Kewanee Oil Company v. Bicron Corporation – Oral Argument – January 09, 1974

Media for Kewanee Oil Company v. Bicron Corporation

Audio Transcription for Opinion Announcement – May 13, 1974 in Kewanee Oil Company v. Bicron Corporation

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Warren E. Burger:

We’ll hear arguments next in 73-187, Kewanee Oil Company against Bicron Corporation.

Mr. Griswold.

Erwin N. Griswold:

Mr. Chief Justice and may it please the Court.

This case is here on a writ of certiorari to review a decision of the United States Court of Appeals for the Sixth Circuit.

That Court by a divided vote, held that the Ohio Law of trade secrets was preempted by the federal patent laws.

On this basis, it reversed a judgment which had been entered by the District Court, following an extensive trial, which had enjoined the respondents here from using and disclosing trade secrets which they had learned while they were in the employ of the petitioner.

The facts are relatively simple as far as the issue before this Court is concerned.

They maybe said, I think to present a classic case of equity jurisdiction.

The petitioner threw an unincorporated division called Harshaw, and manufactures various products in the chemical field.

These include synthetic crystals and the particular product involved here is sodium iodide, thallium activated crystals.

That means that it is basically sodium iodide, but by introducing some thallium in it, the crystal becomes effective in detecting radiation.

And these crystals are useful in locating uranium ore and oil exploration, and through various medical purposes such as detecting malignant tumors.

Potter Stewart:

Mr. Griswold, I — excuse me for interrupting you, but I think you said that the Court of Appeals decided this case by a divided vote?

Erwin N. Griswold:

Yes Mr. Justice.

Potter Stewart:

I missed that, is there a dissenting opinion?

Erwin N. Griswold:

Well, I’m sorry, I — apparently I am wrong.

My recollection was it was a divided vote, but —

Potter Stewart:

I think it was unanimous.

Erwin N. Griswold:

It was unanimous.

Potter Stewart:

Yes.

I just wanted to be sure I hadn’t missed something.

Erwin N. Griswold:

Well —

Warren E. Burger:

Analogously wrong since he —

Byron R. White:

Well, that just means that you think they were unanimously wrong?

Erwin N. Griswold:

I now say they were unanimously wrong.

Potter Stewart:

Right.[Laughter]

Erwin N. Griswold:

Harshaw was a pioneer in this field and has been actively developing it for 25 years.

In 1949, it grew a sodium iodide thallium activated crystal, less than two inches in diameter.

By 1966, after the investment of much money and effort, it was able to grow a crystal 17 inches in diameter.

And I may say that these crystals are grown in — in platinum crucibles that comes out a very substantial mass.

Erwin N. Griswold:

It is then sliced which is a very delicate operation.

It must be quickly encapsulated because it is heavily hydroscopic, it will absorb moisture.

When it absorbs moisture it melts.

This is full of delicate operations and the size of the crystal is significant among other things because that a 17 inch crystal will more or less cover the chest of a person who is being examined, whereas the smaller crystals, you’d have to use many and you might miss places.

Worldwide, there are several companies that compete with Harshaw in this business.

There are three in the United States other than the respondent, two in Japan and one each in Great Britain and France.

Up to date however, no company has grown or sold a 17 inch diameter crystal except Harshaw.

In producing such a crystal, Harshaw developed many confidential processes, procedures and techniques which it claims as trade secrets.

There are six individual defendants, each of them was employed by Harshaw or by a subsidiary of Harshaw.

William O. Douglas:

There is no patent involved here?

Erwin N. Griswold:

There is no patent involved here.

No claim is made based on a patent.

Each entered into a contract with his employer that he would not disclose the confidential information of Harshaw.

Each of these employees occupied a position of trust and confidence with Harshaw and was given access to the secret operations in connection with his employment.

Thus, each of the individual respondents was bound by contract and by fiduciary relationship resulting from his confidential employment, not to disclose Harshaw’s confidential information.

It’s one of the traditional functions of equity to enforce such obligations.

While still employed by Harshaw, four of the individual respondents discussed the possibility of forming their own business.

In order to have a going business in the shortest period of time, they decided to make scintillation detectors using sodium iodide thallium activated crystals.

During the summer and fall of 1969, they associated the other individual respondents to them who had recently left Harshaw’s employ.

They built a plant which was completed in late 1969 or early 1970 and soon had produced a 17 inch sodium iodide thallium activated scintillation crystal.

The District Court found that there was imminent danger of disclosure of plaintiff’s trade secrets to Bicron which was the company they organized, and the use of these trade secrets by Bicron.

In April 1970, Kewanee filed this suit to enjoin the individual defendants in Bicron from using and disclosing Kewanee’s trade secrets.

There was an extensive trial.

The District Court found that Kewanee had a protectable interest in 20 of the 40 trade secrets on which it relied.

It held that the other 20 were common knowledge and could be freely used.

Accordingly, it entered in a judgment enjoining Bicron and the individual respondents from disclosing and using the 20 trade secrets unless and until they became validly, publicly known.

Both sides appealed from this decision.

Kewanee contended that all 40 trade secrets should have been protected, while Bircron cross-appealed claiming that none of the trade secrets should be protected.

And the Court of Appeals after reviewing the record held that the findings of fact made by the District Court were not clearly erroneous within the meaning of Rule 52 of the Rules of Civil Procedure.

The Court further concluded that the District Court properly applied the Ohio Law relating to trade secrets, and then it said and I quote from the opinion as it is set out on page 16 of our brief, “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.

Erwin N. Griswold:

There can be no question on this record, but what these individual defendants appropriated to the benefit of Bicron, Harshaw’s secrets, processes, procedures and manufacturing techniques.”

And the Court of Appeals then concluded that it would affirm the judgment of the District Court, except for the conclusion that it reached, that the Ohio Law trade secrets is in direct conflict with the patent laws of the United States.

That is that the law of trade secrets is preempted by the patent laws, and on this basis the Court of Appeals reversed the order of the District Court which had entered an injunction against respondents, and that is the issue which he has — been brought here.

Now, there is nothing unusual about the Ohio Law relating to trade secrets.

It’s similar to the law which has been long effect in most of the States and which is derived from English sources going back over a century.

It is indeed simply an application of the traditional equity principle, where dealing with threatened breach of contract, or violations of fiduciary obligation.

Obviously, the value of a trade secret depends upon as being kept secret.

This does not mean that it cannot be disclosed in confidence or with suitable safeguards as a means of utilizing the secret.

But unless the safeguards can be enforced, that is the safeguards arising out of contract or out of fiduciary relationship.

The secret will soon no longer be a secret and accordingly will have no value.

A trade secret is not the equivalent of a patent.

A patent when valid, gives a right reaching to the boundaries of the United States, effective against every person in the United States.

It is a true governmental grant of a monopoly.

When a patent is granted, there is disclosure to the public, but no one may utilize the device of process without license for a period of 17 years.

