Are Ideas Within the Traditional Definition of Property: A Jurisprudential Analysis
By Professor Andrew Beckerman-Rodau
Suffolk University Law School
120 Tremont Street
Boston, MA 02108
Web Page: www.lawprofessor.org
Copyright 1994 by Andrew Beckerman-Rodau
[Originally published in 47 Arkansas Law Review 603 (1994)]
Ideas in the form of technical know-how, information,
inventions, and unique product designs are products of mental
activity that often have substantial value. Such products of the
mind, generally called intellectual property, are significantly
different from realty or tangible objects. Products of the mind
can be simultaneously possessed and used by multiple parties, and
different parties may even use the same product of the mind
differently. In contrast, the mythical Blackacre cannot be
simultaneously used as an airport and as a cornfield.
Furthermore, a tangible object such as a wooden chair is not
capable of being used both as a seat and as fuel for a fireplace.
In addition, it is often difficult to determine the precise
parameters of ideas and to control their use. Products of the
mind inevitably rely upon pre-existing knowledge and ideas for
their development and creation. The value and utility of a
product of the mind may be further enhanced by the personal
knowledge of an individual learning of an idea or innovation for
the first time. It is obvious that great difficulties can arise
in attempting to separate a specific idea from both pre-existing
information and the specific knowledge which an individual
hearing the idea possesses in her own mind. Moreover, it is
difficult to prevent a person from thinking about an idea or
innovation she has learned about. Once we learn something it
becomes part of our knowledge base, and it cannot be erased from
our brain the way that data can be erased from a computer's
memory. In contrast, it is relatively easy to prevent a person
from using realty or tangible objects that are owned by another
These differences between ideas and realty or tangible
objects raise the question of whether ideas fit within the
traditional concepts that comprise property law. To answer this
question, this article will first attempt to provide a generic
definition of property. The underlying policy reasons for the
protection of intellectual property, including ideas, will be
identified. In light of this definition and the underlying
policies, the protection of ideas under state common law, trade
secret law, and patent law will be examined. The article will
conclude that common law idea protection, trade secret law, and
patent law are all property based regimes predicated on the
recognition of property rights in ideas.
I. A GENERIC DEFINITION OF PROPERTY
Any ordered system of society must confront the issue of who
owns and who can exert control over various tangible and
intangible things that exist in society. To minimize violent
interaction among people, an organized system must exist to
determine who can use land, chattels, and other "things."
Property law provides a structural framework and a set of rules
that specify and control the legal relationships between persons
It must be made clear that property law does not create
things. Things exist even in the absence of all law. Property
law merely defines the relationships between such existing things
and members of society.
When it is stated that X owns
property, this assertion means that the law has created and
granted to X certain rights with regard to an existing thing.
Absent such legal rights, X may still have or possess the thing
in question, but it cannot be said that X has property.
Inherent in fully comprehending the definition of property
is the necessity of defining the things that are the subject of
property rights. This task is easily accomplished when dealing
with realty or tangible personalty. Realty is tangible,
unique, and easily identifiable. Personalty may or may not be
unique, but it is both tangible and identifiable. Intangibles
present more difficult questions. For example, are ideas,
methods of doing things, mathematical formulas, rights and
obligations contained in a contract, or academic tenure things
that can be the subject of property rights?
A simple but often quoted definition of property states that
property is anything to which a label stating the following can
To the world:
Keep off X unless you have my permission, which I may grant or withhold.
Signed: Private citizen.
Endorsed: The state.
This definition focuses on the right to exclude others from
something you own. Alternatively, many commentators define
property as a bundle of three rights that inure to the owner of a
thing. First, the owner has the right to possession of the
thing. Second, the owner has the right to use of the thing.
Finally, the owner has the right to alienate or otherwise dispose
of the thing.
These two definitions are analogous. The right to possess
and use something is simply another way of stating that you have
a right to exclude others from using that thing, since arguably
you do not possess something if your right of use is the same as
everyone else's right of use. Finally, the right to dispose of
something is also implied in the right to exclude others from
using the thing because granting others the right to possess or
use it is really a method of disposing of that thing.
