# Amicus Curiae Brief — Kewanee Oil Co. v. Bicron Corp. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0273%3A15 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 1974 - **Citation:** 416 U.S. 470 ## Text — Mn at i LIBRARY SUB IN THE Supreme Court of the United States OcroBER TERM, 1973 No. 73-187 KEWANEE Ori CoMPANY v. Bicron CorPORATION, ET AL. On Writ of Certiorari to the United States Court of Appeals for the Sixth Circuit BRIEF FOR THE ASSOCIATION FOR THE ADVANCEMENT OF INVENTION & INNOVATION AS AMICUS CURIAE Epwarp J. BRENNER, President ASSOCIATION FOR THE ADVANCE- MENT OF INVENTION AND INNOVATION 1911 Jefferson Davis Highway Arlington, Virginia 22202 Kari W. FLocks ~Paut L. Gomory Epwakp J. BRENNER Attorneys Press or Brron S. ApamMs Paintine, Inc., Wasnincron, D. C. =>, IN THE Supreme Court of the United States OcToOBER TERM, 1973 No. 73-187 KEWANEE Or COMPANY Vv. BricrRoN CORPORATION, ET AL. On Writ of Certiorari to the United States Court of Appeals for the Sixth Circuit BRIEF FOR THE ASSOCIATION FOR THE ADVANCEMENT OF INVENTION & INNOVATION AS AMICUS CURIAE I. AUTHORITY TO FILE In a letter dated October 9, 1973, the Office of the Clerk of the Supreme Court advised that the Court granted the motion of the Association for the Advance- merit of Invention & Innovation for leave to file a brief, as amicus curiae, in the present case. 2 II. PURPOSES OF BRIEF The major purposes of this brief are to urge this Court: 1. To hold that a state law which protects an in- ventor or developer in the maintenance of his trade secret, whether it may be of a patentable or unpatent- able nature, is not in conflict with Patent Laws. 2. To rule that an inventor or developer has not forfeited his right to protection under a state trade secret law merely because he has used his technology in commerce for more than a year, and 3. To reverse the decision of the Court below to the extent it is contrary to the principles set forth above. Ill. INTEREST OF THE ASSOCIATION FOR THE ADVANCEMENT OF INVENTION & INNOVATION The Association for the Advancement of Invention — & Innovation is a non-profiit professional association of inventors, entrepreneurs, research directors, busi- nessmen, scientists, engineers, lawyers, patent at- _torneys, educators, former government officials and others who are dedicated to the proposition of im- proving the climate for invention and innovation in our country. The combined background of the mem- bership embraces the entire spectrum of the process of invention (conceiving the idea) and _ innovation (bringing the invention to the marketplace). The Association believes that to foster an appro- priate climate for invention and innovation in our country there must be adequate incentives to invest the time, money and effort needed to bring forth inven- tions to the marketplace. Such incentives are present- ly provided by the Patent Laws and state trade secret 3 laws. To eliminate trade secret protection would re- move one of the major incentives for invention and in- novation in the country to the detriment of all con- cerned. IV. WHY THE DECISION OF THE COURT BELOW SHOULD BE MODIFIED 1. The Nature of Trade Secret Protection Was Not Fully Understood or Appreciated. The decision of the Court below concludes that ‘by the use of the state trade secret law he is able to exclude competition and prevent disclosure, thus obtaining protection which he could not obtain under the laws of the United States.’’ To the contrary, trade secret protection does not carry with it a general right to exclude others who happen upon the technology in question through their own honest efforts. Any third party who develops the same subject matter himself is entirely free to use or disclose it in any way he wishes. Trade secret protection only guards against others acquiring the technology by theft or breach of a confidential relationship. The possibility of subsequent independent discovery is the prime risk that is implicit in reliance on trade secret protection. The courts heretofore have uni- versally recognized that the law of trade secrets affords no protection against the honest second discoverer ; see for example Speedry Chems. & Prods., Inc. v. Carter’s Ink Co., 306 F.2d 328, 330 (2nd Cir. 1962) ; Grepke v. General Elec. Co., 280 F.2d 508, 512, 126 U.S.P.Q. 93 (7th Cir.), cert. denied, 364 U.S. 899 (1960) ; Ferro- line Corp. v. General Aniline & Film Corp., 207 F.2d 912 (7th Cir. 1953) (applying New Jersey law), cert. denied, 347 U.S. 953, rehearing denied, 348 U.S. 851 ~ 4 (1954). Indeed, there is substantial reason to believe that the first user of a trade secret may not prevail against the innocent wrongful user thereof, Speedry Chems. & Prods., Inc. supra, wherein it was said: ‘‘However, the discoverer of such secrets has no exclusive right against another who uncovers the secret by fair means, or against those who acquire knowledge of it without a breach of contract or of a confidential relationship with the discoverer, American Dirigold Corp. v. Dirigold Metals Corp., 125 F.2d 446, 52 USPQ 510 (6 Cir. 1942) ; Nims, Unfair Competition and Trademarks, 4th Ed. p. 418.”’ Thus, he who relies on trade secret protection has no monopoly and no right of exclusion. His protection is only against the wrongdoer, but this protection is of prime importance when one has spent considerable re- sources and effort in developing a valuable product or process. By contrast, the Patent Law to the extent pertinent concerns a Government grant of monopoly rights in technology, which rights are assertible against others wholly independent of the manner in which they acquire the protected technology. The Patent Law arms the patentee against any un- authorized use of his invention no matter how the in- vention becomes known to the infringing party. The patent protects the patented technology for a term of years no matter how well it may become known to the world. The Patent Laws operate in an entirely different domain than trade secret laws which depend wholly on a finding of wrongful derivation from a rightful possessor. For these reasons, Patent Laws do not and 4) eannot conflict with trade secret laws such as to preempt them. 2. To Correct an Inaccurate Impression That Trade Secret Laws Duplicate the Patent Laws in Any Real Practical Sense. It is axiomatic that the first requirement of a trade secret is the ability to maintain secrecy. The trade secret must not be ascertainable from study of products sold and is typically a formulation, factory process or other manufacturing technology. In the absence of a patent, technology which enters the public domain is available for use freely by the public. State laws of unfair competition and the like may not be used to achieve a contrary result, Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964). Where the technology may reasonably be kept in secrecy, there is equally no convenient way for a pro- spective patentee to know when the technology which would be disclosed through a patent is used by others. Ability of others also to retain use of the technology seeret tends to render patent protection ineffectual. Thus, while trade secrets are sometimes thought of as an alternative to patenting, United States v. Dubilier Condenser Corp., 289 U.S. 178 (1933), in a very practical sense, trade secret protection is all that is really available for an important class of innova- tions. 3. To Prevent a Substantial Decrease in the Level of Inven- tion and Innovation in the Country on Account of Reduced Incentives. The decision of the Court below is contrary to long established legal doctrines and business practices, and, as such, it substantially reduces the benefits that can be 6 derived from research and development. Thus, when one embarks on a program of research and develop- ment one does not know what patentable or un- patentable inventions may be produced. Further, one can really never be sure what inventions will ultimate- ly be held patentable or unpatentable. Thus, the re- sult is that budgets for research and development will undoubtedly be reduced on account of decreased in- centives for conducting, such programs since trade secret protection would no longer be available as a means to protect the fruits of one’s research and de- velopment program. The decision of the Court below will encourage com- panies to raid their competitors for technical employ- ees in order to learn their competitors’ business and factory practices. It would be much less expensive to appropriate competitors’ trade secrets through this mechanism than to conduct an independent and ex- pensive research and development program. It is to be noted that the present law on trade secrets in most jurisdictions provides a reasonable balance between protecting as employer’s trade secrets while at the same time protecting the employee’s right to change his employment. See for example Allis-Chalmers Mfg. Co. v. Continental Aviation & Eng’r. Corp., 255 F.Supp. 645 (E.D. Mich. 1966). The decision of the Court below encourages com- panies to shift their research and development pro- grams to foreign countries where trade secret pro- tection is available. Also, the decision encourages companies to shift their manufacturing operations to foreign countries for the same reason. The end result of these shifts would obviosly be to reduce jobs for American workers as well as to adversely affect our 7 international balance of trade. With regard to inter- national aspects of the decision, the decision of the Court below would appear to be in conflict with pro- visions of international treaties signed by the United States. 4. To Overcome Undesirable Disincentives for the Transfer and Licensing of Technology. If the decision of the Court below is permitted to stand, licensees will be spurred into discontinuing the payment of royalties under know-how license agree- ments. This could result in the loss by American licensors of a billion dollars of royalties per year from foreign licensees, which would obviously also adversely affect our international balance of payments. More important, however, would be the reduced incentives for licensors to conduct an active research and develop- ment program to generate such know-how in the future. Further, licensors would be discouraged from licensing existing know-how because of the increased likelihood that United States and foreign licensees would not continue for long to pay royalties for such know-how. If the decision of the Court below is permitted to stand, foreign licensors will hesitate to license their technology to United States companies since U.S. licensees cannot assure foreign licensors that their con- fidential know-how can be maintained as trade secrets. The net result of such actions would be to increase im- ports of the products involved or to eliminate them al- together from the American market to the detriment of the American public, to reduce jobs for American workers, and to thereby adversely affect our inter- national balance of trade. . 5. Congress and Other Branches of Government Have Long Recognized the Validity of Trade Secret Protection. By way of example, in the Consumer Product Safety Act of 1972, 15 U.S.C.A. Section 2055 (a) (2) entitled ‘‘Publie disclosure of information’’, Congress provided for recognition and safeguarding of trade secrets by express reference thereto. In the Armed Services Procurement Regulations (ASPR), Section 9-201(c) provides for possible acquisition by the Government of technical information with ‘Limited Rights’? that in essence normally precludes publica- tion or use by the Government outside the Government. The Federal Rules of Civil Procedure refer at Rule 26(e)(7) to protection of . . . ‘fa trade secret or other confidential research, developnient or commercial in- formation ...’. While the right to confidentiality of a trade secret is not absolute, for example such right must bow to national emergencies and the require- ments of pertinent evidence in litigation, nonetheless the trade secret right has heretofor generally been re- spected and upheld in law and its administration. The basic principle as succinctly stated by Justice Holmes in the often cited case of Board of Trade of City of Chicago v. Christie Grain & Stock Co., 198 US 236, 25 S Ct 637, 49 L ed 1031 (1905), is “The plaintiff has the right to keep the work which it has done, or paid for doing, to itself. The fact that others might do similar work, if they wished, does not authorize them to steal plain- tiff’s.’’ 8 Vv. CONCLUSION For the foregoing reasons, amicus urges this Court to modify the decision of the Court below as recom- mended herein so as to avoid the adverse influences 9 such decision would have on the climate for invention and innovation in our country as well as world-wide. A great strength of the United States relative to other countries lies in its superior technology, much of which is unpatented. Our favorable balance of trade in technology-intensive products and know-how license agreements where United States manufac- turing companies are the licensor supply the practical proof. The United States is primarily in the position of a donor of technology. To condone misappropri- ation of such technology only serves to dissipate this great strength. It is submitted that if the basic law is to be change in this field in a way which will have such a major impact on the economic system of the United States (e.g., balance of trade, productivity, ete.) such a change should be effected by Congressional action rather than judicial action. Respectfully submitted, Epwarp J. BrenNER, President ASSOCIATION FOR THE ADVANCE- MENT OF INVENTION AND INNOVATION 1911 Jefferson Davis Highway Arlington, Virginia 22202 Karu W. FLocks Pau. L. Gomory EpwarD J. BRENNER Attorneys ADEPT RR ee ee OPS, ET NS Qe ALATA 2 Netball eA LE ER ARE bg tT YA ocr eV = eee = SA Lk whe pte cat eat SUES ? 4 4 4 Iu the Cm OF THE Ruited States Ocroser Term, 1973 No. 73-187 Kewaner Or Company, Petitioner, vs. Bicron Corporation, eT AL., Respondents. On Writ of Certiorari to the United States Court of Appeals for the Sixth Circuit BRIEF FOR AMICUS CURIAE OPTICAL COATING LABORATORY, INC. Harotp C. Homsaca, . Davin J. Brezver, 4 160 Sansome Street, San Francisco, Oalifornia 94104, Counsel for Optical Coating - Laboratory, Inc., Amicus Curiae. PERNAU - WALSH PRINTING CO. . 562 MISSION STREET - SAN FRANCISCO - CA 84105 Subject Index Page I. The nature and the interest of the amicus ........... 1 A. Optical Coating Laboratory, Inc. .............. 1 B. Interest of the amicus .............06.0 202000 2 Th. ROO iconic eaegae cee we nn eensesarcawerees 3 A. Purpose of brief . 2... 1... ccc cece cee eens 3 B. The potential legal effect of affirmation .......... 