This is true even as to a person who has independently dis — conceived the same idea.

It’s true as to everyone within the outer limits of the United States.

It’s a true monopoly.

But a trade secret is much more limited.

It finds its substance as I have indicated in ordinary principles of equity.

It’s enforced against persons only who have one way or another, undertaken an obligation not to disclose.

It may be enforced too against persons who obtain the secret wrongfully as by bribery or by burglary, as to all the world though, other than those who are bound by contract or by fiduciary duty, the trade secret maybe utilized by anyone who obtains it without wrongdoing.

Thus, it maybe uncovered by inspection by what is called reverse engineering.

You take the thing that you have and a trained engineer works back to see how it was put together or by trial and error.

It may also be developed by anyone who carries on the same steps of research and development which were utilized by the original developer of the trade secret.

In this particular case, the record shows that there are a number of competitors who are in no way bound by contract or by fiduciary obligation, and all of them are free to develop the same trade secrets if they can.

Now, this would not be true with respect to a patent which binds all others no matter how independent or original their activities may be.

Now, the issue here is whether the state law of trade secrets long in effect and prevalent throughout the United States, has in some way been preempted by the patent laws.

It’s true of course that Congress has been given power to grant patents.

Historically the States granted patents in the early days, but I don’t believe they do now.

It may well be true that Congress could under the necessary and proper law — clause preempt the state law of trade secrets.

Erwin N. Griswold:

Just as I suppose if Congress could preempt the copyright field, so as to invalidate all state legislation in that area.

But last term in Goldstein against California, this Court refused to find such an effect in the constitutional provision which is identical with respect to copyrights and patents, and refused to find it as to a matter not covered by the patent law as enacted by — by the copyright law as enacted by Congress.

And we submit that the same conclusion should be reached here with respect to the impact of the patent laws on the state law of trade secrets.

Harry A. Blackmun:

General Griswold, there were some of us who dissented in Goldstein last term.

Do you think our position is inconsistent with yours here?

Erwin N. Griswold:

No!

I do not think so Mr. Justice.

I think that there is a — well, let me put it this way.

If your position was that because of the constitutional clause, no state or — no state can enact either a patent or a copyright law, then I think it would follow that a state could not act — enact a patent law just as it was your position that they could not enact a copyright law.

Warren E. Burger:

Your position would be the same if we’d never decided Goldstein, or if we decided the other way, I take it?

Erwin N. Griswold:

Yes, our position would be exactly the same.

Our position is that we are dealing with a trade secret which we are seeking to enforce through ordinary equitable principles which is in no way inconsistent with a patent and is not a functional equivalent of a patent.

Although of course it is in — has a related — it is in a related field dealing with what might be broadly called industrial property.

There is nothing in the patent law which expressly requires preemption.

As a matter of fact, state trade secret law has coexisted with the patent law in this country for more than a century without interfering with anything that Congress has written in the patent law.

Trade secrets have been clearly established in Ohio at least since the decision of then Superior Court Judge Taft in the case of Cincinnati Bell Foundry against Dodds, decided in 1887.

This Court has many times recognized the existence and validity of trade secrets in its decisions.

We have cited several of these cases in our brief and many more are cited in the numerous amicus briefs which have been filed here.

In the Dubilier Condenser case, this Court said that the inventor and I quote, “May keep his invention secret” and that didn’t mean just keep it to himself because it went on to say, “And reap its fruits indefinitely.”

These decisions were outstanding and unqualified when the patent law was completely overhauled by Congress in 1952.

There is nothing in the statute which indicates any disapproval by Congress of the continuing validity of the law of trade secrets.

Moreover, this Court recognized the validity of trade secrets in the rules of civil procedure which were adopted in 1938.

And Congress has both before and since 1952, enacted many statutes which recognized the continuing validity of the state law of trade secrets, these statutes both before and after 1952 are cited in appendices B and C of our brief.

The issue which we see here I think can be put in this way, Congress could no doubt by its action preempt the state law of trade secrets.

Congress has taken no such action.

The pressure in that direction comes from several decisions of this Court all dealing with other factual situations and not involving trade secrets.

In this connection, I would like to call the attention of the Court to an article which is cited in our brief by Professor Widick of the University of California at Davis.

When we cited it we had it only in manuscript, but I am now advised that it has been published in the December 1973 issue of the journal of the Patent Office Society, 55 journal of the Patent Office Society, 736.

That issue publishes only the first half of the article, the second half will be in the January issue and I will lodge copy of the entire article with the clerk so that it will be available for the Court.

Now, it said that the trade secrets in this case are invalid because the petitioner has lost his right to get a patent on him.

Erwin N. Griswold:

The argument is based on Section 102 (b) of the patent law which is set out on page 3 of our brief, just above the middle which reads that a person shall be entitled to a patent ‘B’ — patent unless ‘B’ the invention was in public use in this country more than one year prior to the date of the application for patent in the United States.

What this says is that where the idea has been in public use for a year, no patent may be obtained and of course we don’t contest that.

It may well be that Harshaw has lost its right to obtain a patent on any of these trade secrets.

However, Harshaw is not claiming under the patent laws.

It does not seek a monopoly against the world.

It seeks only to invoke the traditional function of equity to provide protection against breach of contract or violation of fiduciary responsibilities.

Some of the arguments against us in this respect seem to beg the question.

Thus, in the amicus brief filed on behalf of SCM Corporation, it is said on page 13 that the petitioner’s rights are and I quote, “Forfeited to the public by commercial use in excess of one year, coupled with failure to file a time;y patent application.”

And there are similar statements near the top of pages 18 and 19 and elsewhere in that brief.

Now, of course if the petitioner’s rights have been forfeited, then it has no rights remaining and can get no relief here.

However, that is not what the statute says nor is there any basis for reading the statute to reach such a conclusion.

What the statute says is that a person shall be entitled to a patent unless the invention has been in public use for more than one year.

The only appropriate conclusion from the language is that the right to obtain the patent is gone after one year.

There’s nothing in the statute to support the contention that the petitioner forfeited to the public under the patent laws every right available to it, including the protection of long and traditionally made available rights, extended by courts of equity against breach of contract or violation of fiduciary duty.

The court below and the respondents here rely heavily on this Court’s decisions in 1964 in Sears, Roebuck and Company against Stiffel Company and Compco Corp. against Day-Brite Lighting Company, both in 376 U.S.

Those cases seem to us to be clearly distinguishable.

They did not involve trade secrets nor did they involve any threatened breach of contract or violation of fiduciary duty.

Both have some rather sweeping language applied to other facts, but which may well not be properly applicable on the facts involved here.

Both of the cases involved lamps.

In each case, a design patent had been obtained on the lamp and in each case the design patent had been held invalid.

There was of course nothing secret about the lamps.

They were sold to the public, and they and their design were available for inspection.

They could be photographed and detailed drawings could be made of the designs.

