Comments from David Silverstein

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FROM RESPONDENT 003:
     
     NAME:	David Silverstein
     COMPANY:	LAPPIN & KUSMER
     		COUNSELLORS AT LAW
     ADDR-1:	TWO HUNDRED STATE STREET
     CITY, STATE ZIP:	BOSTON, MASSACHUSETTS 02109
     TELEPHONE:	(617) 330-1300
     FAX:	(617) 330-1311
     REPRESENT:	self

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QUESTION 01:
     Should the PTO require that all Official application related
     materials be delivered to a central location? Specifically, what
     problems would a requirement that all official application-related
     materials be delivered to a central location cause?

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COMMENT ON QUESTION 01:
    No comments supplied
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QUESTION 02:
     Should the PTO adopt a standard application format? If so, what
     portions of the application papers should the PTO require be
     submitted in a standard size and/or format, and what sanction
     (e.g., surcharge) should be established for the failure to comply
     with these requirements?

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COMMENT ON QUESTION 02:
    No comments supplied
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QUESTION 03:
     If the entire application is not published, what information
     concerning the application should be published in the Gazette of
     Patent Application Notices?

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COMMENT ON QUESTION 03:
    No comments supplied
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QUESTION 04:
     Should the patent applicant receive a copy of the published
     application -- either published notice and/or application content
     at time of publication?

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COMMENT ON QUESTION 04:
    No comments supplied
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QUESTION 05:
     Should the PTO permit an accelerated examination? If so, under
     what conditions?

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COMMENT ON QUESTION 05:
    No comments supplied
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QUESTION 06:
     Since the cost for publishing applications must be recovered from
     fees, how should the cost of publication be allocated among the
     various fees, including the possibility of charging a separate
     publication fee?

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COMMENT ON QUESTION 06:
    No comments supplied
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QUESTION 07:
     Should the PTO require an affirmative communication from a patent
     applicant indicating that the applicant does not wish the
     application to be published, or should failure to timely submit a
     publication fee be taken as instruction not to publish the 
     application? That is, should an application be published unless
     the applicant affirmatively indicates that the application is not
     to be published, regardless of whether a publication fee has been
     submitted? What latitude should the PTO permit for late submission
     of a publication fee?

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COMMENT ON QUESTION 07:
    No comments supplied
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QUESTION 08:
     The delayed filing of either a claim for priority under 35 U.S.C.
     119 or 120 may result in the delayed publication of the
     application. Should priority or benefit be lost if not made
     within a reasonable time after filing? What latitude should the
     PTO permit for later claiming of priority or benefit?

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COMMENT ON QUESTION 08:
    No comments supplied
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QUESTION 09:
     Once the patent has issued, should the paper document containing
     information similar to that published in the Gazette of Patent
     Application Notice, i.e., the Patent Application Notice, be
     removed from the search files, and should publication information
     be included on the issued patent?

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COMMENT ON QUESTION 09:
    No comments supplied
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QUESTION 10:
     After publication, should access to the content of the
     application file be limited to the originally filed application
     papers? If not, what degree of access should be permilted? Should
     access be limited to the content before publication, or should it
     extend to materials added after publication?

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COMMENT ON QUESTION 10:
    No comments supplied
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QUESTION 11:
     11.  After publication, should assignment records of a published
          application also be made accessible to the public?

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COMMENT ON QUESTION 11:
    No comments supplied
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QUESTION 12:
     After publication, should access include the deposit of
     biological materials as set forth in 37 CFR 1.802 et seq.?

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COMMENT ON QUESTION 12:
    No comments supplied
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QUESTION 13:
     What types of problems will be encountered if all amendments must
     be made by (a) substitute paragraphs and claims, (b) substitute
     pages, or (c) replacement of the entire application?

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COMMENT ON QUESTION 13:
    No comments supplied
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QUESTION 14:
     Should protest procedures be modified to permit the third party
     submission of prior art only prior to a specific period after
     publication of the application?  What action should be taken with
     respect to untimely submissions by a third party?

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COMMENT ON QUESTION 14:
    No comments supplied
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GENERAL COMMENT:
          In response to the recent notice of public hearing and request
     for comments on the proposal for an 18-Month Publication of Patent
     Applications, enclosed please find a copy of my recently published
     article "Patent Law Revision: The Surprising New Challenge to Trade
     Secrets," appearing in 27 Business Law Review 69 (1994).
          This article argues that adoption of a pre-grant publication
     system for U.S. patent applications may unwittingly undermine the
     current tenuous judicial foundation for state and common law trade
     secret protection in the United States. Accordingly, legislation
     adopting pre- grant publication should be expressly coupled to some
     form of federal trade secret protection.
     
     PATENT LAW REVISION: THE SURPRISING NEW CHALLENGE TO TRADE SECRETS by
     DAVID SILVERSTEIN* INTRODUCTION
     
          Remember the media advertisements for the movie sequel "Jaws II"
     - "just when you thought it was safe to go back in the water ..."?
     Twenty years ago following a decade of legal chaos resulting from the
     1964 United States Supreme Court decisions in the companion cases of
     Sears and Compco the Court's 1974 decision in Kewanee Oil Co. v.
     Bircon Corp.3 appeared to settle once and for all the question of
     whether state trade secret law was "preempted" by federal patent law.
     The Supreme Court ruled in Kewanee that there was no clear conflict
     between state trade secret protection and federal patent policy;
     thus, absent any indication by Congress of an intent to preempt the
     field, trade secrets were eligible for state or common law
     protection.4 With the Supreme Court's subsequent 1979 decision in
     Aronson v. Quick Point Pencil Co.5 upholding the enforceability of a
     trade secret license agreement, many businesses and intellectual
     property lawyers rested easy, smugly confident that this controversy
     was finally behind them.
          A few scholars in the field still seemed troubled, however, by
     the shaky philosophical and practical underpinnings of the Kewanee
     de-
     
      * Professor of Business Law and Department Chair. Suffolk
     University, Boston, MA.
     
     1 376 U.S. 225 (1964). 2 376 U.S. 234 (1964). 3 416 U.S. 470 (1974).
     4 Id. at 48439. 5 440 IT S 257 (1979).
     