3 C. OCLI’s research and development philosophy pro- DAOWON. DEONTONE o5.ns 6686s hese e ses ce sence cines 4 D. OCLI proprietary information is not adequately protected by patents ..........0 65.00 6 E. OCLI trade secret and know-how licensing bene- fits the public ... cic yee cece c cece essen eee 7 1. Licensing domestic companies .............. 7 2. Licensing from foreign companies .......... 8 3. Licensing by OCLI to foreign companies ..... 9 F. Value of trade secret and know-how license sub- stantially inereases after full commercialization.. 9 G. Adverse effect on OCLI sucontracts ............ 10 H. Intracompany policy effect—more limited access to technical information ....................5. 11 I. OCLI’s use of outside consultants would be re- OO xn ey scan ease he ee doe a ae et edee ee eens ll J. Reduced incentive for OCLI to sell or license machines to its competitors ...........0.000000.. 12 TEE.. CRMCIOMIO ei ix ce hkhesck cosnre es oe entasianss descr 12 ne ee" Table of Authorities Cited Cases Pages Dekar Industries, Ine. v. Bisset-Berman Corporation, 434 F. 2d 1304 (9th Cir. 1970) Cert. Den. 402 U.S. 945 CXOTRD oes tiene och hh debe ine ea nck sods oysnueessans 3 ‘Rules Supreme Court Rule, 42(2) 2.2.2.0... 2... cee ce eee eee 1 ' Statutes 35 U.S.C.: PRA FE ois cave ace ence eye esen chk benenewers cass 4 Section 102 2.2... ccc cee cece ee eeees 4 Seetion 103 2.2... ccc cc cee eee eee eeees 4,6 a In the Supreme Court OF THE United States OcroBer TERM, 1973 No. 73-187 Kewanee Orn Company, Petitioner, Vs. Bicron Corporation, ET AL., Respondents. On Writ of Certiorari to the United States Court of Appeals for the Sixth Circuit BRIEF FOR AMICUS CURIAE OPTICAL COATING LABORATORY, INC. I. THE NATURE AND THE INTEREST OF THE AMICUS A. OPTICAL COATING LABORATORY, INC. This brief amicus curiae is submitted by Optical Coat- ing Laboratory, Ine. (herein ‘‘OCLI’’) under Rule 42(2) of the Supreme Court. Letters in which the parties’ coun- sel have acknowledged consent to the filing of this brief are on file with the Clerk of this Court. 2 OCLI is a California corporation with advanced tech- nology products and services for the design, fabrication, and testing of vacuum deposited optical coatings. These coatings are deposited on company manufactured parts or on optical components supplied by custoiners for use in the customers’ devices. OCLI coated parts are used in important products to the consumer such as_ pollution monitoring control devices, burglar alarms, and_ solar energy conversion systems. Although it is not a large corporation (net sales and other revenues in 1972 of approximately 11.4 million dol- lars) it has established a reputation for leadership in de- veloping new processes, products and markets. Such de- velopment expands the frontiers of knowledge in its field and makes new products available to the public. How- ever, it requires large expenditures of time and money in research and development (herein ‘‘R&D”) with a sub- stantial staff of highly trained technical personnel. The reward for this investment of many years of costly ex- perimentation is made possible by protecting trade secrets and know-how using tight security. Such information gives OCLI an advantage over those competitors which do not expend comparable efforts towards R&D. B. INTEREST OF THE AMICUS OCLI is concerned that if the Cireuit Court decision below is affirmed, this would create a legal precedent under which a significant portion of the fruits of OCLI’s costly R&D would become unprotectable. Therefore, it would be vulnerable to dissemination by unscrupulous competitors who, for example, could freely raid experi- 3 enced OCI.I employees and obtain the information at a fraction of its cost to OCLI. Il. ARGUMENT A. PURPOSE OF BRIEF The legal arguments as to the applicable law will be presented in detail not only by the parties but by many briefs amicus curiae which are being filed by othér amici. The purpose of this brief is to present a case history of OCLI’s technological information management program and the potentially devastating effect upon OCLI which would result from an affirmation of the decision of the Cireuit Court. It is believed that this affirmation would produce a similar harmful effect upon many other inno- vative domestic companies to the detriment of the advance- ment of technology in the United States. Since OCLI is a California corporation, the applicable California trade secret law is worthy of note. As enun- ciated by the Ninth Circuit, equitable relief is available to prevent disclosure of trade secrets under state law. The Patent Law, Title 35 of the United States Code, has not been construed as preempting this field! B. THE POTENTIAL LEGAL EFFECT OF AFFIRMATION If this Court affirms the decision below, this would, in essence, establish a precedent termed for this discussion the ‘‘Kewanee Rule’’. Under this rule, protection by the 1Dekar Industries, Inc. v. Bisset-Berman Corporation, 434 F. 2d 1304 (9th Cir. 1970) Cert. Den. 402 U.S. 945 (1971). 4 state law of trade secrets which are appropriate subjects for patent would be preempted by the Patent Law, after the subject matter of the trade secret has been ‘used commercially’? for more than one year. Under 35 U.S.C. 101, such preempted ‘‘appropriate subjects”’ include any ‘‘new and useful process, machine, manufacture or com- position of matter’’ and so are not limited to concepts patentable under the stringent requirements of Sections 102 and 103 of the Patent Act. Accordingly, under the Kewanee Rule, essentially the entire field of trade secrets and proprietary know-how would be unprotectable under State trade secret law after one year of commercial use.? C. OCLI’s RESEARCH AND DEVELOPMENT PHILOSOPHY PROMOTES PROGRESS Because it is highly innovative and develops new prod- ucts and markets simultaneously, OCLI expends substan- tial amounts of time and effort upon research and devel- opment. There are many times when this expense is not fully recouped or when the product is not marketed at all. There are a number of reasons why OCLI management authorizes the large expenditures required for innovative research and development on its products and processes and the machines for producing them. If the new develop- ment is suecessful, OCLI derives a competitive advantage 2Under the Patent Act, such commercial use commences at the sale of one item for commercial purposes even though the trade secret cannot be determined by viewing the product. Typically, such sales oceur many vears prior to any profitable commercializa- tion of the product and so, under the Kewanee Rule, the costly creation of the information would go unrewarded. a 5 during commercialization of the product, typically at least five to ten years. Under the Kewanee Rule, this competi- tive advantage would cease after the first year of com- mercial use because the trade secret information would be available; for example, to a competitor hiring away a knowledgeable OCLI employee. Another reason for such management authorization is that, even if a particular project is unsuccessful, the in- formation derived from such projects can be of great value in creating a reservoir of OCLI expertise for use in related areas of technology. For example, OCLI spent approximately $250,000 to develop high grade products (photomask blanks) for the electronic integrated circuit industry. This money was primarily used to optimize the processing steps to produce increased final product yield and superior quality. Even though OCLI was not success- ful in this specific market place the technical knowledge gained from this effort is proving invaluable in other re- lated fields. If management knew that it could not legally protect the information derived from such research and develop- ment under applicable trade secret law, as would be the case under the Kewanee Rule, it would hesitate to develop innovative new products and markets where there is a significant chance of failure to recoup the investment from the product itself. Thus, management would be forced to seriously consider a total re-emphasis of R&D expenditures so that, for example, risky projects to de- velop new advanced products are reduced in priority. In- stead, the more profitable path in the absence of trade secret protection would be to expend more funds to im- 6 prove the production efficiency in the manufacture of existing products. The net effect would be to inhibit tech- nological progress. ——d D. OCLI PROPRIETARY INFORMATION IS NOT ADEQUATELY PROTECTED BY PATENTS A significant proportion of OCLI R&D expenditure is for engineering the development of processing steps in vacuum deposition of optical thin films. Precision coat- ings, under high vacuum, often require deposition of as many as 50 to 200 thin film layers .of different composi- tions and thicknesses. For example, thousands of specific coatings and coating procedures have been developed by OCLI. OCLI considers the proprietary data and infor- mation developed by such research to be of great value and takes elaborate precautions to retain it in secret. Such information includes what is understood to be ‘‘trade secrets’? and ‘‘proprietary know-how’. The great majority of the foregoing developments in- volve the engineering optimization of detailed processes. Typically, such details are characterized by the United- States Patent Office as obvious subject matter to a person having ordinary skill in the art as defined under 35 US.C. 103. Thus they would be considered by the Patent Office to be unpatentable and therefore unprotectable in the absence of state trade secret law. Thus, under the Kewanee Rule, this valuable information could not be protected at all. OCLI develops as many as one thousand or more coat- ing compositions and procedures a year. A company of Ta Pea TS ase 7 OCLI’s size does not have the resources to file patent applications on each one. Thus, even if the compositions and procedures were patentable, the only practical way to protect most of this information is under applicable state trade secret law. E. OCLI TRADE SECRET AND KNOW-HOW LICENSING BENEFITS THE PUBLIC 1. Licensing Domestic Companies Domestic licensing has become an important source of revenue to OCLI and is a reward for its R&D investment which provides new products for the public. The public is further benefited because the licensees often manufac- ture products in direct competition with OCLI and other companies making similar products. When OCLI has licensed its trade secrets and know- how, the agreements bind the licensees to keep the infor- mation in strict confidence. Under the Kewanee Rule, OCLI would not be able to domestically license such tech- nology because the information could be freely dissemi- nated by the licensees to third parties after one year of commercial use of the information. Another reason for the inability of OCLI to domesti- cally. license under the Kewanee Rule would be that a potential licensee might hesitate to expend considerable sums of money for this information. Instead, it could, if it is so desired, hire knowledgeable technical employees of OCLI who had access to the company’s trade secrets developed by OCLI personnel over the years. Indeed hir- ing such an employee would not even be necessary if the 8 potential licensee could bribe or otherwise persuade him to divulge the information. Sych methods of acquisition would be at a small fraction of OCLI’s cost for the re- search and development involved. The undersirable net effect of the Kewanee Rule would be to penalize OCLI because it is willing to support progressive R&D programs. 2. Licensing From Foreign Companies OCLI has licensed technology from abroad. In one in- stance, OCLI paid almost $900,000 to a European com- pany to obtain trade secrets and know-how relating to durable thin films. Although the license was executed _~ after the first year of sale by the European company in the United States, the information obtained by OCLI en- abled it to begin production in new fields and to advance the technology of the same. These products derived from this licensed technology have returned many millions of dollars over the years. The management of OCLI believes that it would not have attempted to expand into this field of technology without the proprietary information it purchased under the license agreement. Since the European company con- tinued selling goods in the same market to the United States, the above agreement established domestic competi- tion of goods where none would have existed otherwise. Under the above license agreement OCLI was obligated to hold the proprietary information in strict confidence. Under the Kewanee Rule, OCLI could not have protected this information and so the European company might 9 not have licensed OCLI, resulting in a loss of revenue to OCLI and lessened competition in the United States. 3. Licensing by OCLI to Foreign Companies OCLI licensed trade secrets and know-how to a Japa- nese company in an agreement in which proprietary in- formation was strictly protected by both parties. The license fees under the agreement amounted to an initial payment of $150,000 and subsequent yearly payments of about half that amount. Agreements of this type enable OCLI to obtain the rewards for its costly and successful R&D expenditures. Without such agreements OCLI would be required to reduce such expenditures to the detriment of domestic technological progress. One reason why the Japanese company might not li- cense under the Kewanee Rule is that it could hire away employees of OCLI for a small percentage of the value of the information under a license. Also, sinee OCLI could not protect this information from its competitors, the value of the information would be substantially re- duced. F. VALUE OF TRADE SECRET AND KNOW-HOW LICENSE SUB- STANTIALLY INCREASES AFTER FULL COMMERCIALIZA- TION. It is a commercial reality that trade secrets and know- how which have not been fully developed in the market place are worth substantially less than the same informa- tion relating to the same product after full scale com- mercialization and development of the market. Because this usually occurs long after the first commercial sale, 10 all of OCLI’s licenses over the years have been granted long after one year of commercial product sale. Thus, OCLI would not be able to enforce such licenses under the Kewanee Rule. Even if OCLI attempted to license its trade secrets and know-how during the early stages of development and before the expiration of one year after first commer- cial sale, such license would be of negligible commercial value. This is because potential licensees could wait until after the one year period, and legally acquire the infor- mation from a disloyal employee for a fraction of the cost of licensing. ——— G. ADVERSE EFFECT ON OCLI SUBCONTRACTS OCLI does a substantial amount of subcontract work for large corporations such as Xerox, IBM, and Polaroid. All of such contracts relate to OCLI’s developing new component parts in the contractor’s complete devices and include strict clauses to protect the proprietary informa- tion of the contractor. Under the Kewanee Rule, OCLI would not be in a posi- tion to protect the contractor’s valuable proprietary in- formation. Under such circumstances, such companies would not risk OCLI’s custody of this information and so most likely would attempt to perform such services ‘Sin house’’. This would damage small companies, such as OCLI, which rely heavily upon subcontract work. Also, it would tend to reduce competition in the United States. 