What the Illinois Court did in each case was to hold that the plaintiff whose design patent had been held invalid could nevertheless obtain in Mr. Justice Black’s words in the Sears opinion, “The equivalent of a patent monopoly on its unpatented lamp.”

It’s obvious of course that such an injunction by the Illinois Court was the function, only equivalent of a patent.

It would be effective against anybody who sought to make the lamp.

The relief obtained was as wide and as broad as the protection under a patent.

It did not depend in any way on breach of contract or violation of a fiduciary duty.

It applied to anyone who sought to make and market a copy of the lamp, despite the fact that the design patent had been held invalid.

Now this Court did recognize in the opinion in the case by Mr. Justice Black that it was not foreclosing all relief.

Erwin N. Griswold:

It indicated that if there was evidence of passing off that the Court could require a labeling and otherwise designating the source of the particular lamp.

But here the respondents are not seeking to utilize material which is known to the public, or otherwise in the public domain.

On the contrary, the respondents are personally bound by contract and by fiduciary relationship not to disclose what has been communicated to them in confidence.

There is of course an interrelation between the patent law and the law of trade secrets.

This has been known to the profession, to businessmen, to this Court and to Congress for a great many years.

Some of the briefs, including particularly two of the amicus briefs present effects — arguments to the effect that the economy would be better served by reducing the protection which has long been granted to trade secrets.

These are arguments on which Congress has never acted.

They are essentially legislative arguments calling for a change in the law in this area and it has — as it has long been known and understood, and as Congress has written it.

In the constitutional field, it may well be that the court should sit to some extent as a continuing constitutional convention bringing about changes in the interpretation of the constitution from time to time, since no one else has power to authenticate the effect of new developments and new undertakings.

But there is no reason for this Court to sit as a continuing legislative body.

Congress is almost continued — continually in session and it has undoubted power not only to enact a patent law, but also to determine the impact of the patent law on the state law of trade secrets.

Many of the arguments presented in support of the decision below are essentially legislative arguments and should be presented to Congress.

The fact is of course, that Congress has never taken any explicit action which affects the state law of trade secrets and on the contrary it has on many occasions, both before and after the enactment of the patent code of 1952 and in the patent code of 1952, recognized the existence and continuing validity of trade secrets as they have long existed, and under the laws of the several states pursuant to the traditional doctrines of equity.

For example, in the patent code itself, Congress provided that patent application should be kept secret so that if a patent is eventually denied, the applicant still has whatever protection he is entitled to from the trade secret.

Byron R. White:

You mean — Mr. Griswold that applications for patent are by statute secret?

Erwin N. Griswold:

They are kept secret with certain exceptions which are specified in the statute with a very narrow —

Byron R. White:

And you said the — it can be narrow when the applica — if the application is denied that it is never made public?

Erwin N. Griswold:

Then it is not made public and the applicant continues to have whatever rights he may have under the law of trade secrets.

Byron R. White:

Do you have a reference to that code by any chance?

Erwin N. Griswold:

Yes, it is cited in our brief.

I will ask Mr. Springel to —

Byron R. White:

Alright, if it’s in your brief, that’s fine.

Erwin N. Griswold:

— find it.

Byron R. White:

Thank you.

Oh!

That’s better.

Erwin N. Griswold:

Finally, I would call the Court’s attention to the fact that trade secrets play a major role in the economy of the United States, both domestic and foreign.

Many businesses have been founded and conducted on the basis of trade secrets of which the Coca Cola Company is perhaps the classic example.

This is 35 U.S. Code, Section 122 Mr. Justice White.

Byron R. White:

Thank you.

Erwin N. Griswold:

And it is cited in a footnote on page 35 of our brief.

There are similar provision in the regulations of the Patent Office.

Harry A. Blackmun:

Yes, I wanted to be sure about you reference to Coca Cola.

This has been my impression that this is a long-term classic example of a trade secret that has never been discovered, right?

Erwin N. Griswold:

That’s my understanding.

I think it’s part of the folklore, the legal folklore of the country, I — I might say.

In recent years much American know how, and many American processes and procedures had been licensed abroad and the royalties received for these ideas have a very substantial impact on our balance of payments.

It seems odd indeed that because of the patent laws designed to protect American inventors and American industry, this whole structure of industrial property which has been widely and effectively utilized, not hoarded, not suppressed, should be in danger of destruction.

There’s nothing in Sears and Compco, we submit, which is inconsistent with the continued application of the state law of trade secrets.

The court below misconstrued and misapplied those decisions in reaching its conclusion and accordingly the judgment should be reversed.

Warren E. Burger:

Thank you Mr. Girswold.

Mr. McCoy?

William C. McCoy, Jr.:

May it please the Court, pardon me, Mr. Chief Justice, may it please the Court.

Permit me to begin by reference to the specific, precise injunction that’s before the Court and that appears at page 92 to 94 of the appendix and this is a permanent injunction in the part — the only aspect of it that is not permanent, is paragraph D where it says, “It is ordered that defendants, Bicron and the individual respondents shall not be restrained by this injunction from using any trade secret of plaintiff after it has been released to the public by plaintiff, such as by the issuance of a patent or as otherwise become generally available to the public, or other members of the industry, or is obtained by defendants from sources having a legal right to convey such information.”

And I also call the Court’s attention to the title of this injunction that says, “Order for permanent injunction.”

Now, the — there was no award of damages by the District Court and the action of the Court of Appeals was to reverse the District Court and remand for a dismissal of the complaint.

The action of the Court of Appeals appears at page 26 of the petitioner’s — the appendix to the petition for their writ of certiorari.

Now, still going to the — if I may, Your Honors, refer to the decision of the Court of Appeals and it’s at page A7 of the certiorari petition where the Sixth Circuit characterized the issue that it felt was in front of them.

And the Sixth Circuit said, “Therefore, the issue presented to this court in the instant case maybe summarized as follows.

Whether a state trade secret law which protects an invention which would be an appropriate subject for a patent under the patent laws of the United States and which has been used commercially for more than one year conflicts with the policies and purposes of Article 1, Section 8, Clause 8 of the Constitution and the patent laws adopted pursuant thereto.”

Now, this is the last thing I’ll read.

If I may go back to page 6 of the appendix also in the same Sixth Circuit opinion, the — this is setting up their question, the Sixth Circuit says, “We must determine whether the trade secret laws of the State of Ohio are required to be struck down in this case as being in conflict with the United States patent laws, and if so, to what extent?”

Kewanee urges that the issue presented to this Court requires a determination as to whether the enforcement of any and all state trade secret laws conflict with the policy of the United States patent laws.

Thus framed, we consider the issue too broad for our consideration in this case.

Now, as we have set out in our brief, we say the issue is a permanent injunction granted by a District Court as to subject matter, the trade secret subject matter, in conflict with the patent laws of the United States.

If the specific —

Warren E. Burger:

Well, is that because it lasts longer than 17 years in part?