     70 / Vol. 27 / Business Law Review cision and still unsettled
     questions about the conflict between trade secret protection and
     various federal statutes mandating information disclosure.6 Their
     misgivings were muted by the fact that no serious challenge to the
     basic viability to trade secret protection arose in the courts
     following the Aronson case. But, just when everyone thought it was
     safe, a surprising new challenge to trade secrets may be developing
     as an unanticipated side effect of ongoing patent law revision
     efforts.
          Indeed, several very different lines of patent reform appear to
     be converging toward one major proposed revision to U.S. patent law:
     namely, abandoning the historical U.S. practice of maintaining the
     secrecy of pending U.S. patent applications in favor of the more open
     system, practiced by most of the rest of the developed world, whereby
     patent applications are published relatively shortly (typically 6- 18
     months) after an application is filed.7 Such a change in U.S.
     practice is considered to be an important element in continuing
     efforts to "harmonize" U.S. and foreign intellectual property (IP)
     laws. IP harmonization has been a centerpiece of recent international
     treaty negotiations such as the North American Free Trade Agreement
     (NAFTA) and the General Agreement on Tariffs and Trade (GATT).
          In addition, studies and public hearings are now underway to
     consider extending patent protection to a broader range of computer
     software. Because of the special difficulties the Patent and
     Trademark Office would face in performing comprehensive patentability
     searches in this complex and rapidly evolving field, it seems
     generally accepted that any such extension of patent protection would
     necessarily have to be coupled to a pre-grant publication and
     opposition procedure.8 Thus, it now seems inevitable that the U.S.
     will, sooner or later, adopt pre-grant publication of patent
     applications.
          Why should such a seemingly simple procedural change to
     pre-grant publication of patent applications have any impact
     whatsoever on trade secret protection? Answering this question
     requires retracing the fateful and controversial U.S. Supreme Court
     decisions beginning with Sears and Compco in 1964 and culminating
     with the
     
          6 See, e.g., Phillips, Are Trade Secrets Dead? The Effect of the
     Toxic Substances Control Act and the Freedom of Information Act on
     Trade Secrets, 62 J. PAT. OFF. SOC'Y 652 (1980); and Stern, A
     Reexamination of the Preemption of State Trade Secret Law After
     Kewanee, 42 GEO. WASH. L. REV. 927 (1974).
          7 See Note, Eighteen Months to Publication: Should the United
     States Join Europe and Japan by Promptly Publishing Patent
     Applications?, 26 GEO. WASH. J. INTEL L. & ECON. 143 (1992).
          8 See, e.g., PTO Hears From Silicon Valley on Patent Protection
     for Software, 47 PAT., Trade & Copy. .J.  /(BNA)     307  (1994).
     
     1994 / Patent Law Revision / 71 Kewanee case exactly one decade
     later. In part I of this article, patents and trade secrets  are
     generally compared and contrasted as a foundation for the subsequent
     legal analysis.  Part II of this article then reviews the landmark
     Sears and Compco decisions and a few of  the key subsequent cases in
     which the federal courts struggled to apply the underlying 
     philosophy of Sears and Compco to related legal problems, including
     trade secret  protection. Part III of this article analyzes a seeming
     retreat by the U.S. Supreme Court  during the early 1970s from
     strict application of the federal preemption doctrine, as  reflected
     in the cases of Goldstein v. California and Kewanee. Finally, part IV
     considers recent renewed legislative and judicial threats to the
     viability of trade secret protection,  and offers a few suggestions
     for business managers to respond proactively to those threats.
     
     I. A COMPARISON OF PATENTS AND TRADE SECRETS
     
          Trade secrets today constitute a valuable and widely- used
     business asset in the  United States. Thousands of businesses, large
     and small, rely on trade secret protection,  often without even
     realizing it. Trade secrets range from the mundane-e.g., customer 
     lists, ways of keeping accounting records and techniques for
     inventory control-to some  extremely sophisticated technology- e.g.,
     software, plant design, and biotechnology  processes. Although trade
     secrets overlap with patentable subject matter, they also go  well
     beyond. There is no federal trade secret law; protection of trade
     secrets thus rests on  state and common law remedies.
     
          A. Scope of Trade Secret Protection
          Probably the most comprehensive and generally-accepted
     definition of a trade secret appears in the 1939 edition of the
     Restatement of the Law of Torts.9 Section 757 of the Restatement
     observed that while there had been considerable discussion and
     controversy over the basis for protecting trade secrets, "[t]he
     theory that has prevailed is that the protection is afforded only by
     a general duty of good faith and that the liability rests upon
     breach of this duty; that is, breach of contract, abuse of confidence
     or impropriety in the method of ascertaining the secret."10 Thus, it
     has long been clear that "[o]ne
     
          9 See generally R.M. MILGRIM, MILGRIM ON TRADE SECRETS (1985).
     In Note, Trade Secret Misappropriation: A Cost-Benefit Response to
     the Fourth Amendment Analogy, 106 HARV. L. REV. 461, 462 (1992), the
     author declares: "Despite the adoption of the USTA (Uniform Trade
     Secret Act) by thirty-six states and the District of Columbia. the
     1939 Restatement of Torts remains the courts' preferred source of
     definition and guidance ."
      ~0 Id. at 4.
     
     72 / Vol. 27 I Business Law Review who discovers another's trade
     secret properly, as, for example, by inspection or analysis of the
     commercial product embodying the secret, or by independent invention,
     or by gift or purchase from the owner, is free to disclose it or use
     it in  his own business without liability to the owner."11      As a
     practical matter, this definition limited trade secret protection to
     three  varieties of eases: (1) those in which a trade secret is
     learned by "improper"  means, e.g. industrial espionage, bribery of
     company employees, etc.; (2) those  in which an employee who is privy
     to the trade secret as a part of his/her normal work is hired by a
     competitor and divulges the trade secret to his/her new  employer or
     else leaves his/her original employer to start his/her own 
     competitive business; and (3) those in which a trade secret is
     disclosed to  another under a licensing agreement and, at some point,
     the licensee becomes  discontented with the arrangement, refuses to
     pay any further royalties, but  continues to use the trade secret.
     The bulk of the ease law, and the most thorny  legal issues, arise in
     the latter two types of cases where the decisive issue is  normally
     whether there has been a breach of fiduciary duties.
          The Restatement also noted that "[t]he subject matter of a trade
     secret must  be secret. Matters of public knowledge or of general
     knowledge in an industry  cannot be appropriated by one as his/her
     secret. Matters which are completely  disclosed by the goods which
     one markets cannot be his/her secret. Substantially a trade secret is
     known only in the particular business in which it  is used.''l2
     
           B. Categories of Trade Secrets
          One useful and important way of categorizing trade secrets is
     according to how the trade secret is used commercially. Certain types
     of trade secrets, for instance, a prized customer list or a special
     accounting method, are most likely to be used internally. This kind
     of a trade secret will be disclosed only to company employees on a
     "need-to-know" basis and, even then, only subject to  a
     confidentiality provision in the employment contract. Trade secrets
     of this nature are not usually the subject of licensing agreements
     nor are they in any way disclosed by being embodied in a commercial
     product.      At the opposite end of the spectrum are trade secrets
     which can be commercially utilized only by sale or licensing to
     others. This can be the case either where the originator of the
     trade secret has no
     