11 H. INTRACOMPANY POLICY EFFECT—MORE LIMITED AC- CESS TO TECHNICAL INFORMATION All technical personnel of OCLI are subject to confiden- tial employment agreements. OCLI encourages such tech- nical personnel to become versed in all phases of OCLs business. This leads to eross-pollination of information and consequent greater efficiencies in both production and R&D within the company. Under the Kewanee Rule, technical personnel could not be prevented from leaving the company and taking with them trade seerets and know-how developed by OCLI over the years. Thus, OCLI would be required to strictly re- view its policy regarding free access of information to its technical personnel in order to protect the company against raids of such personnel by competitors. Such restrictions would obviously lead to inefficiency within the company. I OCLI'’s USE OF OUTSIDE CONSULTANTS WOULD BE REDUCED OCLI utilizes a number of outside consultants, all of whom sign agreements to protect any proprietary infor- mation to which they had access during consultation. Under the Kewance Rule, OCLI would be extremely hesi- tant to permit such consultants to have such access be- cause it could not protect its proprietary information. Many consultants are employed for their knowledge of new fields into which OCLI is considering entry. OCLI’s failure to use such consultants would tend to decrease the efficient exploration of such new fields. ARG Re PARAS OMT 12 J. REDUCED INCENTIVE FOR OCLI TO SELL OR LICENSE MACHINES TO ITS COMPETITORS OCLI has sold and licensed a number of its optical coating machines to competitors under strict agreements to protect its proprietary information. The purchasers of such machines manufacture products which compete with OCLI’s products in the United States. Under the Kewanee Rule, OCLI would be less likely to sell such machinery since it could not protect its valu- able proprietary information. Ill. CONCLUSION In view of the foregoing, affirmance of the Circuit Court would severely prejudice OCLI for its creative but costly research and development in at least the following ways: (1) it would create incentive for predatory raiding of OCLI’s valuable technical personnel by its less innovative competitors ; (2) OCLI would be forced to reduce the more risky phase of its research and development, i.e., that directed to new fields and products; (3) it would greatly restrict OCLI’s access to foreign technology and the ability of OCLI to sell its technology in foreign countries, resulting in a competitive disadvan- tage to OCLI with relation to companies in such foreign countries ; | : (4) .it would drastically reduce subcontract work by OCLI, an important source of revenue to it; and 13 (5) it would require a reduction in OCLI’s use of out- side consultants. The domestic public would also suffer if the lower - court is affirmed. Technological progress would be de- celerated because OCLI and other innovative companies would have reduced incentive to invest in costly research and development and would have restricted access to both foreign and domestic technical information. In addi- tion, there would be a lessening of competition in the United States market. For the reasons stated it is respectfully submitted that the judgment of the court below should be reversed. Dated, San Francisco, California, November 19, 1973. Respectfully submitted, Harotp C. Housacn, Davin J. Brezner, Counsel for Optical Coating Laboratory, Inc., Amicus Curiae. (Appendix Follows) STATE OF CALIFORNIA ) COUNTY OF SONOMA SS) _ DANFORTH JOSLYN, being duly sworn, deposes and states as follows: 1. He is executive vice president and director of Optical Coating Laboratory, Inc., (OCLI). In that capacity, he is thoroughly familiar with the technological information program of OCLI and participates in management decisions concerning such program. 2. He has carefully reviewed the foregoing brief amicus curiae and affirms, on behalf of himself and OCLI management, that the facts are true within his knowledge and belief and the opinions expressed reflect those of OCLI management. thas H ons Subscribed and sworn to before me this 14th day of November, 1973. Notary Public » “OFFICIAL SEAL. ' BARBARA L. FISHER NOTARY PUBLIC+CALIFORNIA SONOMA COUNTY My Commission Expires May 7, 1975 —s ALND A PENNS SUP | No. 73-187 In the Supreme Court of the United States Ocroser TERM, 1973 KEWANEE OIL COMPANY, Plaintiff-Petitioner, vs. BICRON CORPORATION et al, Defendants-Respondents, BRIEF AMICUS CURIAE OF THE AMERICAN BAR ASSOCIATION Donatp W. BANNER 200 South Michigan Avenue Chicago, Illinois 60604 Tsomas F. McWriaMs 53 West Jackson Boulevard Chicago, Illinois 60604 Joun C. DorFmMan 123 South Broad Street Philadelphia, Pennsylvania 19109 Attormeys For American Bar Association As Amicus Curiae CHESTERFIELD SMITH Post Office Drawer B.W. Lakeland, Florida 33802 President American Bar Association The Scheffer Press, Inc.—(312) 263-6850 ETS EGRET EEL TE BOON POOL LEGS PERRET IN THE SUPREME COURT OF THE UNITED STATES Ocroser Term, 1973 N. 0. 73-187 KEWANEE OIL COMPANY, Plaintiff-Petitioner, vs. BICRON CORPORATION et al., Defendants-Respondents, | emiaaemanaelE aaanaen AS —— ame a BRIEF AMICUS CURIAE OF THE AMERICAN BAR ASSOCIATION Interest of Amicus The American Bar Association, consisting of over 175,000 lawyers throughout the United States, includes a substantial number of members regularly counseling clients concerning the assertion of and defense against patent and trade secret rights. The Association appears here in an attempt to assist the Court in the orderly development and clarification of trade secret law. The Background Facts Trade secrets frequently are of immense value. They are acquired by the expenditure of time and effort and investment so as to afford an advantage over competitors. wn. They are the subject of extremely valuable licensing ar- rangements both intranational and international. Trade secrets are the subject of state criminal statutes. At least 21 states of the United States have adopted statutes making it a crime to fteal trade secrets—with no distinction as to whether or' not they are patentable.’ / For at least three quarters of # century state courts throughout the United States, and many Federal. Courts which have considered the issue, have found that the common law of the states, or state statutes, protect the owner of trade secrets from their theft or their unlawful disclosure or use in violation of a contract or a fiduciary relationship. Most of the states have held that their com- mon law does so protect trade secrets, whether patent- able or not. Representative of such decisions is that of Ark. Stat. Ann. 6641-3949 to 6641-3951 (1967) Cal. Penal Code §499ce (1967) Colo. Rev. Stat. § 40-5-33 (1969), § 40-5-34 (1967) Ga. Crim. Code § 26-1809 (1968) Ill. Rev. Stat. Ch. 38 § 15-1 to 15-9, § 16-1 (1965) Ind. Code §§ 35-17-3-1 to 35-17-3-5 - (1969) Me. Rev. Stat. Ann. Tit. 17, § 2113 (1967) Mass. Ann. Laws Ch. 266 §§ 30(4), 60A (1967) Mich. Compl. Laws §§ 752.771 to 752.773 (1968) Minn. Stat. Ann. § 609.52 (1967) Neb. Rev. Stat. Ch. 28, §§ 548.01 to 548.03 (1965) N.H. Rev. Stat. Ann. Ch. 580, § 32 (1967) N.J. Stat. Ann. §§ 2A: 119-5.1 to 119-5.5 (1965) N.M. Stat. Ann. § 40 A-16-23 (1967) N.Y. Penal Code § 155.00(6), 155.30(3), 165.07 (1967) N.C. Gen. Stat. § 1475.1 (1967) Ohio Rev. Code Ann. Tit. 13, § 1333.51, 1333.99 (1967) Okla. Stat. Tit. 21, § 1732 (1968) Pa. Stat. Tit. 18, § 4899.2 (1965) Tenn. Code Ann. §§ 21-4238 to 21-4240 (1967) Wis, Stat. Ann, § 943.205 (1965) _—e the Connecticut Supreme Court entitled Plastic and Metal Fabricators Inc. v. Roy reported at 163 Conn. 257, 303 A.2d 725 (1972). This protection afforded to trade secrets in the United States is similar to protection afforded in the other in- dustrial countries of the world. Indeed, the United States is party to international treaties which protect against “eompetition contrary to honest practices in industrial or commercial matters” and acts “contrary to commercial good faith’. In the case at bar, the pertinent findings, in the language of the Circuit Court of Appeals, are as follows: “On this record, as a whole, it appears clear to us, as it did to the District Court, that the individual defendants used the information obtained during their employment by Harshaw for the benefit of Bicron. There can be no question on this record but what these individual defendants appropriated, to the benefit of Bicron, Harshaw’s secrets, processes, pro- cedures and manufacturing techniques. (478 F.2d 1076) * “In addition the mere showing or writing about certain manufacturing techniques was found by the District Judge to be insufficient to amount to a dis- closure to the public of those trade secrets involved 2Article 10 bis of the Paris Convention Act of Lisbon, 1958, 13 U.S.T. 1 reads in part: “(1) The countries of the Union are bound to assure to persons entitled to the benefit of the Union effective protection against unfair competition. (2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.” Article 20 of the Pan American Convention, 46 Stat. 2907, reads in its en- tirety, “Every act or deed contrary to commercial good faith or to the normal and honorable development of industrial or business activities shall be considered as unfair competition and, therefore, unjust and prohibited.” . ani in this law suit, which were found by the District Court to be trade secrets within the law. (478 F.2d 1077) “After careful consideration of the entire record it appears that the findings of fact of the District Judge are not clearly erroneous within the meaning of Rule 52, Federal Rules of Civil Procedure, 28 “U.S.C, and the District Judge properly applied the Ohio law relating to trade secrets.” (478 F.2d 1077) The Confusion Below The American Bar Association respectfully suggests that the Court below was in error in thinking that the Ohio law relating to trade secrets resulted in “the main- tenance of a monopoly”. This error led it to reason that the state law could not be enforced because the patent laws were the only ones which could provide a monopoly. The Court’s confusion of state trade secret laws and monopolies was, therefore, a pivotal error below. The trade secret law of Ohio, and that ofall other states, provides a type of protection for these secrets which is distinetly different from the monopoly obtainable under the patent laws. The right which the patent law grants permits the patent owner “to exclude others from making, using or selling the invention throughout the United States” for a stated period. (35 USC 154) This is a broad right to exclude, which extends even to those who may independently make the same invention at some later time. No sueh right to exclude arises out of state trade secret law. On the contrary, the owner of a trade secret only has (1) the right to prevent those who have stolen the secret from him from disclosing or using it, and (2) the right to prevent others from disclosing. or using it in breath of contract or by violation of a fiduciary relation- cae Wet ship. It is impossible, for example, for the owner of such a trade secret to assert any “trade secret” right against any person who- independently develops the same secret. Indeed, it is well settled that more than one person may simultaneously and independently be in possession of the same trade secret. The owner of a new technological development which is patentable therefore has the option of choosing between the broad right to exclude others— the monopoly grant—provided under the patent laws, and the narrow right to keep others from stealing or using his secrets in breach of a contract or of a fiduciary rela- tionship. This Court Has Consistently Recognized The Differences Between Patent Rights and Trade Secret Protection These differences between the rights arising under the patent law and the rights in trade secrets have been stated by this Court many times. In Becher v. Contoure Laboratories (279 U.S. 388), Mr. Justice Holmes said: “It is plain that that suit had for its cause of action the breach of a contract or wrongful disregard of confidential relations, both matters independent of the patent law, and that the subject matter of Op- penheimer’s claim was an undisclosed invention which did not need a patent to-protect it from disclosure by breach of trusts Irving Iron Works v. Kerlow Steel Flooring Co., 96 N.J. Eq. 702, 126 A. 291; Du Pont , deNemours Powder Co. v. Masland, 244 U.S. 100, 37 S.Ct. 575, 61 L.Ed. 1016. Oppenheimer’s right was independent of and prior to any arising out of the patent law, .. .”