William C. McCoy, Jr.:

Yes, that is —

Warren E. Burger:

Of course Coca Cola has managed to keep its secret for more than 17 years, haven’t they?

William C. McCoy, Jr.:

Well, Your Honor, yes I was coming to that, but the thing is we don’t think that Coca Cola is — that’s a trade secret that’s outside of the scope of what we’re dealing with now.

William C. McCoy, Jr.:

The kind of trade secrets we’re dealing with are first trade secrets that are patentable subject matter as provided in the patent code 35 U.S.C 101 and Coca Cola in our view is a food recipe and it would not be susceptible of getting a patent.

Byron R. White:

(Voice Overlap) Are you suggesting that if a man applies for a patent and it’s rejected as not patentable, say no invention, no — that that would be subject to a — that under your argument it would be a valid — could validly subject to a trade secret?

William C. McCoy, Jr.:

I would —

Byron R. White:

(Voice Overlap)

William C. McCoy, Jr.:

I would — may I suggest — I would say that under the decisions of this Court in Sears, Compco and Lear that if a man applies for a patent and its held not patentable and it’s been in public use for more than a year, he could not get an injunction to prohibit somebody else even if there is a — what is argued is that —

Byron R. White:

(Voice Overlap) that be a — do you think the — this is — you spin out from as an intent of Congress to prohibit that, would you cut by the virtue of patent laws?

It’s a preemption or a conflict sort of argument.

William C. McCoy, Jr.:

I would say it’s a conflict, yes.

Byron R. White:

And they — and so you say Congress could’ve intended the states trade secret law to stand along with the patent law?

William C. McCoy, Jr.:

I want to be careful, Your Honor.

I say that the aspect of the state trade secret law that — that is in front of this Court is the injunction only, and I say as to if a man files for a patent application and it’s rejected and he can’t get a patent application, he should not be able to get injunctive relief.

Byron R. White:

Well, why do you suppose Congress provides for secrecy of patent application?

William C. McCoy, Jr.:

Well, the circumstances in which patent applications are filed, the number of patent applications, there’s no license activity whatsoever.

And I think that the idea there’s an election theory and this is what —

Byron R. White:

Well there is a specific provision in the code that says “patent applications will be kept secret if and unless that the applicant permits the publication?”

William C. McCoy, Jr.:

Correct, yes and actually the word they used is not secret, it’s confidential.

Byron R. White:

Yes.

William C. McCoy, Jr.:

That’s correct.

Byron R. White:

And is that — do you agree that — that the Patent Office interprets the statute to require or permit the confidentiality if the application for patent is denied?

William C. McCoy, Jr.:

Well, I think your — with all due respect Your Honor, your — your — I — the Patent Office as I understand it would never disclose a patent application.

Warren E. Burger:

Oh!

That’s to avoid publication, isn’t it?

William C. McCoy, Jr.:

Why sure.

Warren E. Burger:

No.

William C. McCoy, Jr.:

And it’s that —

Warren E. Burger:

Then what’s the difference between patent, what Justice White’s asking you?

Byron R. White:

The question is, what is this — that it is Congress — if Congress — it seems to me that Congress in the patent laws has recognized that there is a role for secrecy or confidentiality with respect to certain processes or design, or patentable material or un-patentable material?

You at least have to get over that in arguing that the patent laws were intended to preempt state laws?

William C. McCoy, Jr.:

Well, Your Honor, I think you’re attaching much — too much important to that — importance to that provision.

The other people have cited.

Byron R. White:

I gather you — you say, you have to get around that the —

William C. McCoy, Jr.:

Alright.

Byron R. White:

You just can’t say —

William C. McCoy, Jr.:

Alright, may I please —

Byron R. White:

— it’s important.

William C. McCoy, Jr.:

They’ve cited a number of other statutes.

For example, one corporation deals with the SEC, it discloses its inner workings and financial information, and the Government is forbidden against disclosure of that information.

And there, they’ve cited a number of statutes here where the idea is, in our view, that when you deal the Government’s — if it’s important to the person making a submission the Government says, “We will keep that confidential, we’ll not disclose it.”

Now the Government isn’t in the patent statutes or the SCC statues or anything else, they’re not saying, “We thereby put an imprimatur on this sort of relief that’s provided — that was provided in District Court in this case.”

Byron R. White:

Well, I know, but let me go back to the question that I asked you that you didn’t answer.

Do you — is it the practice of the Patent Office when an application is denied — patent application is denied, do you to still treat the application confidentially?

William C. McCoy, Jr.:

Yes.

Byron R. White:

And they will not reveal it to anyone without the consent of the applicant, I take it?

William C. McCoy, Jr.:

That’s the practice, yes.

Byron R. White:

And would you suggest that that’s fully consistent with the act of Congress?

William C. McCoy, Jr.:

Certainly yes, I see no problem with it.

Warren E. Burger:

And what’s the purpose of that, to protect the secrecy of confidentiality?

William C. McCoy, Jr.:

I think the real purpose is to let a man with an invention deal with the Patent Office in confidence in knowing that he has an invention and he thinks it’s a —

Warren E. Burger:

But when these dealings are over, which they are substantially at the denial of the application.

William C. McCoy, Jr.:

Yes.

Warren E. Burger:

Then what is the rationale for continuing the confidentiality of that information?

William C. McCoy, Jr.:

Well, I think it’s the same rationale.

The man has —

Warren E. Burger:

It’s a secret.

Let’s keep it a secret, for what purpose?

William C. McCoy, Jr.:

Well, they — it isn’t saying it will keep the dis — it — what they say is, “We’ll not disclose what you’ve disclosed to us.”

So the man feels free to disclose an invention.

Warren E. Burger:

What’s the purpose of it?

William C. McCoy, Jr.:

I think the purpose is to make people feel free to deal with the U.S. Patent Office.

Byron R. White:

Oh!

Byron R. White:

I guess, supposing you would say there would be a federal cause of action against the Commissioner of Patents if he proceeded to disclose a patent application whether pending or denied?

William C. McCoy, Jr.:

You mean by an individual against the —

Byron R. White:

Yes, or by the applicant.

William C. McCoy, Jr.:

I suppose they would.

I’m not aware of anybody has done that.

Byron R. White:

Well, I know but if there would, you never would say that the same owner in the interest of protecting confidentiality couldn’t sue somebody who had a contract with to maintain that secret?

William C. McCoy, Jr.:

No, I’m not saying that Your Honor.

Byron R. White:

Your saying he couldn’t get an injunction against –?

William C. McCoy, Jr.:

Correct.

Byron R. White:

But he could get an injunction against the Commission?

William C. McCoy, Jr.:

No he couldn’t.

I don’t think he should be able to do that either.

Byron R. White:

Well —

Warren E. Burger:

Suppose three members of the Patent Office, technical staff who had dealt with the patent application, resigned from the Patent Office and set up a company after the patent application was denied, and then begun producing the very substance that was involved in the confidential file.

Would you think the court of equity could enjoin them?