          12 Id at 5-6. See, e.g., K 2 Ski Company v. Head Ski Co.. Inc.,
     183 U.S.P.Q. 724 (9th Cir 1974).
     
     1994 / Patent Law Revision / 73 interest in utilizing it him/herself,
     for example an independent inventor, or else  where the trade secret
     is completely embodied in a commercial product. In the  first case,
     the originator can realize a financial return on his/her discovery
     only  by selling or licensing it to another. In the second case where
     the trade secret  consists of a mechanical device or a chemical
     composition, for instance a special  recipe, the secret can, at least
     in theory, be "reverse engineered" by a skilled  mechanic or chemist
     having the equipment necessary for analyzing the commercial
     product.l3 It should be apparent that the owner of a trade secret 
     which can be exploited internally enjoys a more secure position than
     one who  must license his/her trade secret or sell a product which
     embodies the secret.
          A large group of trade secrets fall somewhere between these two
     extremes. A special manufacturing process, for example, may be used
     exclusively internally, but the commercial return can be increased by
     also licensing it to others. In such  cases, however, the potential
     for increased profits must be carefully weighed  against the added
     risk that the trade secret will be accidentally disclosed.
          A second type of typology which can be usefully applied to trade
     secrets is the extent to which a trade secret that is embodied in a
     commercial product can be discovered through "reverse engineering" of
     the product. Once again there  is a spectrum ranging from trade
     secrets which are apparent upon casual inspection, to those which
     defy the most sophisticated analytical techniques.14 The majority of
     trade secrets that are embodied in commercial products, however, fall
     somewhere in between: many will yield to analysis but only at
     considerable effort and expense.l5
          A third important way of classifying trade secrets is according
     to whether they are patentable. With respect to patentability, trade
     secrets fall into three  broad categories: (a) those which are
     clearly patentable if the proper steps are  timely followed, i.e. the
     prompt filing of a patent application; (b) those which are  of
     questionable patentability; and, (c) those which are clearly
     unpatentable. For some purposes, it may be important to subdivide the
     last category according to whether patentability is foreclosed
     because of U.S. constitutional restrictions under Article I, Section
     8 (8)l6, or merely because
     
          13 In Aronson v. Quick Point Pencil Co., 440 U.S. 257, 259
     (1979), the Supreme Court noted that the trade secret involved a
     keyholder "so simple that it readily could be espied unless it was
     protected by patent." By contrast, the trade secret formula for "COCA
     COLA" has defied chemical analysis for more than a century.
          14 Id.
          15 See, e.g., Warner-Lambert Pharmaceutical Co., Inc. v. John F.
     Reynolds, Inc., 178 F. Supp. 655 (S.D.N.Y. 1959), aff'd 280 F. 2d 197
     (2nd Cir. 1960).
          16 See notes 23 and 24 infra and accompanying text.
     
     74 / Vol. 27 / Business Law Review Congress has not seen fit in its
     authorizing legislation to extend patent protection to its
     constitutional limits.l7
     
          C. Differences Between Trade Secrets and Patents
          Section 757, comment (b), of the Restatement made it clear that,
     unlike patents, trade  secrets are not necessarily limited to what is
     conventionally thought of as patentable  "technology."18 First, trade
     secrets encompass a considerably broader field of subject  matter
     than patents including compilations of information, such as customer
     lists, which  are not usually patentable.
          Second, even subject matter which is generally of the type which
     is patentable under  35 U.S.C. Section 101l9 must also meet a
     "usefulness" test under the statute in order to qualify for a
     patent.20 Trade secrets, on the other hand, are subject to no such
     constitutional restriction. The only "usefulness" requirement for a
     trade secret is that it confer on the owner "an opportunity to obtain
     an advantage over competitors who do not know or use it.''2l The
     commercial advantage, however, cannot relate to merely a single or
     limited set of events, for example the amount or other terms of a
     secret bid for a contract.22 A trade secret must be an integral and
     continuing element in carrying on a business or trade; and, in this
     sense, it differs from other types of secret information which may be
     used, from time to time, in a business.
          The Restatement also pointed out that a trade secret may, but
     need not, meet the standards of "novelty" and "unobviousness" which
     the law imposes on patentable invention.23 Similar to the
     "usefulness" standard required for patentable inventions, the
     standards of "novelty" and "unobviousness" are mandated by the
     constitutional prescription that patents "promote the progress of ...
     useful arts."24 An invention which is either already known or is no
     more than an "obvious" modification of an existing device or process
     contributes nothing to advancing the state of the art.25
     
          Compare Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489
     U.S. 141 (1989) with Goldstein v.  California, 412 U.S. 546 (1973).  
        18 Patentable subject matter is defined by 35 U.S.C. 101 (1970) as
     any "new and useful process, machine, manufacture, or composition of
     matter...." t9 Id.  20 Id. See, e.g., Brenner v. Manson, 383 U.S. 519
     (1966).   Restatement of the Law of Torts (1939), 757 at 5. Id. 
     Thus, comment (b) to 757, id., states: "A trade secret may be a
     device or process which is  patentable; but it need not be that."  24
     See, e.g., Graham v. John Deere Co., 383 U.S. 1, 13-17 (1965); and
     Sakraida v. Ag Pro, 425 U.S. 273 (1976). 25 See generally J.F.
     WITHERSPOON ED., NONOBVIOUSNESS - THE ULTIMATE CONDITION OF 
     PATENTABILITY (1980)
     
     . 1994 / Patent Law Revision / 75 As the Restatement observed,
     different purposes are served in awarding patents than in protecting
     trade secrets. "The patent monopoly is a reward to the inventor."26
     By  contrast, legal protection of trade secrets "is not based on a
     policy of rewarding or otherwise encouraging the development of
     secret processes or devices [but rather] is merely against breach of
     faith and reprehensible means of learning another's secret."27  The
     societal interest protected in the case of trade secrets is the
     preservation of "rule of  law," namely justice and fair play.25 In
     the short-run certain economic benefits might accrue to a society
     which completely abandoned protection of trade secrets; in the 
     long-run, however, not only would industry and commerce be likely to
     suffer, but also  serious damage to the underpinnings of societal
     order might ensue.29 If it were  considered all right to pirate
     someone else's trade secrets, why not also his car, his  jewelry, or
     his house?30 To satisfy these limited social objectives, "it is not
     appropriate  to require also the kind of novelty and invention which
     is a requisite of patentability."31'
          In short, the differences between patent and trade secret
     protection were well  summarized by the Restatement as follows:32 
     The protection afforded by the rule stated in this Section is in some
     respects   greater and in some respects less than that afforded by
     the patent law. It is greater in that it is not limited to a fixed
     number of years and does not require novelty and invention as in the
     ease of patents... It is less in that secrecy of the process and
     impropriety in the method of procuring the secret are requisite here
     but not in the ease of patents.
          With this background, we can now turn to the extraordinary legal
     cases that first raised the issue of whether state trade secret
     protection was compatible with federal patent law.
     