. *(Callmann, The Law of Unfair Competition and Trade Marks, 2nd Ed., 1950, Vol. 2, Ch. 14, Sections 51-54; Ellis, — — 1953, Ch. 2; Restatement of Torts (1939) on ; siaibiian In Chicago Board of Trade v. Christie G. & S. Co., (198 U.S. 236, 1905), Mr. Justice Holmes said: “It stands like a trade secret. The plaintiff has the right to keep the work which it has done, or paid for doing, to itself. The fact that others might do similar work, if they might, does not authorize them to steal the plaintiff’s. Compare Bleistein v. Donald- son Lithographing Co., 188 U.S. 239, 249, 250, 47 L.Ed. 460, 462, 23 Sup. Ct. Rep. 298. The plaintiff does not lose its rights by communicating the result to per- sons, even if many, in confidential relations to itself, under a contract not to make it public, and strangers to the trust will be restrained from getting at the knowledge by inducing a breach of trust, and using knowledge obtained by such a breach.” (198 U.S. 250) In the United States v. Dubilier Condenser Corp. (289 U.S. 178, 1933), Mr. Justice Roberts said: “An inventor deprives the public of nothing which it enjoyed before his discovery, but gives something of value to the co ity by adding to the sum of human knowledge. (citing cases) He may keep his in- vention secret and reap its fruits indefinitely. In con- sideration of its disclosure and the consequent. bene- fit to the community, the patent is granted. An ex- clusive enjoyment is guaranteed him for seventeen years, but, upon the expiration of that period, the knowledge of the invention inures to the people, who are thus enabled without restriction to practice it,and profit by its use. Kendall v. Winsor, 21 How. 322, 327, 16 L.Ed. 165; United States v. American Bell Tele-. phone Co., supra, page 239 of 167 U.S., 17 S.Ct. 809. To this end the law requires such disclosure to be made in the application for patent that others skilled in the art may understand the invention and how to put it to use.” (289.U.S. 186, 187) —e may oe Therefore, for almost three quarters of a century the distinction between monopoly rights granted by a patent and the protection granted by states under trade secret laws has been thoroughly understood. Indeed, the two con- cepts have lived in harmony, together supporting the public interest in strengthening: and advancing the indus- trial vitality of the United States. : Congress and State Trade Secret Law It is quite apparent that Congress is not aware that it preempted trade secret law in adopting the eurrent patent statute, passed in 1952. There is no statute en- acted by Congress since that date which implies any pre- emption of the trade secret law of the states. Additionally, although state trade secret law was in existence for well over half a century before passage of the 1952 patent act, there is not one word in that entire statute which provides for any preemption of any trade secret law. Furthermore, the “Commentary on the New Patent Act” which appears as part of the West Publishing Com- pany’s United States Code Annotated, prepared by Mr. P. J. Federico—one of the principal drafters of the 1952 patent act—has not one single word which would suggest that the 1952 patent act was intended to preempt state trade secret law. In addition, and.even though there is no statute passed by Congress since 1952 stating that the patent statute of that vear created any preemption of the state law of trade secrets, Congress has passed numerous statutes which in other ways relate to trade secrets. This action of Congress thus leads to the inexorable conclusion that no such preemption was ever intended by Congress. (These naa statutes are listed as footnote 5 on page 13 of the Peti- tion for Writ of Certiorari in this case, and therefore are not repeated here.) It is interesting to conjecture, however, what result would obtain in the Sixth Circuit should a criminal action be brought against an eniployee of the United States under 18 USC 1905 (1970) which ‘makes it a federal crime for a United States officer or employee wrong- fully to disclose a trade secret which comes to him in the course of his employment. There is, of course, nothing in that statute which makes it inapplicable to the dis- closure of a trade secret of a patentable nature which has been used commercially for more than one year. If a federal employee disclosed such a trade secret, obtained by him from another in the course of his employment, he would be criminally liable. It seems obvious that the Congress would never have passed the criminal statute recited above had it been under the impression it had preempted a certain class of trade secrets from state pro- tection when it passed the patent statute in 1952. Preemption The sole basis in law for the decision of the Court below was not any action of Congress but rather the question asked by this Court in Lear, Inc. v. John S. Adkins, 395 U.S. 653 (1969). At that time—and very wisely—this Court decided it should not “attempt to define in even a limited way the extent, if any, to which the states may properly act to enforce the contractual rights of inventors of unpatented trade secre ” (page 675). The Court below, improvidently we urge, rushed in to decide an issue which this Court refused to decide. In so doing the Court below obviously did violence to a soiica: well-established body of law involving property rights of immense value, having both national and international ramifications. If such law is to be changed, we submit it should only be done by the Congress of the United States after com- plete hearings. Such hearings should cover the manner in which investment is made in the creation of trade secrets and the extent of such investment. The hearings should also embrace the effect of any proposed change in trade secret law on: licensing practices and the inter- national balance of payments; the import of foreign trade secrets into the United States; the pertinent treaties to which the United States is a party; our country’s tech- nology resource, and all other issues which would be affected by the overthrow of settled law in this area. Clearly, only the Congress can obtain the requisite infor- mation to determine whether there should be a change in the law and, if so, to what extent. No Court is in as favorable a position to do so. As this Court said in Gottschalk v. Benson & Tabbot, 93 S.Ct. 253 (1972): “It may be that the patent laws should be extended to cover these programs, a policy matter to which we are not competent to speak. ... . If these pro- grams are to be patentable, considerable problems are raised which only committees of Congress can manage, for broad powers of investigation are needed, including hearings which canvass the wide variety of views which those operating in this field entertain. _ The technological problems tendered in the many briefs before us indicate to us that considered action by Congress is needed.” Furthermore, this precise issue of preemption of state trade secret law by the patent statutes is before the Con- ae ew gress at this time. On September 27, 1973, President Nixon ordered the Commerce ahd Justice Departments to transmit to the Congress a proposed patent act. This was introduced into the Senate by Senator Scott as $.2504. The President’s message of transmittal states, inter alia, that the legislation “would ensure that the patent laws not be construed to replace or preempt state laws con- cerning trade secrets so long as those state laws do not interfere with the free flow of ideas in the public domain.” It should be noted that in the case at bar—as distinguished from the factual situation in Sears (376 U.S. 225, 11 L.Ed. 2d 661, 84 S.Ct. 784 (1964)) and in Compco (376 U.S. 234, 11 L.Ed.2d 669, 84 S.Ct. 779 (1964))—the courts below agree that the fact is that we are dealing with trade secrets and not with “ideas in the public domain.” CONCLUSION This case presents a simple, and yet historic, issue. Its ramifications are of tremendous importance. The American Bar Association urges that the decision below be reversed and that any such dramatic change in state trade secret law, as attempted by the Court below in this case, be stated to be in the sole province of the @ongress of the United States. ‘The American Bar Association has urged such legisla- tive action, having adopted a resolution in 1970 favoring legislation making it plain that the patent laws of the Unitel States are not to be construed to preempt or to affect state or other federal law relating to trade secrets. This resolution was generated y ie decision of the trial court in Painton & Company Ltd. v. Bourns, Inc. (309 F.Supp. 271). That decision was reversed by the Second Cireuit Court of Appeals (442 F.2d 216). ws Sh ola Respectfully submitted, AMERICAN Bar ASSOCIATION Donatp W. BaNnNER 200 South Michigan Avenue Chicago, Lllinois 60604 Tuomas F. McWr.uiamMs ’ 53 West Jackson Boulevard Chicago, Illinois 60604 Joun C. DorFMan 123 S. Broad Street Philadelphia, Pennsylvania 19109 Attorneys for American Bar Assoctation as Amicus Curiae CHESTERFIELD SMITH P. O. Drawer B.W. Lakeland, Florida 33802 President American Bar Association 2; an “NMARYy | i CCury : @ uf > IN THE Supreme Court of the United States OcToBER TERM 1973 No. 73-187 KEWANEE O11 Company, Petitioner, vs. Bicron Corporation, Luoyp H. HamMner, JuLious M. MENEFEE, WittiamM P. Novak, RicHarp W. SPURNEY AND Harry SuscHEK, Respondents. BRIEF ON THE MERITS FOR THE AMERICAN PATENT LAW ASSOCIATION, AMICUS CURIAE JoHN T. Kexton, President American Patent Law Association 2001 Jefferson Davis Highway Arlington, Virginia 22202 By Gerorce E. Frost 3044 West Grand Boulevard - Detroit, Michigan 48202 Its Attorney Press or Byron S. ApaMs Parntine, Inc., WasHincron, D. C. aS » eA gt ae greeny SS Supreme Court of the United States OctToBER TERM 1973 No. 73-187 KEWANEE Or Company, Petitioner, vs. Bicron Corporation, Luoyp H. HAMNER, JuLious M. MENEFER, WittIAM P. Novak, RIcHARD W. SPuURNEY AND Harry SuscHek, Respondents. BRIEF ON THE MERITS FOR THE AMERICAN PATENT LAW ASSOCIATION, AMICUS CURIAE INTRODUCTION This brief amicus curiae is submitted by the Ameri- can Patent Law Association under Rule 42(2) of this Court. Letters of consent from counsel for’ the re- spective parties are on file with the Clerk of this Court. This brief is filed in support of the Petitioner and to express our reasons for believing the Court below has erred. The filing of this brief on behalf of the Association has been authorized by the Board of Managers, which is elected by the members. The Association has over , en 21 SRP A AOI. TT OP ot wa IE REESE BHM NF SEE TINT ME i lS ABTS CEP ERI e 2 3,800 members, including over half of the Patent Lawyers in the United States. I. The court below has held that the United States patent law preempts state common law trade secret protection to inventions which might be patentable. In terms, the patent statutes neither require nor pre- clude this holding. However, the scheme of the patent law, past and present provisions of the patent and related laws, and long standing judicial decisions, show that the court below has erred. Indeed, the omission of a preemption clause in the 1952 Patent Code (66 Stat. 792) itself demonstrates Congressional intent not to disturb the non-preemption implicit in the well developed body of technical trade secret law. In order to obtain a patent, the inventor must file an application fully disclosing the invention. 35 USC 112. The application, and therefore the inven- tion, is made public upon issuance of the patent. A defective or inadequate specification will not support a patent. But if the invention is patentable, and the specification and other requirements of the patent law are met, the inventor receives a ‘‘right to exclude others’’ subsisting for 17 years despite the disclosure of the invention. 35 USC 154. In short, the inventor must forego secrecy. if he is to have a patent but he obtains a right that survives disclosure. When an invention is kept secret, no patent law rights can be obtained. The inventor is relegated to (a) whatever benefit he can obtain from his own secret use of the invention, and (b) the limited tort or con- tract based state law relief he can secure against per- sons who discover the secret by improper means or 3 disclose or use the secret in violation of an obligation of confidence or a contract. 4 Restatement, Torts § 757. The date when secrecy is lost terminates the period for _which state law relief is available and, at least in most instances, ends the duration of any injunctive remedy. See Forest Laboratories v. The Pillsbury Company, 452 F(2d) 621 (7th Cir., 1971).* In short, the United States patent law operates in the domain of disclosed public information, and the state trade secret law operates in the domain of what is kept secret. The protection is complementary, not overlapping.” Except for the decision below, there 1The classic analysis of the rights of owners of ‘‘unpatented in- ventions’’ is contained in Robinson, The Law of Patents (1890). Sections 867-883 of this treatise are devoted to ‘‘ wrongs against unpatented inventions.’’ These sections develop the non-pre- emption doctrine that has been universally applied except for the decision below and the District Court ruling in Painton v. Bourns, 309 Fed. Supp 271. (S.D.N.Y., 1970, rvsd. at 442 F (2d) (216)). 2The philosophical and practical difference between the state trade secret law and the patent law is brought out by the require- ments for a successful trade secret case. In such case, the plaintiff must (a) identify the alleged secret, (b) prove adoption of ‘security measures to insure secrecy, (c) show preservation of the secret by reasonable, enforceable, agreements or other confidential relation- ships with persons to whom the secret is revealed, (d) establish that the defendant’s use of the secret stems from knowledge ob- tained from the plaintiff, (e) establish that the secret is not revealed by inspection or analysis of any marketed products, and (f) be prepared to negate defenses such as independent development of the trade secret by the defendant or others. There is, how- ever, no requirement of ‘‘unobviousness’’ in the patent law sense. On the other hand, the plaintiff-in a patent case need only prove the fact of the patent, his ownership, and the fact of infringement. It matters not whether defendant learned of the invention from plaintiff or developed it independently. He must, however, be prepared to overcome defenses such as anticipation by the prior art and obviousness over the prior art. - AEE LES ORR LOL AGN EN eA a Te TNT, LPI ET Wet PARTY PL, PET COT Hit ey FORM e MER ESS EME RN GIS EP Ne PRA 4 is no occasion for the patent laws to disclaim pre- emption of state trade secret law, for the two separate laws can and do coexist without conflict. It is clear from past and present provisions of the patent law that Congress intended to maintain, not destroy, traditional trade secret protection for inven- tions. For example, 35 USC 24 provides for sub- poenas in aid of testimony in contested matters before the Patent Office. The statute provides that no ‘‘wit- ness shall be deemed guilty of contempt . . . for re- fusing to disclose any secret matter except ujion ap- propriate order of the court which issued the sub- poena.’’ Prior to the 1952 Patent Code, the statute read ‘‘no witness shall be deemed guilty of contempt ... for refusing to disclose any secret invention or discovery made or, owned by himself.’’ R.S. 4908, Section 45 of the 1870 Patent Act (16 Stat. 198). Significantly, this qualification was added in the 1870 Patent Act after a decade of experience under Section 1 of the 1861 Act (12 Stat. 246), which was otherwise similar. Likewise, from 1836 until after 1903, the patent law provided for special disclosures known as caveats to be filed in the Patent Office. It required that each ‘‘eaveat shall be filed in the archives of the office and preserved in seerecy.’’ R.S. 4902, Section 40 of the 1870 Patent Act (16 Stat. 198), and Section 12 of the 1836 Patent Act (5 Stat. 117). Also, 35 USC 122 directs that ‘‘applications for patents shall be kept in confidence by the Patent Office . .. .’’ The Reviser’s Notes state that ‘*This section enacts the Patent Office rule of secrecy of applications.”’ The foregoing statutes would be superfluous if, as the court below has held, the patent law preempts protection for trade secrets involving inventions. 5 When the Congress has intended preemption in patent matters, it has said so. Thus 28 USC 1338 states that the jurisdiction of the Unted States District Courts in ‘‘any civil action arising under any Act of Congress relating to patents . . . shall be exclusive of the courts of the states in patent cases."’ Even this preemption is limited. In Becher v. Contoure Labora- tories, 279 U.S. 388 (1929) a state court suit “‘had for its cause of action the breach of a contract or wrongful disregard of confidential relations both matters inde- pendent of the patent law’’ and ‘“‘subject matter (of) undisclosed invention (that) did not need a patent to protect it from disclosure by breach of trust.”’ Id. at 391. This Court refused to enjoin the state court action because the ‘‘right was independent of and prior to any arising out of the patent law.’’ Idem. Both this Court’s ruling in Becher, and the statute upon which it is based, are inconsistent with the pre- emption doctrine applied below in this case. The theory of the ruling below is similar to the petitioner’s contention in Mazer v. Stein, 347 U.S. 201 (1954). In Mazer it was argued that the design patent ‘law preempted copyright law protection to works of art incorporated in utilitarian lamp bases. Rejecting this contention, this Court held that ‘‘the patentability of the statutes, fitted as lamps or unfitted, does not bar copyright as works of art.’’ Id. at p. 217. The same principle applies in the present case. The patentabil- ity of a trade secret, or its former patentability, does not preclude common law trade secret protection. In Mazer v. Stein the copyright statute showed Congres- sional intent inconsistent with preemption. In the present case, the above-discussed provisions of the patent and other laws, taken in conjunction with the long-standing judicial recognition of common law oe hy? ee PS ae a RY PRS GEO HEED OL ERIE — SE ee" Ph NOME ’ me ry 6 trade secret protection to inventions, show a like Con- gressional intent to leave such trade secret protection unaffected. Il. The court below specifically applied its doctrine of preemption to trade secrets that once could have been patented but are no longer patentable because of more than one year’s commercial use. The doctrine of unpatentability relied upon stems from Macbeth-Evans Glass Co. v. General Electric Co., 246 Fed. 695 (6th Cir., 1917). The court was not there concerned with whether trade secret rights did or did not exist. Rather, the suit was upon a patent, and the patent disclosure itself had terminated trade secret rights. The court did hold that there was a forfeiture of the right to patent protection because ‘“*the ... choice made (between trade secret and patent) was deliberate and is unmistakable; it was the secret use for profit and was persisted in for years’’ and “Tf the right to secure protection of the patent laws ean be effectively repudiated, it certainly has been here.”’ Id. at p. 701. In Metallizing Eng. Co. v. Kenyon Bearing, 153 F(2d) 516 (2d Cir., 1946), Judge Learned Hand—applying the Macbeth-Evans doctrine—stated that the inventor ‘‘must content him- self with either secrecy, or legal (patent) monopoly.”’ Id. at p. 520. Rather than supporting the ruling below in the present case, these decisions show that patent protec- tion and trade secret protection are two different things—and that only an attempt both to use a trade secret commercially for a prolonged period and there- after obtain a patent is contrary to the patent law. In any event, the patent statutes do not express any preemption doctrine as to trade secrets, much less one 7 that applies to some secrets and not to others. Any effort to confine preemiptien to once-patentable inven- tions leads to the illogical result that an unobvious and therefore patentable tirade secret is preempted from trade secret protection. by the patent law whereas the less deserving obvious and unpatentable trade secret is not preempted. See 35 USC 103. This would lead to the absurd requirement that a plaintiff needs to show that the secret ‘is trivial and unpatentable in order to prevail in a tirade secret case. The ruling below must stand or fall on whether the patent law preempts common law trade secret protec- tion to inventions generally, not on the nature of the particular trade secrets before the court. As discussed in part I, above, there is no such general preemption. ITl. Finally, the ruling below is unsound as a matter of policy. Whether the law protects the trade secret or not, the owner oftem can physically maintain the secret. Where the owner cannot bear the expenses of patents and their enfforcement, such secrecy can be especially attractive. An opportunity to disclose and to license, based on the quite limited protection af- forded by the state laws of trade seercts, benefits both the owner of the secret and the public. Judge Friendly was right im stating that: | ‘‘Rather than having a monopolistic tendency, like the Illinois law involved in doare and Compco, the upholding of private agreements for the shar- ing of trade secrets on mutually acceptable terms ‘tends against the owner’s hoarding them.’’ ma) v. Bourns, 442 F.(2d) 216, 223 (2d Cir., 1971) ). 8 An unbroken line of decisions in the one hundred and eighty-three years since the 1790 Patent Act has recognized the benefits of protecting trade secrets and has given narrow and limited protection to trade secrets—implicity denying any federal preemption. Surely, this is not the time to upset an uncountable number of business decisions and agreements based on this established law. The judgment below should be reversed. Respectfully submitted, JoHN T. Ketron, President American Patent Law’ _ Association 2001 Jefferson Davis Highway Arlington, Virginia 22202 By Gerorce E. Frost 3044 West Grand Boulevard Detroit, Michigan 48202 Its Attorney 9 Certificate of Service The undersigned hereby certifies that copies of the foregoing were, on the 20 day of November, 1973, _mailed by registered airmail, as follows: Mr. Epwarp P. TROXELL 1750 Union Commerce Building Cleveland, Ohio 44115 Counsel for Petitioner _Mr. WriuiaM C. McCoy, JR. 625 National City Bank Building Cleveland, Ohio 44114 Counsel for Respondent GEORGE E. Frost 3044 West Grand Boulevard Detroit, Michigan 48202 Attorney for American Patent Law Association PPh a A, NI = LIBRA RY id i ay Sunreme owt : Sr) : Via E as ree OB pin Boe Oe ; IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1973 No. 73-187 ‘ KEWANEE OIL COMPANY, q Petitioner ; versus BICRON CORPORATION, et al. Respondents BRIEF OF SOUTHWIRE COMPANY AS AMICUS CURIAE Van C. Wilks P. O. Box 1000 Carrollton, Georgia 30117 Attorney for Amicus Curiae Of Counsel: D. R. Sloan, Jr. P. O. Box 1000 Carrollton, Georgia 30117 . e che ath . Cs « . ; & « a * . - ~ . wean Runegpnceo. Cranage NH GO IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1973 No. 73—187 KEW ANEE OIL COMPANY, Petitioner versus BICRON CORPORATION, et al. Respondents BRIEF OF SOUTHWIRE COMPANY AS AMICUS CURIAE This brief is submitted with the written consent of all parties to the case. INTEREST OF AMICUS CURIAE Southwire Company, the Amicus Curiae, has a significant research and development effort in terms of both manpower and financial expenditure. Southwire Company has extensively licensed patented and unpatented developments both within and without the United States. Further, Southwire has in the past, and needs in the future, to rely upon numerous » confidentiality agreements with both its employees and licens- ees. Southwire believes that the practical economic impact of this decision was not understood by the Sixth Circuit. that the practical economic impact was not pointed out to that court by the Parties, and that there is great danger that the practical economic impact of this case will not be presented to this Court by the Parties. ARGUMENT Southwire Company (herein called Southwire) believes that the hard legal issues raised by this case will be presented ade- quately to the Court by others. However, a few legal points concerning the economic impact are noteworthy here. The enforceability of contracts involving the transfer of con- fidential information has been upheld in this Country, by this Court, at least since Fowler v. Park, 131 U. S. 88 (1889). These contracts have become so numerous and involve such fantastic financial commitments by American industry in re- liance upon almost a century of case law supporting their vali- dity that any change in the law should properly come from the Congress, not from the Courts. The Congress alone, among the governmental entities, has both the power and the investigative resources to evaluate fully the practical economic impact of trade secret law and the need for, or desirability of, changing almost a century of precedent. An interesting contrast in the treatment of trade secret law and confidentiality agreements is presented by three recent de- cisions of the Sixth Circuit. In United States v. Greenwald, No. 72-2117 (6th Cir. June 1, 1973) the court upheld Green- wald’s conviction for transportation of stolen property in in- terstate commerce. The “property” in question was a “secret chemical formula”. The court had no trouble in finding that unpatented trade secrets are assets. Greenwald is totally incon- 3 sistent with Kewanee Oil Company v. Bicron Corporation, et al, Nos. 71-1041, 71-1042 (6th Cir. May 10, 1973) which was decided a mere three weeks earlier by the same court. Two wecks ‘after Greenwald, the Sixth Circuit decided Screw Ma- chine ‘Tool Company v. Slater Tool and Engineering Corpo- ration, et al, No. 72-1950 (6th Cir. June 15, 1973), which held uncopyrighted matter could not be copied if the result would be unfair competition. The defendant was found in contempt of court in Screw Machine Tool. Thus the Sixth Circuit ap- pears to be saying that if a confidence is betrayed, it may con- stitute a crime, or it may constitute contempt of a court order, but there is no civil remedy. If the policy in favor of uphold- ing confidences is strong enough that betrayal of a confidence is a crime, it appears that one of the most powerful forces for enforcing confidences—a private civil action—should not be de- nied as it was in Kewanee. The Sixth Circuit failed completely, as evidenced by its opinion, to understand the practical, economic significance of its Kewanee decision. Southwire is a relatively small company, but it has a significant research and development effort. South- wire now owns some sixty-one United States patents and over three hundred foreign patents and has over forty-eight pending United States patent applications. In addition to the patents and patent applications, Southwire has developed significant trade secrets or “know-how”. The development and licensing of patents and know-how contribute heavily to Southwire’s viability as a competitor of the giant nonferrous metal com- panies both in the United States and abroad. Southwire now has in force technology licensing agreements with nine U. S. companies involving a gross amount of $6,140,000, and with sixteen foreign companies involving a gross amount of $14,440,000. Each of the license agreements involves the transfer of trade secrets as a significant portion thereof. No matter what the formal words of the particular agreement 4 specify, what foreigners are most interested in buying is our know-how, and not our patents. Patents alone are rarely sale- able. Southwire has relied, and must continue to rely, upon the enforceability of confidentiality agreements to continue its re- search and development program. If a competitor could hire a Southwire employee, and that employee could divulge with impunity any Southwire trade secret over one year old, our re- search program could not possibly pay for itself. Southwire would become, in effect, a development agency for its com- petitors. Millions of dollars of revenue would be lost to South- wire. Also, foreign licensing would, as a practical matter, be- come impossible. What foreign company would take a license for trade secrets that it could obtain by simply hiring a South- wire employee? The United States’ balance of payments would continually deteriorate if foreign licensing of unpatented tech- nology became impracticable. Worse still, research and de- velopment within the United States would be drastically de- creased. What company could afford to spend millions on development just to have its competitors obtain the benefits of that development without spending the time and money nor- mally required? A research oriented company, instead of main- taining.a competitive advantage, would suddenly find itself at a competitive disadvantage. Significant research and develop- ment within the United States would stop. Thereafter, in order to be competitive in a world market, United States com- panies would be forced to buy technology from abroad—if any foreign companies would license within the United States, be- cause United States entities could not enforce confidentiality. The practical impact of the Sixth Circuit’s Kewanee de- cision could not have been thoroughly considered by that court. The potential for economic harm to the Country as a whole is unparalleled. Southwire is but one company. Mag- nify the impact upon Southwire and project the impact upon the national economy, and it becomes abundantly clear that 5 billions or hundreds of billions of dollars annually could be in- volved. This Court should reverse the Sixth Circuit and defer to the Congress any changes in a century of precedent on an : issue with such a momentus potential impact upon this Nation. | | CONCLUSION For the foregoing reasons, Amicus Curiae, Southwire Com- pany, respectfully requests that this Court reverse the court below. Respectfully submitted, Van C. Wilks P. O. Box 1000 Carrollton, Georgia 30117 Attorney for Amicus Curiae 4 “ ! - Of Counsel: D. R. Sloan, Jr. P. O. Box 1000 Carrollton, Georgia 30117 a Gute A CERTIFICATE OF SERVICE This is lo certify that copies of this Brief were served upon the Parties through their attorneys of record in accord- ance with Rule 33 of the Supreme Court of the United States, revised rules, on November 21, 1973. Van C. Wilks P. O. Box 1000 Carrollton, Georgia 30117 Attorney for Amicus Curiae — an AROS OEE CY PIT NR eng MN AAMT TATRA ne et ote 5 AIRE NTE PITTE LENCE MTN ATTN TT OO LLL MICHAEL RO: IN THE | Supreme Court of the United Sates OCTOBER TERM, 1973 a cnn No. 73-187 cteneaneenspprsietens KEWANEE OIL COMPANY, Petitioner, v. BICRON CORPORATION, et al., ; Respondents. cxmvelpuvenssain ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS BOR THE SIXTH CIRCUIT a en BRIEF AMICUS CURIAE FOR BURROUGHS CORPORATION a James M. Clabault Edward G. Fiorito C. Paul Padgett, Jr. Attorneys for Amicus Curiae Burroughs Corporation Burroughs Place Detroit, Michigan 48232 Of Counsel: Kenneth L. Miller Paul W. Fish Leonard C, Suchyta Edward F. Langs Burroughs Corporation Burroughs Place — Detroit, Michigan 48232 Interstate Brief & Record Co., 1036 Beaubien St., Detroit. Michigan 48226 WO. 2-8745—WO., 2-8732 eo a TABLE OF CONTENTS Page Preliminary Statement ............. cece eeeeeeees 1 Questions Presented ............cccee cece eeeeees 2 Interest of Amicus Curiae..... 