Lay aside any statutory violation which there might be, but could a court of equity stop them from using this secret information?

William C. McCoy, Jr.:

I think the relief of — in the court of equity should be, in that situation against disclosure of the trade secret because there they’re assuming it’s not disclosed in the product that they’re selling.

As far as the use is concerned that is — it can always be measured by a reasonable royalties.

The idea of a —

Warren E. Burger:

Well, there’s no patent, how do you get any royalty?

William C. McCoy, Jr.:

Well, they have the same concept with respect to trade secrets Your Honor.

Warren E. Burger:

But, then they could be — they could not be enjoined but they could collect royalty?

William C. McCoy, Jr.:

No, Your Honor.

I’m saying that if three examiners in the Patent Office taking your example, leave the Patent Office and — and there’s been a disclosure in confidence to them and they then setup and start abusing the disclosure —

Warren E. Burger:

The fiduciary information?

William C. McCoy, Jr.:

Yes, I say that they should be enjoined against any further disclosure of their — of the secrets, assuming it’s not disclosed when they use it.

In other words, if the irreparable harm has not been done, then they should be enjoined from doing it.

As for use, I would say that you can always measure the damages by the use, by in effect the same rules that you apply in a patent royalty accounting.

Warren E. Burger:

Well, then are you suggesting that the remedy here is to get some kind of a — an equity decree fixing a royalty for the use of this material, this invention?

William C. McCoy, Jr.:

Well, I’m not sure what case you’re talking about Your Honor that —

Warren E. Burger:

Now, on your case.

William C. McCoy, Jr.:

— the case right in front of you?

Warren E. Burger:

Your case, you said —

William C. McCoy, Jr.:

Well, there’s been no use of the invention in this case. Our people haven’t used these secrets at all and I say that there — that the — and there is no real threat of disclosure.

So I say there should be no injunction whatsoever.

Warren E. Burger:

But if — then this was followed by use and production, then you have indicated, I take it that a court of equity might fashion some kind of a decree for royalties, or damages?

William C. McCoy, Jr.:

Well, I’d say if our people use it in production and abuse a confidence, then there should be damage relief, but there should not be any injunctive relief because when they give injunctive relief, you’re enjoining somebody from doing something where the Kewanee people rejected the idea of federal patent protection.

They could not get a patent — they couldn’t get a patent injunction.

They’re getting better relief under the state trade secret laws than they could get under the patent laws and that’s where I say there’s a conflict.

Warren E. Burger:

Well, isn’t that why some industries now deliberately refrain from seeking patents where they might get them?

If the structure of the situation is such that they can preempt the market and the field by simply producing and hoping that no one will be able to exercise the reverse engineering and figure out how to make it, make the particular product?

William C. McCoy, Jr.:

Well, Your Honor, by the nature of the amici brief that seems to be the case, yes.

There seems to be a flight from the patent system over to a trade secret system.

Byron R. White:

But it does give only, the trade secret system gives relief only against those who have subject to the trade secret restriction?

Certainly isn’t — doesn’t give a right against the public or anybody who independently arrives at this —

William C. McCoy, Jr.:

No.

But that is sort of — that’s in a way an illusionary argument.

The relief that you want in this case, there are three U.S. companies — three U.S. competitors of Kewanee, Bicron is the fourth.

Now there — assuming they had a patent, there are only four people they’ve even considered silly.

What I’m saying is that I don’t say that it’s equivalent to a patent monopoly, but for practical purposes, it’s very close to it.

Byron R. White:

If any of that competitors came by this information independently through their own staff, it certainly wouldn’t be subject to any litigation under the trade secret law?

William C. McCoy, Jr.:

No question about it.

If I may go back to Mr. Justice White’s — your other question was the man who gets the abandoned patent is rejected, there is a Sixth Circuit case of American Gauge versus Maasdam, 245 F2d 62, where an individual made a contract with a corporation for the manufacture of the wire stretcher for fences, and a patent application was filed and the patent application was rejected.

And the individual received royalties for a period of time and then he did not advise the corporation that the patent application had been rejected, and then the corporation terminated his contract, and the corporation continued to sell stretchers.

So the individual sued for unjust enrichment and the Sixth Circuit said that the individual had the right along with the rest of the world to produce and sell wire stretchers.

And they cited Singer v. June, Kellogg, West Point that series of cases which are cited in Sears, Compco.

Warren E. Burger:

How does that help you here?

You lost me somewhere.

William C. McCoy, Jr.:

Well I think it helps me on the idea that if a person submits an idea to the Patent Office, and the Patent Office says that it’s not patentable subject matter, then that — he should not be enjoined from doing that under any circumstances.

Warren E. Burger:

But it wasn’t a secret — in that case, it wasn’t a secret though was it?

William C. McCoy, Jr.:

Well, it was disclosed in secrecy to the corporation, and it was in a factory, I think it certainly was secret, yes.

Warren E. Burger:

But publicly used?

William C. McCoy, Jr.:

Well it would be publicly used in accordance with the patent laws, yes Your Honor.

Warren E. Burger:

Yes, but there was no patent here.

William C. McCoy, Jr.:

That’s correct.

The Patent Office said we — said — the Patent Office considered the development, and said it doesn’t rise, it’s not a patentable subject matter.

So if the Sixth Circuit had granted an injunction the effect would be to give injunctive relief under state trade secret laws where there would be no such relief under the patent statutes.

Warren E. Burger:

In that case, was there any contract between them not to disclose?

William C. McCoy, Jr.:

I don’t know Your Honor.

Warren E. Burger:

That would be quite important, wouldn’t it?

William C. McCoy, Jr.:

There probably be an implied contract to that effect.

But I don’t know whether — I don’t know the nature of the contract.

I’d like to pick up where General Griswold was talking about the subject matter of — that’s before the Court, and by that I mean the sodium iodide thallium activated crystals.

That they are used in — that this is a subject matter which is very vital to this country at this point in time.

It’s detecting malignant tumors in medicine.

It’s used in oil exploration.

It’s used in the location of uranium oil.

This is a substance, and I of course enjoining a parallel with the subject matter in Goldstein which depending upon you age group, is or is not substance.

Now, the specific trade secrets involved in this case are set out in volume 1 of the appendix in the Sixth Circuit Court of Appeals, pages 108 to 110, in case you want to look at them.

The point I want to make there is that those trade secrets are not described in the way a patent is described, they’re merely identified.

You just look at it it’s just a 1 or 2 or 3 line, that’s all.

Now the cases —

Warren E. Burger:

I think we’ll pick up there right after lunch.

William C. McCoy, Jr.:

Okay.

[Luncheon Recess]

Warren E. Burger:

Mr. McCoy, we’ve taken perhaps a little inordinate amount of your time and you have a — you have a complex case before us, so we’ll enlarge you five minutes and add something to the Solicitor General, the former Solicitor General as well.

Hard to break habits here.

William C. McCoy, Jr.:

Thank you.

