(b) (4)

(Supp. TV, 1969) .......scceccevecceescccevebers

The Federal Trade Commission Act, 15 U.S.C. § 46(f )

i renee e rr peer ek ea

The Securities and Exchange Act of 1934, 15 ei C.

§ 78x(a) CUE i os vc ks ou oats se Fwiklaeca sean ds wahias

The Flammable Fabrics <Act, 15 US. C. §1193(¢c)

(Supp. IV, 1969) 0c. ve sce hence ee eceweces

PAGE

3,9

iil

PAGE

The National Traffic and Motor Vehicle Safety Act of

1966. 15 U.S.C. § 1401(e) (Supp. IV, 1969) ...... 7

Act to Develop the Commercial Fishing Industry, 16

U.S.C. § 778(e) (Supp. IV, 1969) ..... 6... ee eee eee 8

18 U.S.C. § 1905 (1964)... eee cece eee eee eens 8

The Federal Food, Drug and Cosmetic Act, 21 U.S.C.

§ BBL(j) (1964) 20... cree cece sce e eee nese ce enes 7

The Wholesale Poultry Products Act, 21 ww: S.C.

§ 458(a)(5) (Supp. OF WO ceca hw 7

The National Stolen Property Act, 26 U.S.C. §§ 1221-

1223 (1964) 2.2.2... eee e cece eee eden eee eens 8

Act to Provide Synthetic Liquid Fuels from Coal and

Oil Shale. 30 U.S.C. § 332(b) (1964) ...........5.. 8

The Clean Water Restoration Act of 1966, 33 U.S.C.

§ 1160(c)(7) (Supp. IV, 1969) ........... eee ee eee 7

The Radiation Control for Health and Safety Act, 42

U.S.C. § 263i(e) (Supp. IV, 1969) wks ke ere Rey 7

The Air Quality Act of 1967, 42 US.C.

§ 1857b-1(b) (4) (Supp. IV, 1969)

§ 1857d(c) (5) (Supp. IV, 1969) and

§ 1857f-6(b) (Supp. IV, 1969) Labi dh was waxes ee 7,8

The Federal Explosives Act, 50 U.S.C.

GABE LIDGE) Se cone nog 8 eee KEV yesew nn cee tae alg 7

Armed Services Procurement Regulations

§§ 9-200 ef. Eq. 00. cree cece sere eseeeevececens 8

NASA Procurement Regulations

$6 D.DO0 et. BOG. wiv rc ered iviccsscesscesopencenes 8

TREATISES AND ARTICLES

Milgrim, Trade Secrets C2008) ...... pastes cdhenda xe

Sutton, Trade Secrets Legislation, 9 IDEA 587 (1966)

iv

TREATIES PAGE

Agreements To Facilitate The Interchange Of Patent

Rights And Technical Information For

Defense Purposes,

Belgium, 5.U.S.T. 2318 [1954] ............04008 8

Denmark, 11 U.S.T. 148 [1960] ....:.....000)00: 8

Prancs, 6 0.8.7. $68 (1067). cece ccactsvadeee 8

Germany, 7 U.S.T. 45 [1956] .............. o

Greece, 6 U.S.T. 2173 [1955] .........eeenee fess 8

Italy, 12 U.S.T. 189 [1960] ............. wii. 8

Japan, 7 U.S.T. 1021 [1956] ............0.. eee.

Netherlands, 6 U.S.T. 2187,{1955] ..........4.0. 8

Norway, 6 U.S.T. 799 [1955] .......00.0ecee eee 8

United Kingdom, 4 U.S.T. 150 [1953] ........... 8

No.

IN THE ‘

Supreme Court of the Gnited States

KEWANEE OIL COMPANY,

Petitioner,

v.

BICRON CORPORATION et al,

Respondents.