0... cece cece ee eens 2 Sammary of Argument.............cccccsccesees 4 ATEUMONE 6i is Geecciveccctesesersecssseeeces I. THE KEWANEE HOLDING PLACES AN UNDUE BURDEN ON TECHNOL- OGY-ORIENTED INDUSTRIBS.......... 6 A. The Decision Below Usurps The Power Of Congress And Judicially Legislates Away A Vast Body Of Existing Trade Beeret TiGW xxx a0 650465 davcaswcewsueces 6 B. The Decision Below And Its Accompany- ing Penumbra Of Uncertainty Will Have A Severe Impact Upon Business Activi- ties And Will Operate To Hinder The Progress Of Science And Technology... . 12 Il. THE U.S. CONSTITUTION DOES NOT PROHIBIT THE STATES FROM EN- ACTING LEGISLATION PROTECTING TRADE SECRETS; SUCH LEGISLA- TION WAS NOT PREEMPTED WHEN CONGRESS ENACTED THE FEDERAL PATENT LAWS; AND TRADE SECRET LAWS DO NOT CONFLICT WITH THE POLICIES AND OBJECTIVES UNDER- LYING THE FEDERAL PATENT LAWS 19 A. The States Have Not, Under The U.S. Constitution, Relinquished To The Fed- li Page eral Government, For Its Exclusive Exer- cise, The Power To Enact Laws Affecting Inventions And Innovations............ 19 B. The Vast Body Of Existing State Trade Secret Law Was Neither Expressly Nor Impliedly Preempted By Congress In Enacting The Federal Patent Laws.... 23 C. State Trade Secret Laws Do Not Stand As An Obstacle To The Accomplishment And Execution Of The Full Purposes And Objectives Of Congress In Enacting The Patent Laws And Hence Are Not To Be Struck Down Under The Supremacy UN ooh es pabassecceessessscens 24 Ill THE COURT BELOW ERRONEOUSLY CONCLUDED THAT ITS RESULT WAS COMPELLED BY PRIOR DECISIONS OF THIS COURT ............... ccc cece eee 26 Conclusion ....... ewes G45 oeeuneveus oe cenevavs ex 30 TABLE OF AUTHORITIES Cases: Becker v. Contoure Laboratories, Inc., 279 U.S. se Bh: |) ee eer 6 Board oj Trade v. Christie Grain & Stock Co., 198 U.S. 236 (1905) ......... ccc eee eee 6 Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 235 (1964) 2.0... cece cece eee 27 Goldstein v. California, 412 U.S. 546 (1973).... 19, 20, 21, 22 Page Gottschalk v. Benson, 409 U.S. 63 (1972)...... 11, 15, 16 Kellogg Co. v. National Biscuit Co., 305 U.S. 111 (ob 2) | SESE eee eee eee 26 Kewanee Oil Co. v. Bicron Corp., 478 F.2d 1074, 178 U.S.P.Q. 3 (6th Cir. 1973) ........ 1, 6, 8, 20, 27 Lear, Inc. v. Adkins, 395 U.S. 653 (1969) ...... 28 People v. Hull, No. 2610 (Troy Mun. Ct., filed PEOTER D0; 1918) scan on cence snes esewasa es 18 Sears Roebuck & Co. v. Stiffel, 376 U.S. 225 (1964) 27 Telex Corp. v. International. Business Machines Corp., Nos. 72-C-18 and 72-C-89 (D.C.N.D. Okla., Sept. 17, 1975) 2060 ccevessaeeseavers 14 United States v. Akfirat, No. 4-80300 (D.C.E.D. Mich., filed Aug. 30, 1973)..:............... 17 United States v. Bottone, 365 F.2d 389 (2d Cir.) . cert. denied 385 U.S. 974 (1966).............. 24 United States v. Dublier Condenser Corp., 289 MS, AIG CUS) opie cess csaesines Senseess 6 United States v. Greenwald, 479 F.2d 320 (6th MP. ASTD). sens ecy ees erode seat eancenss: 24 United States Constitution and Statutes: U.S. Const. art I, $8, el.8...........0.....000.. 19, 21, 24 U.S. Const. art. VI, cl. 8............. cece eee 20 18 U.S.C. 92314 (1968) ......... eee eee eee 24 35 U.S.C. §101 (1952) ...................086. 2, 8, 9,15 35 U.S.C. §$102(b) (1952) ..................... 9, 10 iv Page Bo Us, S108 (1900 )in cs xn cons ee xnseesynewenses 9 BB UBC. S122 (962) cc sisccscsescseusceussess 24 Mich. Cds. ISTO SIOZ 102 6acsn cone vccctwesavens 18 Treaties and Bills: Agreement with Belgium on Patent Rights and Technical Information, Oct. 12, 1954, oad 5 U.S.T. 2318, T.LA.S. 8003. ...........0c00. Agreement with Denmark on Patent Rights and Technical Information, Feb. 19, 1960, [1960] 11 U.S.T. 148, T.LA.S. 4423................ 7 Agreement with Federal Republic of Germany on Patent Rights and Technical Information, Jan. 4, 1956, [1956] 7 U.S.T. 45, T.LA.S. 3478 7 Agreement with France on Patent Rights and Techincal Information, March 12, 1957, [1957] 8 US.T. 353, T.LA.S. 3782......... 7 Agreement with Greece on Patent Rights and Technical Information, June 16, 1955, [1955] 6 UST. 2178, T.LA.S. S286. « —_—_——_— KEWANEE OIL COMPANY, Petitioner, v. BICRON CORPORATION, et al., Respondents. ———>— ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT —__4+—__ BRIEF AMICUS CURIAE FOR BURROUGHS CG@RPORATION ___ \ PRELIMINARY STATEMENT Burroughs Corporation (hereinafter Burroughs) is fil- ing this brief amicus curiae on the merits in support of the petitioner, Kewanee Oil Company, pursuant to Rule © 42(2) of the Rules of the Supreme Court of the United _ States. The requisite written consents of the parties are on file with the Clerk of the Court. The matter is before the Court on a writ of certiorari to the United States Court of Appeals for the Sixth Cireuit which reversed the decision of the District Court for the Northern District of Ohio, Eastern Division, and which held that Kewanee Oil Company did not have a protectable property right in cer- tain of its trade secrets.’ » ¢ 1 Kewanee Oil Co. v. Bicron Corp., 478 F.2d 1074, 178 U.S.P.Q. 3 (6th Cir. 1973). The District Court decision was not reported. SPP MEET PSE AF 2S Na ARSE NNER RET IBALL i * QUESTIONS PRESENTED 1. Whether the U.S. Constitution and the federal patent laws enacted thereunder preempt state trade secret law prohibiting the wrongful appropriation of secret technology to the extent it is encompassed within the categories of patentable subject matter as defined in 35 U.S.C. § 101. 2. Whether such state trade secret laws are in conflict with the policies and objectives underlying the federal patent laws and are. therefore required to be struck down under the Supremacy Clause of the U.S. Consti- tution even though Congress did not express an intent to preempt such trade secret laws when enacting the federal patent laws. INTEREST OF AMICUS CURIAE Burroughs was incorporated in 1905, and is engaged in the business of designing, manufacturing and marketing a _ comprehensive range of products for the recording, stor- ing, computing, processing and‘ communicating of data. This business involves a wide variety of research and de- velopment efforts since success in this dynamic industry depends upon innovation, invention and _ technological growth. Burroughs, including its world-wide subsidiaries, has considerable investments in manpower and capital de- voted to the promotion of technological development. Ap- proximately 1800 employees are involved directly in re- search and development related activities and many thou- sands of additional employees are exposed in some manner to proprietary information. 3 For the year which ended December 31, 1972, the dol- lar value of Burroughs’ world-wide revenue amounted to $1,053,000,000. For this same year approximately 51 mil- lion dollars was spent on research and development related activities. For the current year over 60 million dollars will be spent for research and development, and over 80 million dollars is being budgeted for the year 1974. Bur- roughs has invested hundreds of millions of dollars in re- search and development activities and will continue to in- vest in research and development in the future. In order to protect this investment, Burroughs has relied not only on the patent laws, but also on the law of trade secrets. Accordingly, Burroughs is interested in maintaining the trade secret laws intact to protect both past and future investments. Burroughs is not currently involved in any action in which it is asserting the theft of its trade secrets, and it is not in any way affiliated with either of the parties to this particular action. However, Burroughs has a deep in- terest in the proper resolution of the legal questions pre- sented in this case not only because of the impact the de- cision below will have upon Burroughs, but also because of the impact it will have upon all technology-oriented businesses, upon the economy, and upon the United States as a whole. SUMMARY OF ARGUMENT The decision below, which refused to afford protection under the trade secret law of the state of Ohio, erodes a vast body of trade secret law which has coexisted with the patent laws of this country for well over a hundred years. Congress, prior decisions of this Court and deci- sions in other courts have unanimously recognized trade se- crets and the owner’s right to protect such secrets from wrongful appropriation. The decision below is extremely broad because it encompasses all categories of subject mat- ter coming within the scope of the patent laws, and because nearly every trade secret of any value is eventually com- mercialized. Many agreements involving trade secrets were entered into in reliance upon established trade secret law. The decision below renders uncertain this body of law and the enforceability of these aprocmenits. Technology-oriented industries investing in research and development activities require an assurance of some re- turn on their investment. The preemption of state trade secret laws removes a large portion of the protection upon which they have previously relied. The inability to safe- guard these investments may lead to a cutback in re- search and development investments or to a misallocation of research and development funds by redirecting expendi- tures to segnrity measures aimed at protecting their dis- coveries. Such a cutback may weaken the technological base of the United States, injure its economy, and destroy its position as the world’s technological leader. The power to enact laws prohibiting the misappropria- tion of secret technological information was neither dele- gated to the federal government for its exclusive use nor was it expressly denied the states by the U.S. Constitu- ee ee 5) tion. The existence of such a power in the states is not contradictory and repugnant to the existence of a similar power in the federal government. Congress, in enacting the federal patent laws, gave no indication, either express or implied, of an intent to pre- empt the entire field of law relating to inventions and dis- coveries. Congress, on numerous occasions, has expressed a contrary intent by recognizing the existence of trade se- erets and the importance of protecting them. State trade secret laws are not in conflict with the poli- | cies and objectives underlying the federal patent laws and hence are not required to be struck down under the Su- premacy Clause of the Constitution. The federal patent laws provide the inventor with a right to exclude all others from making, using and selling his invention for a limited period of time. Trade secret law, on the other hand, offers a desirable alternative even though it provides only a very limited form of protection to the trade secret owner. He has no right to exclude all others from using his trade secrets but only has a cause of action against one who has wrongfully appropriated his secret. In practice, the pat- ent laws operate to stimulate research and development, encourage innovation, reward the inventor, and benefit the public through commercialization of new and improved products. State trade secret laws have similar practical effects and are compatible with the constitutional purpose of promoting the progress of science and the useful arts. The court below erred in its assumption that its result was compelled by prior decisions of this Court. Accord- ing to these prior decisions, all ideas which are in the pub- lic domain are subject to free use by all, and states may not grant a patent-like form of protection on an idea ETE RLM PIM TEE MERD TN PLN, SET ELT HAMLET YP RET Re ae Ee ee eM Ee ak, ded 8 ee aa 6 in the public domain. Existing trade secret law is in com- plete harmony with the prior decisions of this Court, since trade secret protection is not granted for an alleged se- eret which has fallen into the public domain. ARGUMENT I. THE KEWANEE HOLDING PLACES AN UN- DUE BURDEN ON TECHNOLOGY-ORIENTED INDUSTRIES. A. The Decision Below Usurps The Power Of Con- gress And Judicially Legislates Away A Vast Body Of Existing Trade Secret Law. Trade secret laws have been recognized by Congress, the states and the courts. The lower court has acknowledged that the common law in most states includes cases recog- nizing the protectability of trade secrets.? The lower court further acknowledges that this Court has approved the protection of a trade secret, if not as a property right, then at least via the enforcement of confidential relation- ships.’ Congress has recognized the existence of trade secrets, the right to protect trade secrets, and impliedly, ? “Without the numerous citations of cases we suggest that instances of protection of trade secrets by the courts may be found in most of the states of the United States.” Kewanee Oil Co. v. Bicron Corp., 478 F.2d 1074, 1081, 178 U.SP.Q. 3, 8 (6th Cir. 1973). ~ “In DuPont Powder Co. v. Masland, 244 U.S. 100, 375 S. Ct. 575, 61 L. Ed. 1016, the Supreme Court of the United States approved pro- tection of a trade secret.” Kewanee Oil Co. v. Bicron Corp., 478 F.2d 1074, 1081, 178 U.S.P.Q. 3, 8 (6th Cir. 1978). See also Becher v. Con- ‘toure Laboratories, Inc., 279 U.S. 388 (1929); Board of Trade v. Christie Grain & Stock Co., 198 U.S. 236 {1905); and United States v. Dublier Condenser Corp., 289 U.S. 178 (1933). ERAT FETT ARNT AEN IRIS ROMY SNS, NOG SENT OR IRAE SIT PEAY —- 7 the ability of trade secret laws and the federal patent laws to function effectively to protect the same subject matter. This congressional recognition is evidenced, for example, by the ratification of several treaties* and the enactment of numerous legislative acts* which expressly recognize trade secrets. Since 1965, many states have enacted criminal laws dealing with the misappropriation of trade secrets. Further, as acknowledged by the lower court, its deci- ‘The following treaties recognize the existence of trade secrets: Agreement with Belgium on Patent Rights and Technical Informa- tion, Oct. 12, 1954, [1954] 5 U.S.T. 2818, T.I.A.S. 3098 ; Agreement with Denmark on Patent Rights and Technical Informa- tion, Feb. 19, 1960, [1960] 11 U.S.T. 148, T.LA.S. 4423 ;* Agreement with Federal Republic of Germany on Patent Rights and Technical Information, Jan. 4, 1956, [1956] 7 U.S.T. 45, T.LA.S. 3478; Agreement with France on Patent Rights and Technical Informa- tion, March 12, 1957, [1957] 8 U.S.T. 358, T.LALS. 3782; Agreement with Greece on Patent Rights and Technical Informa- tion, June 16, 1955, [1955] 6 U.S.T. 2178, T.LA.S. 3286; Agreement with Italy on Patent Rights and Technical Informa- tion, Oct. 3, 1952, [1960] 12 U.S.T. 189, T.I.A.S. 4693; Agreement with Japan on Patent Rights and Technical Informa- tion, March 22, 1956, [1956] 7 U.S.T. 1021, T.LA.S. 3585 ; Agreement with Netherlands on Patent Rights and Technical In- formation, April 29, 1955, [1955] 6 U.S.T. 2187, T.I-A.S. 3287; Agreement with Norway on Patent Rights and Technical Informa- tion, April 6, 1955, [1955] 6 U.S.T. 799, T.LA.S. 3226; and Agreement with United Kingdom of Great Britain and Northern Ireland on Patent Rights and Technical Information, Jan. 19, 1953, [1953] 4 U.S.T. 150, T.I.A.S. 2773. 