Warren E. Burger:

You may proceed.

So that will give 15 minutes yet.

William C. McCoy, Jr.:

Thank you.

May it please the Court?

I’d like to pick up on this matter of the Section 122 of the patent statute.

I have two very brief points.

The first one is, that in our view the purpose of that statute is no different than any of the other statutes that have been cited in the brief of the petitioner, and secondly that if somebody violates anyone of those statutes a relief is provided at — in Section 19 U.S.C., 1905, it’s page 1 (a) of the petitioner’s appendix.

Byron R. White:

Can you tell me what an abandoned patent application is?

William C. McCoy, Jr.:

Pardon?

Byron R. White:

What is an abandoned patent application?

William C. McCoy, Jr.:

Well, you file —

Byron R. White:

Does that included one that’s been denied and you don’t press it?

William C. McCoy, Jr.:

Yes, it would — but it would include other kinds too.

It would include an application where it’s been denied and you determine that — you don’t think you’re going to get good enough protection so you don’t press it, I mean it’s a —

Byron R. White:

I notice the regulations speak of pending applications and abandoned ones, but it doesn’t speak specifically of denied ones.

I take it the abandoned category includes the denied ones?

William C. McCoy, Jr.:

Yes.

Byron R. White:

Thank you.

William C. McCoy, Jr.:

The cases we rely upon and that the Sixth Circuit relied upon where the Sears, Compco & Lear in a nutshell, we read those cases to hold three things.

First, that there is a strong federal policy favoring the full and free use of ideas in the public domain.

Secondly, that the public domain is anything which is not protected by a patent copyright or trademark.

That concept is developed in our brief, but I think that’s a fair definition of the public domain, and if I may, I believe it’s discussed in somewhat different context in the majority opinion in Goldstein.

I’m not — I don’t have the official report, but where this Court said, “In regard to mechanical configurations, Congress has balanced the need to encourage innovation and originality of invention against the need to ensure competition in the sale of identical or substantially identical products.

The standards established for granting federal patent protection to machines, thus indicated not only which articles in this particular category, Congress wish to protect, but which configurations it wish to remain free.

The application of state law in these cases to prevent the copying of articles which did not meet the requirements for a federal protection disturbed the careful balance which Congress had drawn, and thereby necessarily gave way under the supremacy cause of the Constitution.”

Now, there — I believe a further development of that concept is the thought that this word public, when you speak of public domain, maybe it’s a little confusing.

I think that the thrust of the Sears, Compco cases are if you have intellectual property and you wish to protect it, get yourself a patent, or a copyright or a trademark.

Harry A. Blackmun:

Mr. McCoy —

William J. Brennan, Jr.:

(Voice Overlap) by a contract —

William C. McCoy, Jr.:

Pardon me?

William J. Brennan, Jr.:

And that you can’t protect yourself by a contract.

William C. McCoy, Jr.:

You can protect yourself by a contract Your Honor, with — like these service agreements.

William J. Brennan, Jr.:

(Voice Overlap) But I gather, your argument is that the contract made with these respondents not to disclose what they learned while employed with the petitioner, that’s irrelevant to the case entirely, the argument that you’re pointing?

William C. McCoy, Jr.:

Well, I can’t say its irrelevant, but I —

Byron R. White:

Well, you say that it’s specifically enforceable.

William C. McCoy, Jr.:

I say they’re not enforceable.

William J. Brennan, Jr.:

Well that’s —

William C. McCoy, Jr.:

As far as an injunction is concerned.

I say they can’t enjoin them from using.

William O. Douglas:

How about damages?

William C. McCoy, Jr.:

I say you can get damages and the cases that discuss, there is a dissent in a Second Circuit case.

It’s Franke v. Wiltschek, 209 F2d 493, a dissent by a Judge Frank where he made that very point.

He said, “You can’t get an injunction, you can get damages”.

Warren E. Burger:

Is that in your brief by the way?

William C. McCoy, Jr.:

I’m afraid it isn’t Your Honor, I would know.

Warren E. Burger:

Would you cite again?

William C. McCoy, Jr.:

Alright, it’s Franke v. Wiltschek, 209 F2d 493.

William J. Brennan, Jr.:

What year is that?

William C. McCoy, Jr.:

1953, Second Circuit.

William J. Brennan, Jr.:

That was Jerome Frank?

William C. McCoy, Jr.:

Yes.

Harry A. Blackmun:

Mr. McCoy —

Byron R. White:

For a second, what’s the page?

William C. McCoy, Jr.:

It’s 209 F2d 493.

Harry A. Blackmun:

Mr. McCoy, you’ve used the public domain twice now.

Can you draw any distinction between public domain and public use?

William C. McCoy, Jr.:

Yes.

Harry A. Blackmun:

Well, I take it that Coca Cola is in public use, I suppose that Coke people would question whether it’s in the public domain and I take it that the Solicitor General would take the same position here?

William C. McCoy, Jr.:

Well, my — with respect to Coca Cola, I say this Your Honor, that Coca Cola is not patentable subject matter.

Harry A. Blackmun:

Well, suppose it were, what your answer would be —

William C. McCoy, Jr.:

My answer would be there would be a public use.

Harry A. Blackmun:

I take it then you would say it is not on the public domain?

William C. McCoy, Jr.:

I’d say it is in the public domain, too.

Harry A. Blackmun:

It is?

William C. McCoy, Jr.:

By the definition of this Court in Sears, Compco & Lear.

Byron R. White:

Well then, how can you say you could get damages?

The damages that you — you get damages because there’s a wrongful use, a use that’s forbidden, that the law forbids, and you get —

William C. McCoy, Jr.:

The contract forbids —

Byron R. White:

— damages because the law forbids you to break your contract.

That’s right.

William C. McCoy, Jr.:

Yes.

Byron R. White:

And so it’s a wrongful use, but you say equity could not enjoin the use?

William C. McCoy, Jr.:

It should not, correct.

Byron R. White:

Although the same court could give damages on — based on the fact that it’s a wrongful use?

William C. McCoy, Jr.:

Correct, and if I may go back Your Honor, the Sixth Circuit has had really three cases before it on trade secrets.

Your confusion arises by reason of the way the petitioner is characterizing this case.

They’re saying, “We’re trying to outlaw all trade secret agreements, all know how.

We’re trying to upset the balance of payments” and we say no.

All we’re concerned with is the narrow question of an injunction of former employees in this case where the Harshaw Chemical Company dealing with subject matter of vital interest to this country.

These are the sodium iodide thallium activated crystals.

They chose to avoid the patent system, where if they had patented it, they could’ve gotten their injunction.

Instead of going through the patent system, they said, “We’re smarter.

We’ll stay out of it” and suddenly a situation arose and then they come in, and they wanted to get and they got a permanent injunction which is better than any relief they could’ve gotten in the patent system.

And we say that is a — there is a — they’re defeating the purposes of the patent system and that isn’t correct.