Both of the above definitions of property, as stated, are
only workable in a vacuum. The functioning of an ordered society
requires the surrender of some property rights both to society
and to other property owners. In theory, a property owner
should have the right to use the thing she has property rights in
with unlimited interference from the state. However, if X owns
Blackacre and Y owns Whiteacre, a conflict may arise from
unlimited property rights being vested in both X and Y. X may
decide to operate a low-level radioactive waste disposal site on
Blackacre. Y may decide to operate a high-priced health spa and
resort on Whiteacre. Such a situation is problematic because the
two uses proposed by X and Y are incompatible. The proximity of
Whiteacre to a radioactive waste disposal site will make it
difficult or impossible for Y to operate her spa and resort since
it may be impossible to attract customers. Likewise, the
operation of the radioactive waste disposal site may not be
acceptable if toxic substances threaten the lives of persons on
neighboring Whiteacre. Consequently, either X must surrender a
portion of her property rights to Y, or Y must surrender a
portion of her property rights to X to resolve the conflict
between their competing uses of Blackacre and Whiteacre. This
surrender of property rights has been subsumed into the common
law of private nuisance.
The rights of X and Y to use
Blackacre and Whiteacre, respectively, must be balanced against
each other's interests and the interests of society as a
the use proposed by X or by Y is unreasonable in
light of these interests, the use will either be limited,
prohibited, or it will be allowed to continue upon payment of
Owners of property rights must also surrender a portion of
their property rights to the government when necessary to
preserve the health and safety of the general populace. The
public at large has an interest in maintaining its own health and
safety. Fulfillment of this public interest falls upon the
government as the representative of the public at large. If the
government fails to fulfill this obligation, public confidence in
government erodes, and ultimately, the reign of the governmental
system ends. Therefore, X may not be permitted to use Blackacre
for a radioactive waste disposal site if Blackacre is located
near a densely populated urban center whose inhabitants' health
could be adversely affected by the proximity of the disposal
Other public policy considerations also exist that justify
surrender of a portion of an owner's property rights to the
government. Such policy considerations are often the basis for
environmental, zoning, historical preservation, or land use
restriction statutes or ordinances. For example, protection of
endangered animal species for the good of society is the policy
consideration limiting the exercise of certain property rights in
mineral exploration or logging. Similarly, protection of unique
natural land formations in order to prevent erosion may be the
policy consideration for prohibiting the construction of
dwellings in certain coastal areas. The orderly administration
of law enforcement may justify governmental invasion of an
owner's property rights via issuance of a search warrant.
Finally, rent control ordinances that limit the rental income
earned from conveying real property pursuant to a leasehold have
been premised on the public goal of protecting low-income tenants
from the undue hardship of excessive and unreasonable rent
Owners may also face interference with their rights to
dispose of property. An owner of a firearm cannot freely dispose
of it by sale or gift in every state. In many states, the method
of transfer and the potential transferees are limited by statute.
A condominium declaration or a covenant running with the land may
limit the ability of an owner of realty to decide to whom she can
sell her realty. Often, a condominium association or a
homeowner's association has a right of first refusal over a
proposed sale. Federal bankruptcy law allows an owner to sell
her property, but she cannot dispose of it by gift. In
contrast, certain types of personalty can be disposed of by gift
but not by sale.
Finally, some types of personalty, such as
prescription drugs in the hands of the person it was prescribed
for, or a license to practice medicine, are not transferable to
anyone by the owner.
Property can therefore be viewed as a bundle of legal rights
that are subject to being shared, at least partially, with both
other private property owners and with the government in some
instances. A difficult question is how restricted or limited can
the bundle of rights be before property rights cease to exist?
Many restrictions on the rights of an owner can be justified on
the basis of societal concerns for such things as health and
safety. Nevertheless, some restrictions may be so limiting that
property rights cease to exist. For example, a California
statute limits the use of excised body tissue and mandates its
disposal by certain methods. Based on this statute, the
California Supreme Court concluded that cells removed from a
person during an operation were not property, since the effect of
the statute was to greatly restrict the permissible use of the
cells and to require their eventual destruction.