     II. IMPACT OF THE FEDERAL PREEMPTION DOCTRINE
            A. Sears and Compco Cases
          Sears, Roebuck & Co. v. Stiffel Company33 and Compco Corp. v.
     DayBrite Lighting, Inc. 34 were companion cases at the United States
     
     26 Restatement of the Law of Torts, supra note 21. 27 Id. 28 See
     generally R.M. UNGER, LAW IN MODERN SOCIETY (1976) at 192-223. 29 Id.
     30 Such a society recalls Hobbes' alternative to political and social
     order, a state wherein life is "poor, nasty, brutish and short." T.
     HOBBES, LEVIATHAN (Bobbs-Merril Co. ed. 1958) at 107.
     
     31 Restatement of the Law of Torts, supra note 21. See also
     University Computing Co. v. Lykes - Youngstown Corp., 183 U.S.P.Q.
     705 (5th Cir. 1974). 32 Restatement of the Law of Torts, supra, note
     21. 33 376 U.S. 225 (1964). 34 376 U.S. 234 (1964).
     
     76 I Vol. 27 / Business Law Review Supreme Court on writs of
     certiorari to reexamine holdings by the Seventh Circuit Court  of
     Appeals relating to the scope of Illinois unfair competition law. The
     facts of the Sears case are representative of both cases.     
     Stiffel Company had designed and secured both mechanical and design
     patents on a pole lamp, a vertical floor-to-ceiling tube having lamp
     fixtures positioned at varying  heights along the tube.35 Soon after
     Stiffel introduced its pole lamps, Sears, Roebuck &  Company began to
     market a substantially identical pole lamp at a cheaper price than
     the  Stiffel lamps. Stiffel brought suit in the United States
     District Court for the Northern  District of Illinois charging Sears
     with infringement of its patents and with unfair competition under
     Illinois law.
          The District Court held both of the Stiffel patents invalid
     under 35 U.S.C. Section  103 on the grounds that the pole lamp was
     merely an "obvious" modification of existing lamp and lighting
     devices.36 The District Court found, however, that the Sears lamp 
     was a substantially identical copy of the Stiffel lamp with respect
     to both functional and nonfunctional details and ornamentation. In
     view of this finding, the District Court held  that, with respect to
     the public, there was a likelihood of confusion between the Sears and
     the Stiffel lamps and, accordingly, Sears was in violation of
     Illinois unfair  competition law.37 This was so even though there was
     no evidence or allegations that  Sears had in any way mislabeled its
     lamps so as to suggest any connection with Stiffel.
          The Seventh Circuit affirmed the District Court's award of
     monetary damages and  injunctive relief to Stiffel.38 The Court of
     Appeals expressly rejected arguments on  behalf of Sears that
     Illinois unfair competition law required "palming off" or "secondary 
     meaning"; it was sufficient, according to the Court of Appeals, that
     the similarity in  design created a "likelihood of confusion" as to
     the source of the products.39 The  Supreme Court granted certiorari
     "to consider whether this use of a State's law of  unfair competition
     is compatible with the federal patent law.40
          The Supreme Court opinion in Sears opened appropriately with a
     lengthy discourse  by Justice Black on the history and philosophy of
     federal patent law as a narrow and limited exception to the
     historical 376 U.S. at 225-26.
     
     36 Id. at 226. 37 Id. 38 313 F. 2d 115 (7th Cir. 1963). 39 Id. at
     118. 40 376 U.S. at 228.
     
     1994 / Patent Law Revision / 77 Anglo-American antipathy to monopoly
     privileges.4l Special note was made of the fact  that "when the
     patent expires the monopoly created by it expires, too, and the right
     to  make the article - including the right to make it in precisely
     the shape it carried when  patented passes to the public."42 For
     these reasons, concluded Justice Black "the patent system is one in
     which uniform federal standards are carefully used to promote 
     invention while at the same time preserving free competition."43
          The difficulty with permitting a state to safeguard through its
     unfair competition laws that which fails to meet the standards of
     federal patent protection, said Black, is that  "States could allow
     perpetual protection to articles too lacking in novelty to merit any 
     patent at all under federal constitutional standards. This would be
     too great an encroachment on the federal patent system to be
     tolerated."44 Under the so-called  "Supremacy Clause"45 of the U.S.
     Constitution, where state law conflicts with federal  policy the
     state law is "preempted." Justice Black acknowledged that "a State
     may, in appropriate circumstances, require that goods, whether
     patented or unpatented, be  labeled or that other precautionary steps
     be taken to prevent customers from being  misled as to the source."46
     Because of the conflict with federal patent law, however, the  Court
     held that "a State may not, when the article is unpatented and
     uncopyrighted,  prohibit the copying of the article itself or award
     damages for such copying."47 On this  basis, the holdings of the
     Court of Appeals in both Sears and Compco were reversed.
     
            B. Brulotte v. Thys Company It soon became clear that the
     extensive discussion by the Supreme Court in the Sears and Compco
     decisions about the historical, philosophical, and constitutional
     foundations of the U.S. patent systems was not mere dicta nor limited
     to the fact pattern of those two cases. In the later 1964 case of
     Brulotte v. Thys Company,48 the Supreme Court demonstrated its intent
     to apply the same federal preemption reasoning that dictated the
     outcome of Sears and Compco to a broad
     
     41 Id. at 229-30. 42 Id. 43 Id. at 230-31. 44 Id. at 232. 45 U.S.
     Const., Art. VI, para 2, reads in part: "This Constitution. and the
     Laws of the United States...shall be the supreme Law of the Land. ."
     46 376 U.S. at 232. 47 Id. 48 379 U.S. 29 (19641.
     
     78 / Vol. 27 / Business Law Review range of related issues where
     conflicts were perceived to exist between state/common  law and
     federal patent principles.
          In Brulotte, the Court held invalid several patent licensing
     agreements which provided for royalty payments continuing beyond the
     date on which the last of those patents had expired. The Court
     reasoned that once the patent monopoly expired, everyone (including
     former licensees) should be free to use the invention without paying
     additional tribute to the inventor. State contract law could no more
     be used to protect an invention after patent expiration than state
     unfair competition law could protect an invention after  patent
     invalidity. The Court expressly rejected a lower court holding that
     the arrangement at issue was merely a reasonable way "to spread the
     payments for the use of the patents."49
            C. Lear, Incorporated v. Adkins
          Sears, Compco, and Brulotte, of course, were not trade secret
     cases. Not until five  years later in Lear Incorporated v. Adkins50
     was the potential impact of these cases on  trade secret protection
     fully appreciated.5l In Lear, however, the Court addressed for  the
     first time the question of whether, by logical extension of the
     doctrines of Sears,  Compco, and Brulotte, a licensee should also be
     able to avoid royalty payments when an  unexpired patent underlying a
     licensing agreement is found to be invalid.
          After summarizing the facts and procedural posture of the case,
     Justice Harlan began the majority opinion with a lengthy history and
     analysis of the doctrine of licensee estoppel.52 "Licensee estoppel,"
     a modern application of the ancient maxim that you  should not bite
     the hand that feeds you, was a judicially-created doctrine which held
     that  a licensee was estopped from challenging the validity of the
     patent unless he/she first  repudiated the licensing agreement.53
     Because a patent licensing agreement is, in essence, a covenant by
     the patent owner not to sue the licensee for patent infringement,
     repudiation of the agreement would leave the licensee open to suit
     for infringement as  well as breach of contract should the patent
     subsequently be declared valid. In view of  the high costs and
     uncertainties involved in litigating the validity of a patent, the
     doctrine  of licensee
     