Warren E. Burger:

Well, you have another element in this case and that’s violation of a fiduciary relationship alleged, and apparently to some extent found that —

William C. McCoy, Jr.:

Well, Your Honor, with all due [Attempt to Laughter] respect further language of the Court of Appeals came from about that.

I don’t know if their — the findings of the facts that referred to in our brief and there was no violation of any fiduciary relationship.

Warren E. Burger:

What did the District Court find on that?

William C. McCoy, Jr.:

The District Court found there had been no use or disclosure of the trade secrets.

It’s the findings that are referred to in about the third page of our brief.

And in the transcript, we’ve cited you to the record on that.

There wasn’t any.

William C. McCoy, Jr.:

Our people didn’t do anything wrong.

That’s the reason they’re so concerned.

They tried to go out and start their own business and they say, “It is a free country, isn’t it?”

And they didn’t do anything wrong and they are put under an injunction and the injunction is a severe handicap on their — that they’re trying to raise money.

Thurgood Marshall:

They didn’t even use any of the secrets?

William C. McCoy, Jr.:

They didn’t break a contract.

William J. Brennan, Jr.:

When they left and did not make use of it?

William C. McCoy, Jr.:

No!

They didn’t break any contract.

They hadn’t done anything wrong.

William J. Brennan, Jr.:

Did they have a contract not to disclose when they left?

William C. McCoy, Jr.:

Yes, they did.

They made no disclosure.

Thurgood Marshall:

How did they come up with a 17 inch thing?

William C. McCoy, Jr.:

Pardon?

Thurgood Marshall:

How did they come up with the 17 inch when it — only one other person had?

William C. McCoy, Jr.:

They came up with it from the — first the — there’s nothing —

Thurgood Marshall:

Didn’t they use the secrets they’ve got?

William C. McCoy, Jr.:

No they didn’t.

Thurgood Marshall:

(Inaudible)

William C. McCoy, Jr.:

They are expired patents.

All their publications of government research laboratories and incidentally the government paid Harshaw a million dollars to devel — I don’t know exactly how much, but a lot of money to develop these secrets.

Thurgood Marshall:

They used semantics and all, what did — did they use anything that they’ve learned at the other company, anything?

You don’t think —

William C. McCoy, Jr.:

I’d have to answer, certainly they used what they learned at the other company, but it doesn’t mean that they were trade secrets.

There — they didn’t use anything at the other company —

Thurgood Marshall:

But did they use any trade methods that the other company had?

William C. McCoy, Jr.:

Not that were secrets Your Honor, no.

Not that —

Thurgood Marshall:

I didn’t’ say secret, did they use any methods that the other one had?

Thurgood Marshall:

Did they use any methods that they learned?

William C. McCoy, Jr.:

Well, they couldn’t have helped, but apply the knowledge they learned at Harshaw.

Thurgood Marshall:

Well, thank you for bringing that much.

William C. McCoy, Jr.:

Right, certainly but all I say Your Honor —

Thurgood Marshall:

And in doing that, didn’t they violate the terms of the contract?

William C. McCoy, Jr.:

No!

They didn’t.

Thurgood Marshall:

Why not?

William C. McCoy, Jr.:

Because the contract says they can’t disclose confidential or secret information.

It doesn’t say they can’t use what they learned there that it — other than confidential and secret information.

Thurgood Marshall:

Who else made a 17 inch one?

William C. McCoy, Jr.:

Well, there are actually —

Thurgood Marshall:

It isn’t so public, I mean, how did the other companies didn’t do it?

William C. McCoy, Jr.:

Your Honor, at page 1410 of the transcript in the District Court, the Harshaw men finally admitted in response to questions of the judge that, and this is in our — it’s cited in our brief too, that there is no magic in the trade secrets in 17 inches.

They said there are secrets applied on different sizes.

Thurgood Marshall:

The District Court found to be contrary, didn’t he?

Didn’t the District Court judge found that 20 of these were trade secrets?

William C. McCoy, Jr.:

Yes.

Thurgood Marshall:

Didn’t he?

William C. McCoy, Jr.:

I guess he did.

Thurgood Marshall:

He found that.

William C. McCoy, Jr.:

Yes he did.

Thurgood Marshall:

And you still say they weren’t trade secrets.

William C. McCoy, Jr.:

Correct, we say none of them were trade secrets.

Thurgood Marshall:

Well, you just say that District Court was wrong in its finding?

William C. McCoy, Jr.:

Yes.

William H. Rehnquist:

But the Court of Appeals is against you on that as well as the District Court, isn’t it?

William C. McCoy, Jr.:

In what respect, Your Honor?

William H. Rehnquist:

Well, I thought Court of Appeals upheld all the findings of the District Court except for the patent argument.

William C. McCoy, Jr.:

That’s correct.

Warren E. Burger:

Just the remedy, is all they disagreed on?

William C. McCoy, Jr.:

Correct.

Lewis F. Powell, Jr.:

Mr. McCoy, as I understand your position now, it is that there had been no violation of the contract?

William C. McCoy, Jr.:

Correct.

Lewis F. Powell, Jr.:

And I thought you said earlier that there could be a suit for damages but I suppose you mean if there had been a violation?

William C. McCoy, Jr.:

No, Your Honor, I was speaking generically as to the relief.

The point I’m trying to make when I speak of suit for damages is that we’re not seeking to outlaw all these technical service agreements between various companies and so forth.

In this case, no, there shouldn’t be a suit for damages because there was no violations found.

The instructions of the Court of Appeals are to reverse and dismiss the complaint.

(Voice Overlap)

William J. Brennan, Jr.:

At page 67 of the findings of fact in article 48 in the appendix.

Is this a typical agreement?

The Hamner, the one at Hamner executed?

The employee agrees to carefully guard and keep all secret and confidential information which shall or may concern the company’s inventions, discoveries, improvements, techniques, methods of manufacture, finance and so forth, and shall at no time in — the during or after his employ disclose directly or indirectly any such information, is that it?

William C. McCoy, Jr.:

Yes, sir that is.

William J. Brennan, Jr.:

And you say there was no contract?

Each of them signed — each of the respondents signed that form of contract?

William C. McCoy, Jr.:

Well, it’s — there is — yes.

Byron R. White:

Did Hamner sign that?

William C. McCoy, Jr.:

Well, he signed it with a different company, but —

William J. Brennan, Jr.:

Well this says, they executed it on or about March 11, of ’64, an agreement was provided, wasn’t’ that an agreement with the —

William C. McCoy, Jr.:

Well, it was the — it was not with Kewanee, it was with a wholly owned subsidiary with Kewanee and the reason that Hamner left Kewanee is because they had a contract with them to keep him employed until 1974, and they dissolved the company to avoid the contract.

So he left them and started another business.

Warren E. Burger:

That’s another lawsuit though, is it?

William C. McCoy, Jr.:

Yes sir, it is Your Honor.