The above discussion demonstrates that a workable definition
of property can be expressed only in the form of a bi-polar
continuum. If a person has the unrestricted right to possess,
use, and dispose of a thing, then that thing is the subject of
property rights vested in that person. This represents one end
of the continuum. At the other end of the continuum are things
which are subject to limitations that deny anyone the right to
possess, use, or dispose of the thing. Such things are not the
subject of property rights vested in an individual. These two
ends of the continuum are theoretical. Few, if any, things fit
at either end. The majority of things falls between these two
poles of the continuum. The difficult question that arises is
whether something should be treated as subject to property rights
or not since things must be placed at one end of the continuum or
One approach is to objectively evaluate the amount of
control an owner has over something to determine if it should be
considered property. This
approach, however, is inadequate to
explain the treatment of various property interests. As already
discussed, a body part removed during an operation is not
considered property in California because use and disposal of the
removed tissue are greatly restricted. Nevertheless, future
property interests such as a reversionary interest, a possibility
of reverter, a power of termination, a contingent remainder, and
an executory interest are all considered real property
This classification is hard to justify under
an objective control test. A reversionary interest retained by a
lessor upon conveyance of a nine hundred and ninety-nine year
lease is an extremely remote interest. Additionally, other
future interests are still valid even if it is highly unlikely
they will ever become possessory interests. In fact, the common
law Rule Against Perpetuities specifically upholds the validity
of certain contingent property interests if any possibility, no
matter how remote, exists that the property interest can become
possessory within the perpetuities period. Such future
interests grant no rights of possession or use of the property
before the end of the prior possessory estate. In addition,
many of these contingent interests were inalienable at common
Under an objective control test, many of these
contingent future interests would not be property. Nevertheless,
it is clear that such interests have been consistently viewed by
the law as property.
In the context of Fifth Amendment "takings," the government
must compensate private property owners when their property is
taken for public use.
interference with private property interests is a taking only
when there has been either a physical invasion of the property or
when the entire economic value in the property has been
eliminated by the governmental action. If after governmental
action the private property owner retains possession of the
property and is capable of making some use of the property, no
taking has occurred.
Despite significant limitations on the
use of the property, ownership continues. This result reinforces
the conclusion that the bundle of property rights can be
significantly interfered with or limited without the destruction
of property rights. A contrary conclusion would require
governmental compensation whenever the rights of a property owner
are significantly limited or interfered with, since compensation
is required when the governmental action amounts to a taking.
The determination of when something is property can be
understood only by evaluating the general underlying policy
considerations of the law in a specific factual setting. If
these considerations are furthered by treating something as
property, then that is the conclusion the court will reach. If
these considerations are not furthered, then the thing at issue
will not be viewed as property. A decision that something is or
is not property is therefore a legal conclusion, or the ending
point rather than the beginning of the analysis.
II. THE UNDERLYING POLICIES OF INTELLECTUAL PROPERTY LAW
A. Securing for the Public the Benefits of Products of the Mind
One of the most fundamental purposes of intellectual
property law is to enable the public to benefit from the
innovative mental creations that spring from the minds of
For example, a new drug or medical discovery can
alleviate suffering and prolong life. A faster computer
microprocessor may increase the usefulness of computers and
reduce their cost. Development of alternative fuels may reduce
environmental degradation resulting from the current reliance on
fossil fuels. The creation of works of fine art may enrich our
culture. Improved marketing and advertising techniques may
improve product differentiation and enable consumers to more
easily make purchasing decisions.
The law seeks to accomplish this goal by providing rewards
for making intellectual contributions to society. Such rewards
are necessary incentives to encourage the pursuit of intellectual
Inability to profit from creative endeavors would
tend to be a disincentive to invest time or capital in research
and development activities. For example, a company typically can
spend tens of millions of dollars developing a computer
microprocessor. Such microprocessors can then be reverse
engineered for a fraction of the development costs. Absent legal
protection, the reverse engineer could then underprice the
developer because she would not have substantial development
costs to recoup. Consequently, a company would have no incentive
to make the investment in research and development; thus, society
would lose the benefit of such activities.
B. The Regulation and Management of Competition
Intellectual property law is also designed to promote
commercial fairness by regulating and, in some cases, managing
A business should not be allowed a "free ride"
on the back of a competitor who has invested substantial time,
effort, and capital developing a product or a marketplace
reputation. At the same time, the law strives to promote
competition as an important aspect of the free enterprise
Such regulated or managed competition is a policy
that is strongly embedded in our law. Both state and federal
antitrust laws prohibit certain types of marketplace behavior
rather than requiring unfettered free-wheeling competition.