          49 Id. at 31. See also Boggild v. Kenner Products, 228 U.S.P.Q.
     130 (6th Cir. 1985) reversing 576 F. Supp. 533 (S.D. Ohio 1983).
          45 395 U.S. 653 (1969).
          51 See, e.g., Sutton, Trade Secrets - Federal Preemption and
     Legislative Solutions, 1971 PAT. L. ANN. 129 (1971).
          52  395 U.S. at 662-68.
          See Automatic Radio Company v. Hazeltine Research, Inc., 339
     U.S. 827 (1950).
     
     1994 / Patent Law Revision / 79 estoppel proved to be a substantial
     deterrent to licensee patent challenges.
          Harlan observed that the case law in this area had struggled for
     many years to try to  accommodate the conflicting policies of
     contract law and federal patent law. One the one  hand, the courts
     were reluctant to create an anomaly in patent licensing whereby a 
     contract would be judged by hindsight and an imprudent licensee
     permitted to escape  from the terms of what, in retrospect, proved to
     be a bad bargain. On the other hand, a  uniform and consistent
     federal patent policy required that there be free competition in 
     ideas and inventions which were not protected by federal patents or
     copyrights. The  problem, observed Harlan, came down to a "search for
     an acceptable middle ground."54
          In reviewing this search, the Court concluded that the balance
     which it previously  struck in Automatic Radio Company v. Hazeltine
     Research, Inc., by sanctioning the licensee-estoppel doctrine, was
     improperly weighted in favor of contract principles  under state
     laws. It found that the Court's more recent decisions in Sears and
     Compco  compelled a holding that federal patent policies prevailed
     over conflicting state contract  law.55 Accordingly, the Court had
     little trouble in overruling Hazeltine and the  licensee- estoppel
     doctrine.56
          But, the issues raised in Lear, noted the Court, were "far more
     complicated"57 than  simply a licensee-estoppel case. In the "easy"
     case where a patent owner licenses an already-issued patent, the
     licensee gains two advantages over its competitors: first,  freedom
     from the threat of a patent infringement suit; second, deterrence
     against competitors entering the field. As Justice Harlan observed,
     however, the licensee in this  case, i.e. Lear, "gained an important
     benefit not generally obtained by the typical licensee."58 This was
     the benefit of access to secret, proprietary information several 
     years before Lear's competitors obtained access to this information
     upon publication of  Adkins' patent.59 "At the core of this case,
     then," said Harlan, "is the difficult question  whether federal
     patent policy bars a State from enforcing a contract regulating
     access to  an unpatented secret idea."50 This key quotation was the
     very first time that the U.S.  Supreme Court raised the "difficult
     question"51 of the continued
     
     54 395 U.S. at 668 55 Id. at 670. 56 Id. 57 Id. 58 Id. at 671. 59 Id.
     at 671-72. 60 Id. at 672. 61 Id.
     
     80 / Vol. 27 / Business Law Review viability of trade secret
     protection in light of federal patent policy.
          At one extreme, observed Harlan, was the position taken by
     Adkins that because  Lear obtained privileged access to Adkins' ideas
     before the patent issued, the trade secret and license agreement with
     Lear should be legally enforceable irrespective of the validity  of
     the patent. This position, however, clearly contravened the
     principles of Sears, Compco, and Brulotte.62 A fall- back,
     alternative position advanced by Adkins was, even  assuming that
     Lear could raise patent invalidity as a defense to Adkins' breach of 
     contract action, at least until such time as the patent was actually
     declared invalid Lear  should be obliged to continue its royalty
     payments. This argument, too, was flatly  rejected by the Court.63 A
     host of related and even more difficult questions touching  directly
     on the continued viability of trade secrets were raised by Justice
     Harlan but were left unanswered.64
          Harlan's majority opinion was far from unanimous. One justice
     argued that the  majority had gone too far, while three others urged
     that it had not gone far enough.  Justice White, while concurring
     with the majority on the licensee- estoppel issue,  contended that
     until the validity issue was determined in the lower courts, the
     Supreme  Court lacked jurisdiction to rule on Adkins' claims for
     royalties.65
          By contrast, Justices Black and Douglas, the drafters and
     leading proponents of the  decisions in Sears, Compco, and Brulotte,
     in a separate opinion joined by Chief Justice Warren, excoriated the
     majority for failing to carry through the mandate of the Sears and 
     Compco doctrine to its logical conclusion.66 Specifically focusing on
     trade secret protection, Justice Black concluded:67   One who makes a
     discovery may, of course, keep it secret if he wishes, but private
     arrangements under which self-styled "inventors" do not keep their   
     discoveries secret, but rather disclose them, in return for
     contractual    payments, run counter to the plan of our patent laws,
     which tightly regulate    the kind of inventions that may be
     protected and the manner in which they    may be protected. The
     national policy expressed in the patent laws, favoring    free
     competition and narrowly limiting monopoly, cannot be frustrated by
     
     62 Id . 63 Id. 64 Although the Court freely acknowledged that its
     present decision would "of course, require the state courts to
     reconsider the theoretical basis of [trade secret protection]," id.,
     the Court side-stepped this thorny issue with the observation that
     the state "courts may well reconcile the competing demands of patent
     and contract law in a way which would not warrant further review in
     this Court," id. 65 395 U.S. at 677-81. 66  Id. at 676-77. 67 Id. at
     677.
     