-~

eS

MOTION FOR LEAVE TO FILE

BRIEF AMICUS CURIAE

THE PATENT LAW ASSOCIATION OF CHICAGO

respectfully moves this Court for leave to file the accom-

panying brief amicus curiae in connection with the petition

for certiorari in the above entitled case. Consent to the

filing of the brief has been refused by Bicron Corporation

necessitating the filing of this Motion under Supreme Court

Rule 42. |

The movant, THE PATENT LAW ASSOCIATION OF

CHICAGO, is comprised of some 700.attorneys engaged in

the practice of patent, trademark, copyright and unfair

competition law. The Association believes that this case

raises serious questions of law concerning the viability of

trade secret rights. It is believed that changes in the laws

concerning such rights will undoubtedly have a serious im-

pact on commerce, both domestic and foreign. It is believed

“that such changes are contrary to the substantial body of

law developed in the jurisprudence of this country, and that

material changes in the law should be brought about only

after due deliberation and a carefully and fully focused

2

inquiry. There can be no doubt that such changes might

have serious effects on the nation’s international relations,

both politically and economicall¥t For these reasons. the

Association feels that this Court should exercise its super-

visory authority to review the decision by the Sixth Circuit

_ in the subject case and reexamine its impact on the laws

pertaining to trade secret rights, as is more fully set forth

in the accompanying brief. :

THE PATENT,LAW ASSOCIATION OF CHICAGO

No.

IN THE

Supreme Court of the Gnited States

KEWANEE OIL COMPANY,

Petitioner,

BICRON CORPORATION et al.,

Respondents.

>

- BRIEF AMICUS CURIAE OF

THE PATENT LAW ASSOCIATION OF CHICAGO

SUPPORTING PETITION FOR CERTIORARI

I. QUESTIONS PRESENTED

1. Whether this Court should exercise its supervisory

jurisdiction to resolve the conflict between the decision of

the Sixth Circuit Court of Appeals and the prior decisions

both of this Court and various other Cireuit Courts regard-

ing the continued viability of trade secrets and state trade

secret laws in the United States?

29. Whether state trade secret laws are in conflict with

Article I, Section 8 (Clause 8) of the Constitution of the

United States, and the Patent Laws of the United States

(Title 35, United States Code), so as to be preempted

thereby?

II. INTEREST OF AMICUS CURIAE

The Patent Law Association of Chicago was organized

and has been in existence since November, 1884. Its active

membership comprises some 700 attorneys engaged in the

4

practice of patent, trademark, copyright and unfair compe-

tition law who reside within 100 miles of the United States

Courthouse in Chicago. These attorneys represent clients

throughout the United States, including those residing and

doing business in the judicial districts embodied within the

Sixth Cireuit. The affairs of the Association are governed

by its Board of Managers, which is responsible for this

brief. Because of the impact of the Sixth Circuit’s decision

on both foreign and domestic industrial and intellectual

property rights, the Board voted to authorize the filing of

this amicus brief.

The conflict presented by the decision of the Sixth Cireuit

striking down the trade secret law of the State of Ohio (and

by implication the trade secret laws of other states within

the Sixth Cireuit) will make it difficult for organizations

utilizing trade secrets in the conduct of their business to

make future decisions with any degree of certainty. The

conflict here is particularly critical because of the inherent

nature of trade secret rights, the disclosure .of which, in

consequence of the Sixth Circuit Law announced in the

Kewanee decision, will operate to destroy such rights every-

where. Without clarifi¢ation from this Court, trade secret

rights viable in circuits other than the Sixth Circuit can be-

come void in all circuits.

The Patent Law Association of Chicago believes that it

ean demonstrate and emphasize areas of importance and

conflict with respect to the question of law decided by the

Sixth Circuit that might well be beyond the experience of

the parties alone.

III. REASONS FOR GRANTING

WRIT OF CERTIORARI

The granting of the writ is urged for a number of com-

pelling reasons:

1. The decision is in direct conflict with the law of the

other circuits.

5

2. The decision will have widespread practical ramifica-

tions in both domestic and international trade and could

materially affect the balance of payments.

3. The decision is in direct conflict with the body of law

that has developed and exists with specific recognition by

Congress and this Court as to the viability of trade secrets.

1. Conflict With The Circuits

In its decision the Sixth Circuit specifically recognizes

the conflict with the ‘other circuits. (Slip Opinion at p. 7;

... F.2d ..., 178 U.S.P.Q. at 12, citing Servo Corp. of

America v.-General Electric Co., 337 F.2d 716 (4th Cir.

1964); Dekar Industries, Inc. v. Bissett-Berman Corp., 434

F.2d 1304 (9th Cir. 1970); Water Services, Inc. v. Tesco

Chemicals, Inc., 410 F.2d 163 (5th Cir. 1969) ; Painton € Co.

v. Bourns, Inc., 442 F.2d 216 (2d Cir. 1971).) It would seem

that such express recognition is tantamount to an invitation

to this Court to grant certiorari to resolve the conflict.