Lewis F. Powell, Jr.:

Mr. McCoy, may I ask you one more question.

You’ve emphasized the fact that this injunction could extend longer than the 17-year period covered by a patent.

Suppose a contract had provided for a limitation on the use of secrets, only say three years.

Would you think an injunction would be appropriate by that?

William C. McCoy, Jr.:

My position on that Your Honor, is no.

William C. McCoy, Jr.:

I don’t think it’s appropriate to give any injunctive relief under a trade secret contract because you’re enjoining somebody from doing something that at that point is supposedly in the public domain.

I’ll go back to that American Gauge case of the Sixth Circuit in these other cases to the same event.

The — I was started with Sears-Compco the other case we do rely upon is Goldstein.

We’ve discussed that in our brief.

And I don’t think there’s a — and I’ve read what I feel is a relevant language there.

Warren E. Burger:

Well, the Sears and Compco Mr. McCoy, the object was something you could see as to its configuration, just as you could this thermal drinking cup.

You can’t — a stranger can’t look at this mass of crystals or whatever they are and know how to make it or copy it, can he?

William C. McCoy, Jr.:

No.

Warren E. Burger:

So some distinction between Sears and Compco cases and this situation, in that respect.

William C. McCoy, Jr.:

Well, legally Your Honor, no, I don’t think so.

I think that the — what you said in Sears-Compco was that if you have intellectual property and you want to protect it in — get yourself a patent, or a trademark, or a copyright.

Warren E. Burger:

When you can’t keep a secret or something that you actually issue to the whole world as you do with a book if you publish it without a copyright, or the lamp stand in these other cases, can you?

That’s distinguishable from a trade secret situation, is it not, nothing very secret about the lamp involved in these earlier cases.

William C. McCoy, Jr.:

Well, no Your Honor, but the concept of the lamp case was that there was a design patent involved there, I believe and the Illinois, I mean the courts in Illinois said, “That’s an invalid patent.”

So therefore, there was no protection under the patent laws.

But then the court turned around and said, “But we’ll give protection under Illinois unfair competition laws.”

And I would go back to the language I quoted from your Goldstein decision, and that — and I am saying that the Supreme Courts — and the Congress has said, “This is a patentable subject matter and anything that’s outside that, in the number (ph) or whatever you want to call it, that people can use.”

Your Honor, I see my time is up.

I do — I — may I read very briefly this patent fee borne language in that case where a decision was a — it’s relied upon substantially by the petitioner.

I want to talk — say that about two thirds down on the second column at page 225, the Court clearly cuts itself out from the injunction concept that we’re discussing now.

The — this is the majority opinion, the decision there, it says, “Provisions against competition not utilizing the secret after expiration of agreement are a different matter which must be judged on their own facts.”

And I think that’s the case we’re at.

Warren E. Burger:

Thank you Mr. McCoy.

Do you have anything further?

Erwin N. Griswold:

Yes Mr. Chief Justice.

William J. Brennan, Jr.:

Will you state that for me, what — whether there was a contract or not?

Erwin N. Griswold:

Well, there were six contracts, Mr. Justice.

There was a contract with each of the employees.

The contract in the case of Hamner was with a predecessor company which was taken over by Harshaw.

Warren E. Burger:

The contract had a succession clause in it, did it not?

Erwin N. Griswold:

It had a what?

Warren E. Burger:

Succession clause?

Erwin N. Griswold:

It applied with respect to successors, yes and Hamner was in the employee of Harshaw for awhile before he left.

William J. Brennan, Jr.:

Now, what about the Benefree (ph) trade secret agreement, was that only with Benefree (ph) or was there other trade secret agreements like that?

Benefree (ph), I know is —

Erwin N. Griswold:

There were contracts with all six.

Some of them were employment contracts.

Some of them were more sweeping trade secret contracts.

There was not a trade secret contract with everyone, but there was an employment contract with everyone, or a trade secret contract.

This is spelled out in the findings that there was a contract and either contract is broad enough to cover what’s involved here.

Moreover, they were all employees so that they are all covered by law of confidential employees, so that they were all covered by the fiduciary relationship.

Byron R. White:

And I take it, the District Court found that there was an imminent danger of disclosure of trade secret that they were forbidden — that the defendants were forbidden to foreclose?

Erwin N. Griswold:

Yes, Mr. Justice.

This is on page 89 of the appendix and conclusion 6 of the court.

The plaintiff has submitted convincing proof not only that the Richard formula will not grow such a crystal, but also that in order to grow a sodium iodide thallium activated scintillation crystal, the defendants must of necessity supplement the Richard formula with plaintiff’s trade secrets.

The court concludes that there is an imminent danger of disclosure of plaintiff’s trade secrets to Bicron and the use of these trade secrets by Bicron.

Byron R. White:

And they found that the — that that disclosure in use would be violative of contract to the —

Erwin N. Griswold:

Would violate the contract and the fiduciary relationship.

Now, I would like to make a further answer to the question which Mr. Justice Blackmun asked me at the beginning of the argument.

With respect to the opinion of Justice Marshal which Justices Blackmun and Brennan joined in the Goldstein case.

That did not turn at all on the constitutional question.

It turned down the fact that the statute involved there, that is the Federal Copyright Act uses the exact wording of the Constitution, specifically the words writings of an author.

And from that, those three Justices reached the conclusion that Congress had occupied the field and that there was no room for a state statute in the area.

There is nothing comparable to that with respect to the patent law.

And then with respect to Mr. Justice White’s question, I should have been quicker in bringing to your attention that the statute, the Patent Office statute is printed in full in our brief, Title 35, Section 122 is in the appendix at page 6 (a).

Application for patent shall be kept in confidence and so on and then on page 3 (a) is the Patent Office regulation which that statute puts into statutory language.

Pending patent applications are preserved in secrecy.

The regulation used the word, though I don’t think that there is a —

Byron R. White:

How about the denied patent applications, are they published?

Erwin N. Griswold:

What applications?

Byron R. White:

What about applications that don’t succeed, that they are —

Erwin N. Griswold:

They are not published, they are kept in secret.

Byron R. White:

Where do you find that in the statute where the (Voice Overlap) —

Erwin N. Griswold:

That is discussed in footnote 35, in footnote 11 on —

Byron R. White:

(Voice Overlap) it talks about abandoned ones.

Erwin N. Griswold:

Well, that’s a — there’s a good deal of this patent language that I’m not — I think it is my understanding that patents which are abandoned that you are free to terminate your patent application at anytime you want to, and that the material remain secret.

Byron R. White:

Yes.

Erwin N. Griswold:

The only thing that the Patent Office publishes is patents which are granted.

Byron R. White:

Or where it’s waived?

Erwin N. Griswold:

Or where?

Byron R. White:

Or where it’s waived under another —

Erwin N. Griswold:

Or if it’s waived, yes.

If you want to make it free, you can.

Thank you.

Warren E. Burger:

Thank you gentlemen.

The case is submitted.