     1994 / Patent Law Revision / 81 private agreements among individuals,
     with or without the approval of the State.
            D. Painton & Company, Ltd. v. Bourns, Inc.
          It did not take long for the Black-Douglas philosophies, as
     expressed in their Lear  concurrence, to find expression in the
     decision of a sympathetic federal trial judge. Less  than a year
     after Lear was decided, Judge Constance Baker Motley relied on this
     case as  the basis for summarily dismissing counterclaims for an
     injunction and unpaid royalties  due under a trade secret licensing
     agreement in Painton & Company, Ltd. v. Bourns,  Inc.68
          The Painton case involved a "naked" trade secret license. There
     was no patent  involved, valid or otherwise. No patent application
     had ever been filed, nor had one even been contemplated. In an
     extraordinary exposition on the potential evils of trade  secrets,69
     Judge Motley concluded that "[f]or these reasons, this court holds
     that federal patent law requires an inventor to submit his ideas to
     the Patent Office before he can  compel consideration [to be paid]
     for the use of his idea."79
          On appeal, in a unanimous and carefully-reasoned opinion by
     Judge Henry Friendly, the Second Circuit Court of Appeals reversed.7l
     First, the Court noted that not even the opinion of Justice Black in
     Lear went so far as to rule out the collection of royalties prior to
     the filing of a patent application.72 Next, the Court addressed Judge
     Motley's arguments that protection of trade secrets was contrary to
     public policy because it discouraged patent applications.73 The Court
     carefully distinguished three categories of  trade secrets: "(1) the
     trade secret believed by its owner to constitute a validly patentable
     invention; (2) the trade secret known to its owner not to be so
     patentable; and (3) the trade secret whose valid patentability is
     considered dubious."74
          The Court concluded with respect to type (1) that there was
     little danger that inventors of clearly patentable inventions would
     choose to forego a patent in lieu of trade secret protection.75 With
     respect to type (2), the Court concluded that there was no merit in
     promoting 68 309 F. Supp. 271 (S.D.N.Y. 1970).
     
     69 Id. at 274. 70 Id. 71 Painton & Company, Ltd. v. Bourns, Inc., 442
     F.2d 216 (2nd Cir. 1971). 72 Id. at 223. 73 Id. at 223-24. 74 Id. at
     224. 75 [~
     
     1994 / Patent Law Revision 1 83 opportunity to cash in on the
     successful recordings of others by making counterfeit  tapes from a
     master recording and selling them well below the prices of the
     genuine recordings.83 This was possible under U.S. copyright laws
     because tapes were not  considered to be "copies" of the underlying
     copyrighted words and music, and  protection for sound recordings per
     se did not become available until February 15, 1972,  when a long
     overdue amendment to the Copyright Act became effective.84 Several
     states  responded to this congressional oversight either by enacting
     their own laws, like  California, or by affording protection based on
     common law copyright.85
          Goldstein argued, however, that California's record piracy
     statute was preempted by  federal copyright law and, therefore, was
     invalid. In particular, Goldstein contended that  the principles
     enunciated by the Supreme Court in the Sears and Compco cases
     prevented  the states from affording legal protection to works which
     did not qualify for federal copyright protection.86 All of the
     recordings duplicated by Goldstein had been "fixed"  prior to
     February 15, 1972 and, thus, were ineligible for protection under the
     Sound Recording Amendment of 1972.87 Furthermore, Goldstein argued
     that even under the  Sound Recording Amendment, records and tapes
     were protected from duplication only  for the normal copyright term.
     By contrast, under the California statute, pre-1972 recordings were
     protected in perpetuity,88 just as state unfair competition law would
      have done in Sears and Compco.
     
          But, writing for a narrow 5-4 majority, Chief Justice Burger
     reaffirmed Goldstein's  conviction.89 Instead of the Sears and Compco
     blunderbuss approach to federal preemption, Justice Burger adopted a
     more deliberate and discriminating analysis. First, he noted, this 
     was not an area where the Constitution granted exclusive authority to
     the federal government.90 Nor, he observed, was this an area where
     the Constitution granted  authority to the federal government and
     prohibited the States from exercising similar authority.9l
          Instead, Burger concluded, this was a third type of situation
     where the Constitution  granted authority to the federal government
     but  83 Id. at 549-51.
     
     84 The Sound Recording Amendment. Pub.L. 92-140 (1971). 85 See, e.g.,
     Mercury Record Productions, Inc. v. Economic Consultants, Inc., 183
     U.S.P.Q. 358 (Wisc. Sup. Ct. 1974). 86 412 U.S. at 551 87 Id. at 552.
     88 Id. 89 Id. at 570. 90 Id. at 552. 91 Id. at 553.
     
     84 / Vol. 27 / Business Law Review said nothing about the concurrent
     exercise of state authority. In this third type of case,  Burger
     argued, concurrent state regulation should be upheld unless Congress
     had  expressly withdrawn state power or such state regulation was
     "absolutely and totally  contradictory and repugnant" to federal
     authority.92 Because neither of these limitations  applied to the
     California statute at issue, it was held valid. Over vigorous
     dissenting  opinions by Justices Douglas and Marshall,93 the Court
     concluded:94 "[I]t is difficult to see how the concurrent exercise of
     the power to grant copyrights by Congress and the  States will
     necessarily and inevitably lead to difficulty."
          The Sears and Compco cases were neither overruled nor
     convincingly distinguished.  A distinction which the majority opinion
     raised but never fully elaborated was that pre-1972 sound recordings
     were subject matter left unregulated by federal law. Thus,  states
     were free to step into this vacuum without infringing on federal
     policies.95 By  this line of reasoning, technology not encompassed by
     current patent law could  presumably be validly protected under state
     trade secret law.96 But what about  inventions which are of
     questionable patentability? This and a host of related questions 
     were left unanswered until Kewanee.
     
          B. Kewanee Oil Co. v. Bicron Corp.
          Kewanee Oil Co. v. Bicron Corp97 involved former employees of
     the plaintiff who  formed or later joined the defendant, a competitor
     in the same technical field as the plaintiff. While employed by
     Harshaw Chemical Company, an unincorporated division  of Kewanee Oil
     Company, each of the subject employees had executed confidential 
     disclosure agreements which, as a condition of their employment,
     required them not to  disclose confidential information or trade
     secrets obtained in the course of  employment.98
          Kewanee commenced this action in the U.S. District Court in Ohio
     seeking injunctive  relief and damages under Ohio's trade secret laws
     for the misappropriation of its trade  secrets by Bicron Corp. The
     
       Id. at 554. 93 Id. at 572-79.
        Id. at 559.
        Id. at 569-70.
     
          More recent case law has indicated that the enforceability of
     "hybrid" license agreements covering  both patented and trade secret
     subject matter may turn on the express allocation of royalties
     between the  two. See, e.g., Mestre v. Pitney Bowes, Inc., 701 F. 2d.
     1365 (11th Cir. 1983); and Chromally American Corp. v.  Fischmann,
     716 F. 2d 683 (9th Cir. 1983).  9 416 U.S. 470 (1974).
     