In applying federal antitrust law, the United States Supreme
Court has specifically approved conduct that restrained certain
aspects of competition. In Continental T.V., Inc. v. GTE
GTE, a television manufacturer, franchised
retail sellers of its products. The franchise agreements
contained a location clause which allowed franchisees to sell GTE
televisions only from the franchise location.
 These location
clauses were alleged to be unfair restraints of trade in
violation of federal antitrust law because they limited
intrabrand competition among GTE franchisees. The court noted
that vertical restraints, such as these location clauses, limited
intrabrand competition. Nevertheless, the court found the
anticompetitive practice to be allowable because it increased
Another recent Supreme Court decision, Aspen Skiing Co. v.
Aspen Highlands Skiing Corp., involved competing ski areas
located in Aspen, Colorado. Aspen Skiing Company operated three
areas, and a competitor, Aspen Highlands, operated a single ski
area. The competitors cooperated in the issuance of a joint ski
lift ticket which entitled the user to ski at any of the four
Aspen ski areas. The practice of offering the joint ticket was
challenged by the Colorado Attorney General as providing a forum
for price fixing and as an attempt to monopolize downhill skiing
services in Aspen. The case was settled by consent decree.
Subsequently, Aspen Skiing Company ceased offering the joint
ticket in favor of a ticket limited to the three ski areas it
owned. Aspen Highlands filed suit, alleging that Aspen Skiing
Company's refusal to cooperate in issuing the all-Aspen ticket
was an attempt to monopolize the ski market in Aspen, in
violation of federal antitrust law. The Supreme Court affirmed
an award of seven and one-half million dollars against Aspen
Skiing Company. Additionally, the district court entered an
injunction requiring the competitors to cooperate in offering a
four area ticket for a limited period of time. This result
evidences an intent to manage competition because it literally
punishes Aspen Skiing Company for refusing to cooperate with
Aspen Highlands in offering their services. If the purpose of
the law was to promote true competition, Aspen's conduct would
have been permitted.
In a famous antitrust decision, Judge Learned Hand
reinforced the idea that antitrust law is designed to regulate
competition rather than to prohibit the existence of monopolies
in the market. Judge Hand stated that
"[a] single producer may be the survivor out of a group
of active competitors, merely by virtue of his superior
skill, foresight and industry. In such cases a strong
argument can be made that, although, the result may
expose the public to the evils of monopoly, the
[Sherman antitrust] Act does not mean to condemn the
result of those very forces which it is its prime
object to foster . . . ."
According to Judge Hand, it is the conduct engaged in by the
competitor to acquire the monopoly that is the subject of review.
III. ARE IDEAS WITHIN THE DEFINITION OF PROPERTY?
An examination of intellectual property provides a good
example of the application of an existing body of law to new
things that have arisen from both societal changes and
technological advances. Although the fundamental concepts of
property pre-date the invention of computers and the
sophisticated technical know-how of today, protecting these
additions to society within the existing framework of property
law promotes predictability and uniformity in the law. In fact,
the law of property is easily adaptable if the basic presumptions
and definitions of property law are applied to ideas.
Nevertheless, property law protection should extend to such
things only if the underlying policies of intellectual property
law are furthered.
Answering the question of whether ideas are within the
generic definition of property previously developed requires
application of the bundle of rights theory. Each of the
different methods of protecting ideas must be individually
examined. The dominion and control an owner can exert over the
idea, the right to use the idea, and the right to alienate the
idea must be evaluated. Additionally, the determination of
whether ideas are property must be made in reference to
furthering the underlying policies of intellectual property law.
The protection of ideas via common law idea protection, trade
secret law, and patent law are examined separately below.
A. Common Law Protection of Ideas
Ideas are extremely valuable things since they are the
initial building blocks of many creative innovations.