5 Milgrim, Sears to Lear to Painton: Of Whales and Other Matters, 46 N.Y.U. L.Rev. 17, 32, n. 67 (1971). * R. M. Milgrim, Trade Secrets, § 1.10[1] (1978). Pavrennc: PSPS EY % 8 sion is in direct conflict with the law in other circuits.’ These laws represent a vast and fairly uniform system of trade secret law presently existing in the United States. Billions of dollars are atid « annually in research and development activities.’ While it is true that patents are available to protect a portion of the resultant technology, there still remains a substantial portion of valuable infor- mation, data and know-how which can only be protected under state trade secret laws. It may be argued that a considerable body of trade secret law is still available to protect this resultant technology since the court below found that “ ... the trade secrets in question relating to the processes, procedures and manufacturing techniques of Harshaw, as conceded by counsel for Kewanee, were ‘patentable’, that is, appropriate subjects for considera- tion under the provisions of Title 35 U.S.C. § 101" Ke- wanee Ou Co. v. Bicron Corp., 478 F2d 1074, 1078, 178 ™“We recognize that our holding in this case is in conflict with the previously cited decisions of other Circuits, Servo Corp. of America v. General Electric Co., 337 F.2d 716 (4th Cir. 1964), cert. den. 883 U.S. 934, 86 S.Ct. 1061, 15 L.Ed. 2d 851 (1966), rehearing denied 384 U.S. 914, 86 S.Ct. 1333, 16 L.Ed. 2d 366 (1966); Dekar Industries, Inc. v. Bissett-Berman Corp., 434 F.2d 13804 (9th Cir. 1970), cert. den, 402 U.S. 945, 91 S.Ct. 1621, 29 L.Ed. 2d 113 (1971); Water Services, Inc. v. Tesco Chemicals, Inc., 410 F.2d 163 (5th Cir. 1969); Painton & Co. v. Bourns, Inc., 442 F.2d 216 (2nd Cir. 1971). . . .” Kewanee Oil Co. v. Bicron Corp., 478 F.2d 1074, 1086, 178 U.S.P.Q. 3, 12 (6th Cir. 1973). 8A recent survey of the R&D industry predicts a total research and development expenditure for the current fiscal year, 1973, in excess of $31 billion. Plant, $31-Billion for Research, Ind. Res. 42 (Jan. 1978). ®35 U.S.C. §101 (1952) defines the categories of subject matter which come within the jurisdiction of the federal patent laws as follows: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improve- ment thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” These statutory categories are broadly construed and most of the fruits of today’s research and development efforts are encompassed within this broad definition. SCOR ENTS ATER A ERE EE EN Pht SL OO DORR ENTR RETURN PILL ROT OE IS eS cad eR eas — 9 U.S.P.Q. 3, 5 (6th Cir. 1973). While the court below seemed to consider this limitation to be a substantial nar- rowing of the range of trade secrets affected by its deci- sion, such is not the case since most trade secrets in exist- ence today deal with technological information relating to a process, machine, article of manufacture or composition of matter and therefore are encompassed within the cate- gories of patentable subject matter as defined in 35 U.S.C. y101 (1952). Many trade secrets that are encompassed within the categories of patentable subject matter would not successfully pass examination” by the United States Patent Office and issue as valid and enforceable patents. However, the lower court did not limit the impact of its decision to only those trade secrets that could pass such an examination. Even if the lower court’s decision can be construed to limit its effect to only those trade secrets that could pass such an examination, the ambiguities inherent in the deci- sion below pose many unanswered questions. Who is quali- fied to answer the difficult question of whether or not a given trade secret could pass the examination? Must the proprietor file a patent application in order to have an already overburdened United States Patent Office make this determination? If a patent application must be filed, at what point in the prosecution of a patent application may an applicant accept the Patent Office’s determination that the subject matter is unpatentable and seek protection via 10 One of the usual tests applied during the examination of patent applications by the U.S. Patent Office is the so-called “obviousness” test as defined in 35 U.S.C. §108 (1952): “A patent may not be ob- tained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the sub- ject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the in- vention was made to a person having ordinary skill in the art to which said subject matter pertains. Patentability shall not be negatived by the manner in which the invention was made.” BEI yy 10 state trade secret laws? If the Patent Office initially rejects the application, is the applicant free to assume that the sub- ject matter was not patentable and therefore proceed as though it was protectable as a trade secret? Must the ap- plicant prosecute the application through a final action; through a decision from the Board of Appeals; through a decision from the Court of Customs and Patent Appeals or appropriate district court; or must he prosecute through an appeal to this Court? How many inventors, or em- ployers for that matter, will have the necessary time and funds to follow this procedure, and even if they were fi- nancially able, should they be required to do so? If the pro- prietor of a trade secret has not filed a patent application and brings an action in the state courts, should the state court be given the responsibility of determining whether or not the trade secret would have passed the examination of the United States Patent Office? These unanswered questions are so substantial that the practical effect of even a limited, narrow construction of the lower court’s de- cision would be to deny industry the ability to depend upon the state laws for the protection of trade secrets. It may also be argued that the lower court tried to fur- ther narrow its decision by limiting it to only those trade secrets which have been in commercial use” for more than 1135 U.S.C. §102 (1952) provides that “A person shall be entitled to a patent unless— (b) . . . the invention was . . . 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,... .” This provision in the federal patent laws prevents an inventor from maintaining his invention as a trade secret while commercializing it for more than one year and then filing a patent application if he be- lieves his secret will be discovered or for any other reason. This pro- vision gives the inventor who commercializes his invention one year during which he must elect either to seek patent protection or to forego his rights under the federal patent laws. FS OER RII, 2 NOES NR PTR IT TR ET Fr HLH REN ATE TS RD Qe, SOE EAR ETON ARON EERE ST ET HH 11 one year prior to the commencement of the suit. The pro- prietor of a trade secret normally intends to recoup his research and development expenses by commercially ex- ploiting his innovation through his own use or that of his licensee. Accordingly, most trade secrets of any value will eventually be put into commercial use, and come within the scope of the decision below after the lapse of one year. Limiting the time for recouping research and development investinent to one year would substantially erode the value of the trade secret laws. Therefore, this second attempt by the lower court to narrow the effect of the decision is also ineffective for most practical business situations. If the far-reaching changes made by the lower court are in fact required, Congress is the proper body to effect such changes. This Court has recently considered the de- cision of a lower court which would have had a great im- pact upon the protection of proprietary rights in a com- plex technological field and concluded: “. . . considerable problems are raised which only committees of Congress can manage, for broad powers of investigation are needed, including hearings which canvass the wide variety of views which those operating in this field entertain. The technological problems tendered in the many briefs before us indicate to us that considered action by the Congress is needed.” Gottschalk v. Benson, 409 U.S. 63. 74 (1972). 12 B. The Decision Below And Its Accompanying Pe- numbra Of Uncertainty Will Have A Severe Im- pact Upon Business Activities And Will Operate To Hinder The Progress Of Science And Tech- nology. All technology-oriented corporations. with world-wide interests are immediately and directly affected by the decision below. Burroughs, for example, is currently a party to many existing agreements involving the pro- tection of proprietary information, but the validity of these agreements has been cast in doubt by the decision below. The types of business agreements relating to’ proprie- tary information are many and varied. Most technology- oriented business organizations offer some type of agree- ment regarding employment to at least their technical personnel. In a typical agreement, an employee who is exposed to trade secret or confidential information, or who is hired to invent or improve products, agrees not to disclose proprietary information acquired on a confidential basis without the permission of the employer. Frequently he also agrees to assign his inventions and ideas to his employer who supports his inventive efforts. Increased compensation, technical training and opportunities for advancement within the business organization provide the quid pro quo for the employee’s agreement. Many provisions of these agreements may be unen- forceable under the decision below which permitted the employees to leave the company from which they had ac- quired proprietary trade secret information on a confi- dential basis during the course of their employment and to immediately set up their own corporation founded on these misappropriated secrets in direct competition with PAG ESR PAM ENT IEEE TOI ITN MRE IE LEI HB EN ALAR ET NEES 13 their former employer. The lower court ruled that state trade secret law could not be used to stop such piracy and appeared to imply that this served a higher good asso- ciated with the concept of free competition. The decision below is more likely to have the opposite effect. The in- ability to protect technology and to secure a return on research and development investments, will likely result in the diminution of a prime economic incentive for re- search and innovation and may eventually lead to a cut- back in research and development expenditures or to a misallocation of available resources by redirecting expen- ditures to security measures designed to guard self-de- veloped technology. As security within the business organ- ization is tightened, the dissemination of technology with- in the organization will be restricted resulting in ineffi- ciency and a slow-down in the rate of technological pro- gress. This cannot further free competition, but clearly will serve instead to hinder the progress of science and the useful arts. Another area of uncertainty fostered by the decision be- low is in the numerous technology-oriented business or- ganizations which employ trade secret-type agreements in vendor-vendee situations. These organizations frequently have suppliers build sub-assemblies or devices in aeccord- ance with the organization’s proprietary information and contractually obligate the supplier and his employees to protect the organization’s proprietary information. Un- der the decision below, the supplier and his employees are free to use the secret information to make and sell devices to others, or even to sell the valuable and costly informa- tion to the organization’s competitors. It would appear that only large corporations capable of fulfilling all of their needs in-house would be able to effectively compete since they would not be forced to rely on others for sup- RTE SL ARS SPP ‘ CRS RS oe 14 plying the necessary parts or sub-assemblies for their products. However, even the large, self-sufficient corpora- tions are effected by the risk that the corporation’s em- ployees will steal its trade secrets.” Similarly, it may be noted that as a result of many of today’s complicated technical systems, field tests must be conducted by customers, or at the customer’s location. If such tests cannot be conducted on a confidential basis, competitors may acquire test data and other proprietary information without restriction. KNOW-HOW LICENSES Many technology-oriented business organizations are operating today under trade secret agreements or know- how licenses. Billions of dollars in royalty payments are paid and received for such licenses annually.* Indeed, such licenses often form the only source of income for small research and development oriented businesses. Un- der the decision below, businesses receiving royalty pay- ments under such licenses may not be able to collect even 12 International Business Machines Corp. has proven damages re- sulting from the theft of its trade secrets by its former employees and has been awarded $21.9 million on that basis in a recent decision. Telex Corp. v. International Business Machines Corp., Nos. 72-C-18 and 72- C-89 (D.C.N.D. Okla., Sept. 17, 1973). 18 United States business organizations received from abroad some $3.1 billion in royalty payments and paid to foreign organizations some $276 million in royalty payments for the year 1972. 58 U.S. Dept. of Commerce, Survey of Current Business 42, No. 9, September 1973. While the entire amount is not attributable to trade secret licenses, a considerable portion is, and furthermore, this figure relates only to foreign licenses. It can be assumed that a much larger dollar amount is involved in licenses between United States business organizations. 