      98 Id. at 473. e notes 3
     
     1994 / Patent Law Revision / 85 District Court granted Kewanee a
     permanent injunction against Bicron using or disclosing 20 of the 40
     claimed trade secrets until such time as they became a matter of
     public knowledge through proper means.99 On appeal, the U.S. Court 
     of Appeals for the Sixth Circuit adopted the trial court's fact
     findings that Bicron  had appropriated for its own benefit secret
     information from the former Harshaw employees.100 As a matter of law,
     however, the Court of Appeals reversed the  District Court decision
     on the grounds that Ohio trade secret law was preempted  by federal
     patent law.101 Because this holding was in conflict with earlier
     decisions in other federal courts of appeals, the Supreme Court
     granted  certiorari.l02 The unusual importance of this case in
     intellectual property  circles was underscored by the filing of 21
     amicus ("friend-of-the- court")  briefs.l03
          Again authoring the majority opinion for a divided Court, Chief
     Justice Burger  reversed the Sixth Circuit Court of Appeals and
     reaffirmed the continued viability of trade secrets. Burger relied
     heavily on the Goldstein case as a precedent for the general
     proposition that concurrent federal and state legislation in the
     intellectual property field does not necessarily and inevitably 
     lead to conflict and, therefore, does not always require federal
     preemption.l04
          The Chief Justice noted that in the Sears and Compco cases,l05
     the lamp and lighting designs had become part of the public domain,
     subject only to the existing patent rights.l03 When the patents were
     invalidated, patent protection and any other form of legal protection
     was terminated. The Supreme Court had held that the information
     disclosed to the public as a part of the patent quid pro quo could
     not thereafter be withdrawn through the application of state unfair 
     competition laws.l07 In Kewanee, however, no patent "bargain" had
     ever been  struck, and no public disclosure had ever been made.
     Vis-a-vis the general public,  the information involved in Kewanee
     was still secret.      To help in categorizing analyzing the impact
     of trade secrets on patent protection, Justice Burger turned to the
     taxonomy of trade secrets employed by the Second Circuit Court of
     Appeals in Painton
     
     99 Id. at 473-74. 100 Id. at 474. l01 Id . 102 414 U.S. 818 (1973)
     
     '03 The list included three former Commissioners of Patents and
     Trademarks, see 40 L.Ed. 2d 879-80.
      t 416 U.S. at 47880. 405 See notes 33-47 supra and accompanying
     text. 106 Id. l07 416 U.S. at 481
     
     86 / Vol. 27 / Business Law Review v. Bourns.108 Following an almost
     identical line of reasoning as Judge Friendly, Burger  concluded that
     in none of Judge Friendly's three categories of trade secrets was the
      probability of a conflict with federal patent policy so great as to
     compel a holding of  federal preemption.l09 Sears and Compco were
     distinguished on the grounds that in those  cases the operation of
     state law had the effect of withdrawing knowledge from the public 
     domain whereas a trade secret, by definition, "has not been placed in
     the public  domain.''110 Commenting on the possibility that
     abolishing trade secret protection would promote more patent
     application filings, Justice Burger observed:
     
       The mere filing of applications doomed to be turned down by the
     Patent Office will bring forth no new pueblo knowledge or
     enlightenment, since under federal statute and regulation patent
     applications and abandoned patent applications are held by the Patent
     Office in confidence and are not open to pueblo inspection.
     
          It will be apparent that this important line of argument in
     defense of the Kewanee  decision remains valid only so long as the
     United States does not adopt a pre-grant publication system.
          In a scathing dissent in Kewanee, Justice Douglas charged:ll2
     "Today's decision is at  war with the philosophy of [Sears and
     Compco.]" The crux of Douglas' argument was that a patent owner must
     have an invention which meets certain standards and must  disclose
     this invention to the public, for which he receives only a limited
     period of exclusivity. A trade secret owner, on the other hand, need
     not have an invention which  meets any standards, gives nothing to
     society and, in return, receives a potentially perpetual monopoly.ll3
     According to Douglas, "[t]he conflict with the patent laws is 
     obvious.''ll4 Although Douglas would not have sanctioned the
     deliberate theft of a trade secret, he believed that the civil remedy
     should have been limited to damages for breach  of contract.ll5 In
     his opinion, injunctive relief should be reserved for patents where
     the  inventor has "paid" for his monopoly by making a full public
     disclosure of his  invention."116
     
     108 See notes 68-78 supra and accompanying text. '09 416 U.S. at
     484-89.
      to Id. at 484.
       Id. at 489.
       Id. at 495.
      113 Id. at 495-96. Cf: Greenberg v. Croydon Plastics Co., Inc., 184
     U.S.P.Q. 27 (E.D. Pa. 1974). 114 416 U.S. at 496. 115 Id. at 498 116
     Id.
     
     1994 / Patent Law Revision / 87
          Justice Marshall, in a brief concurring opinion, concluded that
     there was neither  persuasive evidence of actual conflict between the
     patent and trade secret systems nor of  congressional intent to
     preempt the field."7 In contrast with Chief Justice Burger,  however,
     Justice Marshall had no doubts that "the existence of trade secret
     protection  provides in some instances a substantial disincentive [to
     apply for patents] and thus  deprives society of the benefits of
     public disclosure of the invention..."ll8
     
     IV. THE FUTURE OF TRADE SECRET PROTECTION
          A. Recent Judicial and Legislative Developments
          Following the Kewanee decision in 1974, the U.S. Supreme Court
     revisited the  specific issue of trade secret protection in one case
     and the broader issue of federal- state  conflicts in the
     intellectual property field in another. In the 1979 case of Aronson
     v.          Quick Point Pencil Co., ll9 another decision authored by
     Chief Justice Warren Burger,  the Supreme Court applied the Goldstein
     preemption analysis to conclude, as in  Kewanee, that federal law
     preempted state law only in cases where the state law "stands  as an
     obstacle to the accomplishment and execution of the full purposes and
     objectives  of Congress.120 The Court thus upheld the validity of the
     trade secret license at issue in  Aronson based on the conclusion
     that no conflict necessarily existed between trade  secrets and
     patents.121'
          The Aronson case added a few wrinkles not present in Kewanee.
     The keyholder invention involved in Aronson "[a]lthough ingenious,
     ... was so simple that it readily could be copied unless it was
     protected by patent.''l22 The trade secret license had been 
     negotiated while a patent application was pending, but no patent was
     ever issued. Competitors were therefore able to freely copy the
     design while Quick Point was  compelled to go on paying royalties.
     Still, the Court noted, Quick Point had not done  badly in its
     bargain: partly as a result of its jump on the market because of its
     license  agreement with Aronson, it had sold more than seven million
     dollars worth of the  keyholders.l23 Moreover, Justice Burger noted,
     whereas the state unfair competition  laws struck down in Sears and
     Compco barred
     
