Facts: Harshaw, an unincorporated division of plaintiff, manufactures synthetic crystals for detection of ionizing radiation.  In 17 years it developed a 17-inch crystal using a secret process and spending $1 million in research.  Employees of defendant formerly worked for Harshaw and had executed an agreement requiring them not to divulge confidential information or trade secrets obtained as employees.  Defendant company was formed in 1969 and in one year it had developed a 17-inch crystal.

The district court held for plaintiff granting injunction against disclosure or use of 20 of the 40 trade secrets until such trade secrets were released to the public, plus damages for misappropriation of trade secrets.  The court of appeals agreed with the district court findings of fact, but held that Ohio's trade secret laws conflicted with federal patent law.

Issue:  Does federal patent law preempt state trade secret law?

Holding:  No.

Reason:  The protection granted trade secrets includes prohibitions against disclosure or unauthorized use by those in whom the secret is confided under restriction against disclosure and against industrial espionage.  Patent protection requires novelty, utility, and nonobviousness, and grants a 17-year right of exclusion.  Protection goes not only to copying the subject matter, but also forbids independent creation.

Are states forbidden to act at all in area of protection of trade secrets?  Goldstein held that States may exercise regulatory power over writings; likewise, this is true of discoveries.  The only limitation on states is that in regulating copyright and patent, they not conflict with Congressional regulation of these areas.

Is Ohio trade secret law void under the Supremacy Clause?  It depends on whether the state stands as an obstacle to accomplishment.  Execution of the full purposes and objectives of Congressional federal policy may not be denied by the states.  This is true even if the state is acting in an area of state power.  Patent law does not expressly endorse or forbid the operation of trade secret law.  Patent law gives a 17-year monopoly, but imposes on inventors a requirement of disclosure.  The importance of trade secret protection is to subsidize research and development.  It protects items not subject to patent protection.  Congress left the trade secret area unattended, so there is no reason a state should not act, e.g., discovery.  There are reasons the holder of a discovery would apply for a patent whether trade secret protection existed or not.  But the question is whether items which are the proper subject for patent also may be accorded trade secret protection.

There are three categories of trade secrets: (1) ones the holder believes constitute a validly patentable invention, (2) ones the trade secret holder knows is not patentable, (3) ones whose valid patentability is considered dubious.

Trade secrets known not to be patentable - For these, little is accomplished by abolishing trade secret protection.  Patent protection is not a viable alternative here.  Trade secret encourages invention in areas where patent does not reach.  Competition is furthered and the public is not deprived of the use of valuable if not patentable inventions.  If trade secret protection is removed, there would still be inventions not subject to patent.  This would require more security precautions, plus paying employees considerably more.  It also would cause problem in the area of licensing others to exploit secret processes if there can be no binding contract between them.  The result would be to hoard rather than to disseminate information.  Nothing in patent law requires states to refrain from action to prevent industrial espionage.

Trade secrets for which there is legitimate doubt about patentability - Doubt plus the expense to obtain and defend patents probably causes some to refrain from applying regardless of trade secret protection.  There are greater rewards in patent but trade secret protection assists inventors in more efficient exploitation of their discoveries.  Abolition of trade secrets might encourage those "on the line" to apply for a patent.  The PTO will throw out those which do not qualify, but society will be deprived of the use of these discoveries through trade secret protected licensing.  There is a difference in the validity of a patent.  More of these invalid patents are likely to issued if trade secret protection is abolished.  There is no conflict in patent and trade secrets as far as the first two categories.

Trade secrets of subject tatter clearly patentable - Here, the federal interest in disclosure is at its peak.  There is no risk of deference from patent applications by those who can reasonably expect to get a patent since trade secret protection is weaker in many respects.  Trade secret law does not prevent discovery by fair means such as independent creation or reverse engineering; patent law forbids use of invention for whatever purpose for 17 years.  Where patents act as a barrier, trade secret protection acts as a sieve.  The chances are remote that one will elect trade secret protection when patent is available.  Extension of trade secret protection to this category does not conflict with policy of disclosure.

Partial preemption will not do, i.e., preemption in the third category while allowing trade secret protection for others.  This would create too many problems for state courts.  Neither partial nor complete preemption justified.

Trade secret plays an important part in developing industry and knowledge.  Congress by its silence all these years has seen wisdom in allowing states to enforce trade secret protection.  Until Congress takes affirmative action, states should be free to grant protection.

Marshall Concurring:

He disagrees that there is only a remote chance inventor will rely on trade secret rather than patent protection.  Congress offered a limited monopoly for disclosure, but did not put pressure on inventors to go patent rather than trade secret.  Years of coexistance between federal patent and state trade secret show it works fine.

Douglas Dissenting:

 The product here could have been patented.  The district court's injunction was too broad; running into perpetuity and conflicts with 'Sears.  It also conflicts with patent law.  To redress theft of a trade secret, there are tort damages for breach of contract.  Damages for breach of confidential relation is not preempted by patent law, but an injunction against that use is because the patent law says that the only monopoly over trade secret that is enforceable is by specific performance.  And that monopoly exacts as a price full disclosure.  Yet, trade secret can be protected only by being kept secret.  An injunction barring disclosure does service protection accorded valid patents and is therefore preempted.