15 after costly and extended litigation. Companies which are obligated to make royalty payments under such agree- ments may refuse to pay and may choose to destroy the ’ license and the existence of the trade secret by publicly disclosing the trade secrets themselves. Finally, there is a substantial risk that a prospective licensee will be less inclined to take a royalty bearing license under a trade secret so long as the less costly opportunity exists for hiring one or more of the licensor’s employees who are in possession of such trade secrets. Alternatively, a pro- spective licensee may find it easier and less expensive to simply steal the trade secret. COMPUTER PROGRAMS Computer programs or software represent a consider- able portion of the total cost of a computer system and any given program represents a substantial investment of time and capital. Many computer corporations and small businesses specializing in developing computer pro- grams have elected to market their programs under an agreement licensing the customers’ use and limiting the dis- semination of the programs. This Court in Gottschalk v. Benson, 409 U.S. 63 (1972), held that a computer program directed to a mathematical algorithm could not be pat- ented where the effect of the patent would be to cover all practical uses of the mathematical algorithm itself. This would take certain computer programs out from under the scope of the decision below since they are not encom- passed within the category of patentable subject matter defined by 35 U.S.C. § 101 (1952). However, the dividing line between. those types of _programs that are not pat- entable and those that should be patentable has not yet 16 been established by Congress in accordance with the rec- ommendation of this Court in Gottschalk v. Benson. Until such time as Congress acts, many businesses which rely upon trade secret protection will have to continue their practice with respect to both types of programs even though only some programs would be protectable as a result of the decision below. If such programs can be dis- seminated or misused with impunity, many businesses, which depend on such programs for a significant portion of their income, will suffer an impairment of their ability to compete, and the amount of competition in the computer industry will be even further reduced. NATIONAL ASSET Many businesses have competitors in foreign countries and will be impacted by the international aspects of the decision below. The inability to stop the theft of trade secrets and to control the flow of technical information leaving this country could ultimately lead to a substan- tial weakening of our position as the world’s technologi- cal leader. United States companies have billions of dol- lars invested in research and development activities’ and license their resulting technology to others or are li- censed under another’s technology. The ability to license existing domestic technology in foreign countries consti- tutes a vast national asset. Foreign corporations will have a reduced incentive to take licenses under U. S. tech- nology on a royalty bearing basis since it will be far eas- ier and less expensive to merely hire another’s trusted employees or otherwise misappropriate the desired trade 14 Plant, supra note 8, at & 17 secrets." The decision below results in a lessening of the value of this asset with corresponding detrimental effects upon the competitive position of the United States in markets throughout the world, upon our already strained balance of payments,’ and upon the very health and vital- ity of our American economy. Further, foreign corporations may refuse to license domestic corporations because the domestic corporations cannot guarantee the security of the trade secret and, once the security is breached, the trade secret is lost. The inability of domestic corporations to secure technology from abroad further operates to stifle technological growth and development and to hinder the progress of seienc* and the useful arts. *8 Even with the current availability of trade secret protection, foreign corporations have been implicated in the misappropriation of trade secrets valued at millions of dollars; for example, a recent theft of trade secrets from the Ford Motor Company related to glass manu- facturing techniques valued at over a million dollars. United States v. Akfirat, No. 4-80300 (D.C.E.D. Mich., filed August 30, 1973). 16 Since the yearly revenue received from licensing foreign businesses under domestic technology exceeds $3.1 billion, while the outflow of royal- ties paid by domestic organizations for foreign technology is only $276 million, the total loss to the American economy could exceed $2.8 billion. 53 U.S. Dept. of Commerce, Survey of Current Business 42, No. 9, September, 1973. Compensating for the proportion of this amount at- tributable to patent and trademark royalties, we may reasonably con- clude that over $1.5 billion are lost to the American economy. Milgrim, Sears te Lear to Painton: Of Whales And Other Matters, 46 N.Y.U. L. Rev. 17, 26, n. 40 (1971). 18 OTHER POLICY CONSIDERATIONS There is justifiable concern over the possible effect of this decision on state and federal criminal laws dealing with the theft of trade secrets. This decision affects the determination of what is protectible as a trade secret, and it may be that such laws could be rendered void for vague- ness or preempted by the policy behind the federal pat- ent laws. The decision of the lower court has already been cited in a recent criminal action brought in the State of Michigan” in which the defendant is being prosecuted un- der the Michigan trade secret theft statute, CL 1970, § 752.772.% The defendant in that case moved for dismissal of the complaint against him, urging that the statute was void because it conflicts with the patent laws of the United States. The type of permissiveness encouraged by the decision below may lead to a further deterioration in commercial morality, to a lessening of a citizen’s obligation to respect the property rights of others, and to a possible substitu- tion of trade secret thievery in place of legitimate research and development efforts. A corporation which attempts to operate in this environment will find itself at,a com- mercial disadvantage if its competitors are free to deal 17 People v. Hull, No. 2610 (Troy Mun. Ct., filed March 30, 1973). 18 Mich. C.L. 1970, §752.772 provides: “Any person who, with intent to deprive or withhold from the owner thereof the control of a trade se- cret, or with an intent to appropriate a trade secret to his own use or to the use of another, steals or embezzles an article representing a trade secret or without authority makes or causes to be made a copy of an article representing a trade secret, is guilty of a misdemeanor and shall be fined not more than $1,000.00 or imprisoned for not more than 1 year, or both.” PPO TR Ee og ET A & ONS EES STG PE TT ¥ vs ated ae a lS ate ee 19 in trade secret thievery and in that brand of ‘‘instant technology” which is achieved by hiring another’s trusted employee and using the proprietary knowledge which the employee gained through his position of confidence and trust. IL. THE U.S. CONSTITUTION DOES NOT PROHI- BIT THE STATES FROM ENACTING LEGISLA- TION PROTECTING TRADE SECRETS; SUCH LEGISLATION WAS NOT PREEMPTED WHEN CONGRESS ENACTED THE FEDERAL PATENT LAWS; AND TRADE SECRET LAWS DO NOT CONFLICT WITH THE POLICIES AND OBJEC- TIVES UNDERLYING THE FEDERAL PATENT LAWS. A. The States Have Not, Under The U.S, Constitution, Relingquished To The Federal Government, For Its Exclusive Exercise, The Power To Enact Laws Af- fecting Inventions And Innovations. In Goldstem v. California, 412 U.S. 46 (1973), which was decided after the decision of the lower court in this action, this Court enunciated the test to be applied in re- solving the preemption issue. Goldstein is particularly pertinent since it involved U. S. Const. art. I, § 8, el. 8," the very constitutional clause involved in the present case: f A state statute proscribing tape piracy was challénged in Goldstein as violative of U. S. Const. art. I, § 8, el. 8 and of the federal statutes enacted thereunder. This Court held that this clause does not expressly or by infer- ence vest all power to grant copyright protection exclu- sively in the federal government, nor did the state statute 19“To promote the Progress of Science and useful Arts, by secur- ing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;” U.S. Const. art. I, § 8, el. 8. . . ie Vee ST RNR 20 conflict with the federal copyright laws so as to fall under the Supremacy Clause” of the U. S. Constitution.” Initially, this Court inquired as to whether the state statutes were beyond the powers which the states re- served in our federal system.” If the states have relin- quished such powers to the federal government for its exclusive exercise, they cannot exercise these powers.” This Court, in Goldstein, applied the three tests of Alex- ander Hamilton which pronounced that the states retain all rights and powers unless (1) the Constitution expressly grants an exclusive authority to the federal government; (2) the Constitution grants a particular power to the fed- eral government and simultaneously prohibits the exer- cise of a similar power by the states; or (3) it grants a power to the federal government to which a similar power in the states would be absolutely and tota!lv con- tradictory and repugnant.” While the lower court in the present case did not have the opportunity to apply these tests since Goldstein was decided after the decision below, it is seemingly appro- priate to apply them by. analogy to the facts of Kewanee. The first two tests present no barrier to the State’s enact- ment of trade secret laws. Art. I, §8, cl. 8 of the U.S. 20“This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Auth¢rity of the United States, shall be the su- preme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. Const. art. VI, cl. 2. 21 Goldstein v. California, 412 U.S. 546, 571 (1978). 22 Id. at 552. 23 Id. 24 Id. 21 Constitution, granting to Congress the power to grant patents for certain inventions and innovations, does not expressly provide that such powers shall vest exclusively in the federal government nor does the U. S. Constitution expressly provide that such power shall not be exercised by the state.* The third test requires examination of the manner in which the power to grant patents operates in our federal system.** Specifically, it requires the exami- nation of the differences between those situations in which the exercise of the power by the federal government and the states, or by the states alone, may possibly lead to conflicts, and those situations where conflicts will neces- sarily arise.” This Court specifically stated that ‘‘It is not ...a mere possibility of inconvenience in the exercise of powers, but an immediate constitutional repugnancy that can by implication alienate and extinguish a pre- existing right of [state] sovereignty.’ The Federalist, No. 32, at 243.” Goldstein v. California, 412 U.S. 546, 554 (1973). Art. I, §8, cl. 8 of the U. S. Constitution has as its ob- jective the promotion of the progress of science and the useful arts.* One objective of this clause was clearly to facilitate the granting of rights national in scope, but, as recognized in Goldsteim, the fact that this clause recog- nized the potential benefits of a national system does not indicate that all discoveries of inventors are of national interest or that state legislation is, in all cases, unneces- 25 Td. at 558. 26 Td, 27 Id. at 554. 28 Td. at 555. — - ——_— 7 : SUPREME COURT, uU. IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1973 No. 73-187 KEWANEE OIL COMPANY, Petitioner, BICRON CORPORATION, ef ai, Respondents. BRIEF AMICUS CURIAE FOR THE BUDD COMPANY HERMAN FOSTER EDWARD M. FARRELL 2155 West Big Beaver Road Troy, Michigan 48084 Attorneys for The Budd Company Washington, OC. e CLE PUBLISHERS e LAW PRINTING CO. e (20?) 393.0625 IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1973 No. 73-187 KEWANEE OIL COMPANY, Petitioner, Vv. BICRON CORPORATION, ef al, Respondents. BRIEF AMICUS CURIAE FOR THE BUDD COMPANY The Budd Company, a Pennsylvania corporation, with an office at 2155 Big Beaver Road, Troy, Michigan 48084, files this brief amicus curiae in support of Petitioner, together with letters of consent from both Petitioner and Respondents. QUESTIONS PRESENTED 1. Do the Patent Laws of the United States pre-empt subject matter sought to be protected under a state trade secret law? 2. Does failure of an inventor to avail himself of a right under the Patent Laws of the United States destroy his right to protect his invention in other ways including by contracts or trade secrets? 2 INTEREST OF AMICUS CURIAE This company has a vital interest in this case because it has its corporate office located in the Sixth Circuit. It engages in activities including export sales, overseas manufacturing and licensing of technology and expertise in 15 foreign countries. It has substantial ownership in five foreign companies, and is licensor to 28 foreign manufacturers, including most of the world’s major automotive companies, and has a worldwide network of some 200 distributors. This company relies heavily on the protection afforded its technological information, including trade secrets, by means of contract. If the opinion of the Sixth Circuit is upheld, the value of technological information conveyed or received as trade secrets by this company, and other companies conducting similar activities would be greatly diminished. SUMMARY OF ARGUMENT 1. No preemption by the Federal Government should occur with respect to Trade Secrets in the absence of specific Federal Statutes when no preemption has occurred with respect to other forms of Intellectual Property to which both Federal and State Statutes have been directed. 2. An inventor has a right to protect his invention by secrecy if he so chooses. A patent gives him an additional means of protection by granting the right to prevent others from making, using, and selling his invention, but this additional protection is not mandatory. The two rights are entirely distinct. By granting an inventor an additional right, Congress did not intend to deprive an inventor of the right to select the protective means which may be to his best advantage. 3 ARGUMENT I. THE PATENT LAWS OF THE UNITED STATES DO NOT PREEMPT SUBJECT MATTER SOUGHT TO BE PROTECTED UNDER A TRADE SECRET LAW. A. Three Tests for Preemption In Head v. New Mexico Board of Examiners in Optometry, 374 U.S. 442, 443, 444, Justice Brennan in a concurring opinio [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0273%3A15. Public record. Not legal advice.