     117 Id. at 494. 118 Id. 119 440 U.S. 257 (1979). 120 Id. at 262. 121
     Id. at 262-63. 122 Id. at 259. 122 Id. at 263.
     
     88 / Vol. 27 / Business Law Review everyone from copying the
     unpatented designs, enforcement of the trade secret license in 
     Aronson only restricted Quick Point.l24    The 1989 Supreme Court
     decision in Bonito Boats, Inc. v. Thunder Craft Boats, Inc.,l25 
     however, forced the Court to reexamine the very foundation of Sears
     and Compco. The  Bonito case involved the validity of a Florida
     statute that prohibited the sale of boat hulls  made by a copying
     process known as direct or "plug" molding. This process made it 
     possible for competitors to quickly and inexpensively produce carbon
     copies of other  manufacturers' commercially successful boat hulls
     without incurring any of the expenses  of design and testing.
          Plaintiff-petitioner in this action argued that, unlike the
     expansive state unfair  competition laws at issue in Sears and
     Compco, the subject Florida statute did not prohibit all copying of
     unpatented boat designs but rather only copying by one  especially
     reprehensible technique.l25 But, it was to no avail as the Supreme
     Court ruled  that the Florida statute was preempted by federal patent
     law. Warren Burger had since  retired from the Court, and there was
     no evidence in Justice O'Connor's opinion in Bonito  of the federal
     preemption analysis that Burger had employed in Goldstein, Kewanee,
     and  Aronson.
          Under the Goldstein approach, the Court would have started by
     asking whether the  exercise of concurrent state power in Bonito, as
     reflected in the Florida statute, was "absolutely and totally
     contradictory and repugnant" to federal authority. Instead, 
     reverting to the Court's approach in Sears and Compco, Justice
     O'Connor began her analysis in Bonito with the history of the patent
     laws as a carefully balanced exception to  the general public policy
     against monopolies. In effect, the Goldstein approach created a 
     rebuttable presumption against federal preemption, whereas the Sears
     and Compco  approach established an almost insurmountable presumption
     against the exercise of concurrent state protection. Although Justice
     O'Connor acknowledged that since Sears  the Court's decisions "have
     taken a decidedly less rigid view of the scope of federal  preemption
     under the patent laws, e.g., Kewanee,''l27 in truth it is likely that
     a different outcome would have resulted in Kewanee had the Court
     applied the Sears instead of the  Goldstein approach.
          Thus, even prior to recent legislative proposals, there was
     reason to question the  continued viability of the Kewanee decision.
     But, when the legal philosophy reflected by  Sears, Compco, and more
     recently
     
      Id. at 264. 125 489 U.S. 141 (1989). 126 Id. at 163.
      Id. at 156.
     
     1994 / Patent Law Revision / 89 Bonito, is combined with a possible
     change in the U.S. patent system, the threat to trade secret
     protection becomes manifest. As previously noted, serious
     consideration is currently being given to pre-grant publication of
     U.S. patent applications.l28 This change would help to harmonize the
     U.S. patent system with those of most other developed countries. In
     addition, pre-grant publication of patent applications is a necessary
     element of a pre-grant public opposition system, which is also a part
     of patent practice in some other developed countries. Such a
     pre-grant opposition system is considered by many to be the only
     workable means of insuring that the most recent and relevant prior
     art comes to the attention of the Patent Office in a rapidly evolving
     technology such as computer software.
          If the U.S. were to adopt pre-grant publication of patent
     applications, however, it would mean that the subject matter of
     patent applications would, sooner or later, become public knowledge
     whether or not any patent were ever issued. Thus, there would
     suddenly be a public benefit in compelling the filing of patent
     applications even for subject matter that was clearly unpatentable or
     where patentability was in doubt. A principal foundation of Chief
     Justice Burger's opinion in Kewanee would thereby be undermined.l99
     Were this to happen, it is easy to envision a renewed judicial
     challenge to the viability of trade secret protection. With Chief
     Justice Burger no longer on the Court, with the Court's recent
     reaffirmation of the federal preemption doctrine in Bonito, and  with
     the logic of Kewanee undercut by adoption of pre-grant publication,
     it is  also not difficult to envision the narrow 5-4 majority
     decision in Kewanee being  ultimately overturned.
          B. Proactive Management Responses
          Astute managers do not wait to be run over by legal changes but
     rather anticipate such changes and respond proactively.l30 This
     author believes it is not too soon for managers to start thinking
     about how better to prepare their companies for the possible future
     curtailment of trade secret enforceability.
          First, it is well to bear in mind that even Justice Douglas in
     his vociferous  dissent in Kewanee did not argue that there should be
     no protection whatsoever  for trade secrets. While Justice Douglas
     did not believe that a trade secret  license, e.g., in Aronson,
     should be enforceable, he did believe that businesses  should have
     some protect-
     
     128 See notes 7 and 8 supra and accompanying text. 129 See notes 110
     and 111 supra and accompanying text. 130 See, e.g., Silverstein, The
     Litigation Audit: Preventive Legal Maintenance for Management, 31
     Bus. HORIZONS 34 (1988).
     
     90 / Vol. 27 / Business Law Review tion against theft of trade
     secrets that were being used wholly internally.l3l But,  in such
     cases as employee theft or industrial espionage, Justice Douglas
     urged  that the remedies be limited to money damages with no
     possibility of injunctive  relief.l32 It seems likely that even if,
     at some future date, trade secret protection  were limited, such
     limitations would not exceed those proposed by Justice Douglas.
          Therefore, a manager might begin a proactive strategy in this
     field by preparing a comprehensive inventory of the company's trade
     secrets and categorizing those secrets according to whether they are
     utilized internally, externally, or both. The more the secrets are
     used externally, for example by being embodied in a product or
     licensed to others, the more vulnerable they will be to a future
     change in the case law. If feasible, for the more valuable secrets,  
            the company might want to reduce its exposure to possible
     legal change by  curtailing external uses, for instance by not adding
     any new licensees
     or by not  licensing the company's newest trade secrets to anyone.
          Even for those trade secrets used completely internally, the
     company might want to reexamine the extent of in-house disclosure-
     which employees really "need to know" the secrets to do their jobs?
     If there is a reasonable possibility  of obtaining a patent on a new
     discovery, the company might be wise to redo  the usual cost-benefit
     calculus before making the decision between patent and trade secret
     protection. These and other similar measures can help a firm better 
     position itself to withstand a significant change in the law of trade
     secrets.
          At the same time, businesses will want to be sure that their
     federal legislators  are well aware of the possible damage to
     traditional trade secret protection that  could inadvertently result
     from adoption of pre-grant publication of patent  applications.
     Ideally, any such legislation would be coupled with an  unequivocal
     declaration by Congress that state trade secret law was not  intended
     to be preempted by federal patent law.
     
     CONCLUSION
     
          Recently proposed revisions to the U.S. patent system, when
     viewed together with case law over the last thirty years relating to
     federal preemption doctrine as applied to this field, poses
     significant risks to the viability of state  trade secret protection.
     Managers in companies that have large portfolios of  trade secrets
     need to be aware 1994 / Patent Law Revision /91 of the possible legal
     threat to these valuable assets and take appropriate steps now to
     safeguard their firms' interests.


Last Modified: March 1995