Nevertheless, an analysis of whether they are property initially
requires an application of the bundle of rights definition of
property. The ability to possess an idea by exerting dominion
and control over it is a fact dependent question. Due to the
nature of an idea, it cannot be possessed if it is known by
For example, if X conceives of an idea, which unknown to her
is generally known by scientists, can she possess the idea? X
may be able to personally use the idea and even sell it to others
who are not aware of it. She may even be able to exert dominion
and control over her personal knowledge of the idea by keeping it
secret and by disclosing it to others only pursuant to a contract
requiring that the idea be kept secret. However, she is
powerless to prevent the scientists who are aware of the idea
from using it. In fact, those scientists are free to disclose
the idea to everyone without X having any ability to prevent such
actions. Such an analysis seems to establish that X has the
right to use the idea. However, her right to possess and
alienate it will depend on the degree to which it is known by
others. This analysis explains the development of the often
judicially stated requirement that ideas must be "novel" before
they are considered property. This requirement can really be
viewed as a shorthand statement of whether the particular idea at
issue is subject to being possessed by someone in accordance with
the bundle of rights definition of property. Hence, an idea
that is not novel is in the public domain and can be used freely
Such an idea
is not property, and it is therefore
not possible to steal it.
This novelty requirement was one of the issues in an action
against investigative reporter Geraldo Rivera and a major
television network for misappropriation of an idea. Plaintiff
alleged that he related to the reporter the story that Elvis
Presley died from an interaction of prescription drugs.
Subsequently, Mr. Rivera produced an hour-long special on the
death of Elvis Presley that was broadcast on network television.
The show concluded that Presley's death was due to an interaction
of prescription drugs rather than cardiac arrhythmia as
court rejected plaintiff's
misappropriation action because prior to plaintiff's alleged
disclosure of the drug interaction theory to Mr. Rivera, several
newspaper articles had speculated about this theory. Therefore,
it was not novel.
The court's determination that novelty was lacking was
actually a determination that the idea allegedly provided by
plaintiff was not property. Referring to the bundle of rights
theory of property, it is obvious that an idea that is
disseminated via newspaper articles cannot be subject to the
dominion and control of anyone. Plaintiff would be unable to
assert any control over the idea or exclude anyone from using it.
Furthermore, allowing plaintiff to have property rights in this
idea would amount to removal of the idea from the public domain.
This result is contrary to one of the underlying purposes of
intellectual property law, which is to secure the benefits of
products of the mind for the public. Therefore, the idea is
incapable of being property.
In a more recent decision, a novelty determination was
undertaken with regard to alleged misappropriation of an idea for
an investment strategy that minimized losses. Plaintiff
confidentially disclosed his idea to a brokerage house which
rejected the idea, but which subsequently began using an
analogous investment strategy. However, the plaintiff was
unsuccessful in pursuing his misappropriation action against the
brokerage house because the idea was previously known. The court
concluded the idea was not novel, and plaintiff therefore did not
have a property interest in it.
In the area of advertising, some slogans have been treated
as property while others have been deemed unprotectible under a
property theory. The slogan "The Beer of the Century" for use in
advertising the sale of beer was deemed property, but the
slogan "We can't help bragging about Dad's. After all it's our
pop" for use in advertising Dad's root beer was held not to be
slogan "Mr. Wiggle" used for the sale
of jello was determined not to be property. These results are
consistent when viewed from the perspective of the right to
possess the slogans and to exclude others from using them. The
beer slogan was original, and the creator disclosed it only on a
limited basis to a potential buyer subject to a restriction that
the slogan could not be adopted or used by others. The creator
maintained control over the slogan and avoided disclosure of it
to the general public. Therefore, the slogan was novel and
entitled to property status.
In contrast, the root beer slogan was denied status as
property because it had been freely disseminated to the public.
The jello slogan was also denied property status because it had
been previously and independently created and used in advertising
by another party. Both of these slogans were therefore not novel
because they were not subject to the control of the party
asserting property rights in them.
Valuable ideas are often denied status as property despite
the existence of novelty.
Prior to the late 1960s, the school
supplies industry was characterized by product lines that were
drab and unattractive.
In response, the design firm of
Richter & Mracky came up with the new idea of placing fabric and
designs on notebook covers and binders that matched clothing
being advertised in young women's fashion magazines. They
disclosed the idea to a school supply company and prepared sample
designs, but the school supply company rejected the designs. The
company subsequently developed its own designs which it used in
accordance with Richter & Mracky's idea. The concept was a great
success that generated millions of dollars in additional sales
the court refused to allow Richter &
Mracky to assert any property rights in its idea. On its face
this result seems highly inequitable since the idea was not
previously used in the industry, and there was no evidence that
it was known by others. Furthermore, its use generated millions
of dollars in sales revenue. Therefore, the idea was obviously
novel and extremely valuable.