Perhaps the conflict is most clearly focused by compari-

son with the recent Second Circuit decision in Painton,

supra. In that case, the Court had to resolve the issues of

preemption of state trade secret laws by the federal patent

laws, and the matter of federal patent policy. In reversing

the district court by rejecting preemption, the Second

Circuit held that:

“We therefore do not find, either in general consid-

erations of public policy or in emanations from the

federal patent law, a sufficient basis for declining to

enforce even the royalty provisions of trade secret

agreements, at least with respect to cases where no

patent application has been filed.” (442 F.2d at 225)

The practical consequences of this conflict if allowed to

stand are far-reaching in scope. Obviously, any public dis-

closure of a trade secret destroys the secrecy and the prop-

er ote

6

erty right that is premised on that secrecy. Thus, any trade

secret holder doing business in the Sixth Circuit will find

his trade secret information no longer secure from public

disclosure. That, of course, would not only lead to the

destruction of the property right in the Sixth Circuit, but

in all other circuits as well. The probability of interference

with interstate commerce is apparent. Even if the Kewanee

holding is totally rejected outside the Sixth Circuit, its

effect will be felt throughout the nation.

2. Impact on Commerce

The Second Circuit in the Painton decision fully recog-

nized that the abrogation of state trade secret laws would

have a severe impact on both domestic and foreign com-

merce. Judge Friéndly observed (442 F.2d at 225):

“In thousands of contracts businessmen have divulged

such secrets to competitors, dealing at arms’ length

and well able to protect themselves, on the faith that

mutually acceptable provisions for payment, for the

preservation of confidentiality, and for the return of

the secret information on termination or default will

be enforced by the courts. * * * The district judge cited

no data to prove that licensing of trade secrets had

worked adversely to the public interest. To the con-

trary, such facts as have been brought to our notice

indicate that the sharing of technological know-how on

the basis of proper agreements has been [p. 226] bene-

ficial not only within this country but in its relations

with others.” (Emphasis added.) _

In refusing to overturn trade secret laws “save on the clear

showing” of inconsistency with other rules of “higher sanc-

tion” the Second Cireuit took judicial notice that the

loss in “foreign dollar payments might run as high as

$1 billion annually.” (422 F.2d at 226 n. 7). We suggest that

amount would prove to be a substantial understatement.

7

The reasoning in Painton is completely consistent with

Mr. Justice Harlan’s admonition in Lear v. Adkins, 395 U.S.

653,675 (1969). There the Court refused to “define in even a

limited way the extent, if any, to which the states may prop-

erly act to enforce the contractual rights of inventors of un-

patented secret ideas.” Lear specifically recognized the

“difficulty and importance” of that task and held it should

be undertaken only after a “fully focused inquiry” by the

state courts to determine the extent to which they will

respect the contractual rights of inventors of such un-

patented secret ideas.

The Court in the Kewanee case was able to point to

neither a “clear showing of inconsistency” nor a “fully

focused inquiry.”

3. Conflict With Congress and This Court

.The conflict generated by the Kewanee decision is not

limited to the decisions of other circuits, but extends to the

entire body of law developed from the beginnings of our

American jurisprudence. This Court has consistently ree-

ognized the common law concept of trade secrets. Patterson

v. Kentucky, 97 U.S. 501 (1878); Fowle v. Park, 131 US.

88 (1889); Dr. Miles Medical Co. v. Park & Sons Co., 220

U.S. 373 (1911); E. I. du Pont de Nemours Powder Co. v.

Masland, 244 U.S. 100 (1917).

But of equal importance is the fact that Congress has

repeatedly recognized trade secrets, rights, and their coex-

istence with the patent laws.’ Since the enactment of the

15 USC. §552(b)(4) (Supp. IV, 1969); 15 U.S.C. § 78x(a)

(1964) : 15 U.S.C. § 46(f) (1964); 21 U.S.C. § 331(j) (1964) ; 50

US.C. § 131 (1964); 42 U.S.C. § 263i(e) (Supp. IV, 1969); 21

U.S.C. § 458(a)(5) (Supp. IV, 1969); 42 U.S.C. § 1857d(e) (5)

(Supp. IV, 1969) and § 1857 £-6(b) (Supp. IV, 1969); 15 U.S.C.

§ 1193(e), (Supp. IV, 1969); 33 U.S.C. § 1160(e)(7) (Supp. TV,

1969) ; 15 U.S.C. § 1401(e) (Supp. TV, 1969).