In another decision, a railroad employee came up with the
idea of selling advertising space in the employer's railroad cars
and railroad stations. The employee disclosed the idea to the
employer who adopted it and reaped substantial profits. The
employer refused to compensate the employee, and the court found
that the employee had no property interest in the idea. The
court took judicial notice of the fact that selling advertising
space was well known and therefore found that applying the
employee's idea to the railroad was obvious and without any
seems hard to justify. If the
employee's idea was obvious, why had this type of advertising not
been done by the railroad prior to the employee's suggestion?
Furthermore, how could the idea be without value in light of the
substantial profits the idea generated upon implementation?
The above two cases suggest that the court is actually
looking beyond the question of whether the novel idea at issue
was property. One explanation of these and similar cases is that
a continuum exists with regard to the granting of property rights
in novel ideas.
first end of the continuum are mere
mental conceptions of ideas without any method of implementing or
carrying out the idea. For example, I might conclude that an
inexpensive method of desalinating ocean water would assure an
adequate supply of freshwater in areas near the ocean that lack
adequate supplies. However, this idea is a mere abstract mental
conception if I lack the actual knowledge necessary to
inexpensively desalinate water.
At the opposite end of the continuum are ideas that are
reduced to a tangible working form. An example would be a
working desalinization plant that operates for one-hundredth of
the cost of existing desalinization plants. Both the mere
abstract mental conception and the tangible working plant may be
previously unknown to anyone in the world, therefore rendering
them both novel and subject to being possessed, used, and sold by
the creator. Thus, they would seem to be property under the
bundle of rights definition. But does protecting such novel
products of the mind facilitate the public's acquisition of these
products? Granting a property right in the abstract idea of
developing an inexpensive desalinization plant does not provide
any benefit to the public. However, once the plant is developed
and a working facility exists, the public does benefit.
Therefore, an idea at the first end of the continuum should not
be granted status as property since protection of such an idea
does not further the underlying purpose of intellectual property
law by providing a benefit to the public. In contrast, an
idea at the opposite end of the continuum should be property
since it does provide a public benefit, which is in accordance
with the underlying policy of intellectual property law.
Additionally, denying property status to abstract
conceptions at the first end of the continuum actually promotes
the goals of intellectual property law. If property status is
denied at the abstract idea stage but granted when the idea is
reduced to a tangible workable form, innovators will be
encouraged to reduce abstract ideas to tangible forms. If the
idea is potentially valuable, inventors and innovators may be
spurred to reduce it to a tangible form as rapidly as possible
because in the interim someone else may develop the same idea.
Withholding property status until an abstract idea is reduced to
a tangible form rewards the first party to reduce the idea to a
tangible form, since the first party to have possession of
property is the owner.
Therefore, property status should be granted only to ideas
which are far enough along on the above described continuum such
that a public benefit flows from granting property status to the
idea. This policy judgment is represented by the "concrete"
requirement often espoused by courts in idea protection cases.
When an idea is sufficiently developed to benefit the public, a
court will conclude the idea is concrete, and as a result, it is
deemed property if the idea is also novel. An idea
inadequately developed to benefit the public will be deemed not
to be concrete and therefore not be property.
Once an idea is deemed novel and concrete and therefore
property, that status is easily altered. The bundle of rights
definition of property defines property as a thing that can be
possessed, used, and alienated. Therefore, once the idea is
disseminated to the public, property status ends because such
dissemination injects the idea into the public domain. As a
consequence, anyone is free to use the idea. The creator of the
idea retains the right to use her idea, but this use right is
identical to the use rights of the rest of the public.
Additionally, the creator has lost the right to alienate the
idea. The creator cannot transfer the idea to anyone else since
it is already accessible to everyone by virtue of its public
Maintaining the property status of an idea requires
controlling access to it. This can be accomplished by not
revealing the idea to anyone or by disclosing the idea pursuant
to a contract which obligates the recipient of the idea to
maintain confidentiality. This need for control over access has
led to the development of trade secret law, which defines the
requisite secrecy and access requirements necessary to maintain a
property interest in certain ideas.