‘

8

first patent act in 1790, and its fifteen subsequent revisions

before the last revision of 1952, Congress has enacted no

less than eleven acts that expressly recognize trade secret

rights. Congress has made it a federal crime for a govern-

ment employee to disclose the trade secrets, 18 US.C.

§ 1905 (1964). It has enacted tax legislation that recognizes

trade secrets as property subject to capital gains treat-

ment, 26 U.S.C. §¢ 1221-1223 (1964). See FE. I. du Pont

de Nemours & Co. v. United States, 288 F.2d 904 (Ct. Cl.

1961) and Pickren v. United States, 378 F.2d 595 (5th Cir.

1967). It has even empowered the executive branch to ac-

quire, purchase, license or lease trade secrets, 42 U.S.C.

§ 1857b-1(b)(4) (Supp. IV, 1969); 16 U.S.C. § 778e(e)

(Supp. IV, 1969); 30 U.S.C. §322(b) (1964). Besides the

clear expression of Congress concerning the viability of

trade secrets, the executive branch of the federal govern-

ment,? together with a host of foreign governments as sig-

natories to existing treaties,® recognize both the existence

of, and the necessity for, trade secrets.

The magnitude of the problem is reflected by the massive

body of state law affected by the Kewanee decision. At least

nineteen state legislatures have passed laws making it a

2 The procurement regulations of the Department of Defense

and the National Aeronautics and Space Agency recognize and

provide for the use, acquisition and protection of trade secrets.

Armed Services Procurement Regulations §§ 9-200 et seq. and

NASA Procurement Regulations §§ 9-200 et seq.

3 These treaties recognize that a trade secret owner should be

compensated for the use or disclosure of his trade secret. See,

for example, Agreements To Facilitate The Interchange Of Patent

Rights And Technical Information For Defense Purposes, Belgium,

5 US.T. 2318 (1954); Denmark, 11 U.S.T. 148 (1960) ; France, 8

U.S.T. 353 (1957) ; Germany, 7 U.S.T. 45 (1956) ; Greece, 6 U.S.T.

2173 (1955); Italy, 12 U.S.T. 189 (1960); Japan, 7 U.S.T. 1021

(1956) ; Netherlands, 6 U.S.T. 2187 (1955) ; Norway, 6 U.S.T. 799

(1955) ; United Kingdom, 4 U.S.T. 150 (1953).

9

crime to misappropriate trade secrets, while the common

law of every state recognizes the right of its citizens to own

trade secrets. Milgrim, Trade Secrets §1.01[2] and § 1.10

(1968); Sutton, Trade Secret Legislation, 9 IDEA 587

(1966).

Moreover, in Goldstein ¥. California, — U.S. —, 178

USPQ 129, decided June 18, 1973, this Caurt considered

the doctrine of preemption in connection with the copy-

right clause, Article I, § 8 (Clause 8), of the Constitution,

and interpreted the federal copyright laws of the United

States in a manner that is wholly inconsistent with the

holding of the Sixth Circuit. This Court found in Goldstein

that neither Article I, §8, nor the federal copyright laws

(Title 17, United States Code) precluded state legislation

in the copyright field. In Goldstein the rationale of pre-

emption was rejected. The inconsistency between the Ke-

wanee and Goldstein decisions is apparent. :

CONCLUSION

For these reasons the issuance of a writ of certiorari is

urged by The Patent Law Association of Chicago.

Respectfully submitted,

THE PATENT LAW ASSOCIATION OF CHICAGO

Patrick H. Hume, President \

One First National Plaza

Chicago, Illinois 60670

Crype F. WiLuian

Raymonp P. Niro

One First National Plaza

Chicago, Illinois 60670

Counsel to the Association

10

CERTIFICATE OF SERVICE

I, Clyde F. Willian, a member of the bar of the Supreme

Court of the United States, representing The Patent Law

Association of Chicago, amicus curiae, certify that a copy

of the within brief has been served by United States mail.

on counsel for each of the parties, with adequate air mail

postage affixed thereto, addressed as follows:

Edward P. Troxell, Esquire William C. McCoy, Jr.,

Jones, Day, Cockley & Reavis Esquire

1750 Union Commerce McCoy, Greene & Howell

Building 1300 Investment Plaza

Cleveland, Ohio 44115 1801 East Ninth Street

Cleveland, Ohio 44114

Attorneys for Petitioner Attorneys for Respondents.

Done at Chicago on 30th July, 1973.

Clyde F. Willian