B. Trade Secret Law
Trade secrets are actually a species of ideas. The
generally accepted common law definition of a trade secret is
explained in the following statement:
"A trade secret may consist of any formula, pattern,
device or compilation of information which is used in
one's business, and which gives him an opportunity to
obtain an advantage over competitors who do not know or
use it. It may be a formula for a chemical compound, a
process of manufacturing, treating or preserving
materials, a pattern for a machine or other device, or
a list of customers. It differs from other secret
information in a business . . . in that it is not
simply information as to single or ephemeral events in
the conduct of the business, as, for example, the
amount or other terms of a secret bid for a contract or
the salary of certain employees, or the security
investments made or contemplated, or the date fixed for
the announcement of a new policy or for bringing out a
new model or the like. A trade secret is a process or
device for continuous use in the operation of the
business. Generally it relates to the production of
goods, as, for example, a machine or formula for the
production of an article. It may, however, relate to
the sale of goods or to other operations in the
business, such as a code for determining discounts,
rebates or other concessions in a price list or
catalogue, or a list of specialized customers, or a
method of bookkeeping or other office management . . .
The 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
In addition, the Uniform Trade Secrets Act has been
recently adopted in a significant number of states. It
provides the following definition of a trade secret:
"'Trade secret' means information, including a formula,
pattern, compilation, program, device, method,
technique, or process, that:
(i) derives independent economic value, actual or
potential, from not being generally known to, and not
being readily ascertainable by proper means by, other
persons who can obtain economic value from its
disclosure or use, and
(ii) is the subject of efforts that are reasonable
under the circumstances to maintain its secrecy."
The Restatement and the Uniform Trade Secrets Act
definitions are very similar. They both require a trade secret to
be information that: (1) is not generally known; (2) is kept
secret; and (3) has economic value. However, the two
definitions also include some fundamental differences. The
Restatement definition requires that a trade secret must actually
be used in the trade secret owner's business. Moreover, it
rejects isolated and ephemeral data from the definition of a
the Uniform Act only requires that
a trade secret have actual or potential economic value.
Therefore, actual use of a trade secret is not mandated by the
isolated or ephemeral data can
properly be the subject matter of a trade secret under the Act.
As already discussed, an idea can be a "thing" subject to
property rights; therefore, "know-how" that fits under the
definition of a trade secret is also capable of being property.
Consequently, an analysis of trade secrets should focus on the
generic definition of property previously developed. This
examination necessitates a determination of whether trade secrets
are things which can be possessed, used, and alienated.
The possessor of a trade secret has the right to exclude
others from using her trade secret. Stealing the trade secret
from its owner, using or disclosing the trade secret in violation
of a confidential contractual agreement, or engaging in improper
means of obtaining the trade secret are prohibited by trade
secret law. In addition, a trade secret owner can freely
alienate the trade secret. Finally, ownership of a trade secret
gives the owner the right to use the trade secret for her
commercial advantage. Based on these considerations, trade
secrets appear to fit within the bundle of rights definition of
property. However, this thesis must be tested by analyzing the
particular legal rules that have developed for trade secrets.
The requirement that a trade secret must not be generally
known is merely another way of determining whether the trade
secret owner has possession of the know-how comprising the trade
secret. If the know-how is widely known, it is not possessed by
its owner since she would not be able to exert control over know-
how in the public domain. It is axiomatic that the owner must
take reasonable steps to maintain the secrecy of her trade secret
before property rights attach to it. Property rights in
something normally do not depend on maintaining secrecy; however,
the definition of property requires that the owner has the right
of dominion and control over the thing and thereby the right to
exclude others from using it. If the trade secret owner fails to
maintain secrecy, the trade secret will become public
information, and it will be impossible for the owner to exert any
dominion and control over it. Hence, the secrecy requirement
makes sense because the existence of the property interest
depends on secrecy.
This secrecy requirement is analogous to actions that must
be taken to preserve the existence of tangible property
interests. For example, certain preventative steps must be taken
to preserve an oceanfront house located on land subject to severe
storm erosion. The owner must take steps to minimize or prevent
erosion, or ocean storms will eventually erode the land and cause
the house to fall into the ocean. Likewise, computer data stored
on tapes or disks must be maintained in an environment free of
magnetic fields to prevent destruction of the stored data. In a
similar fashion, the failure of the owner of know-how to protect
its secrecy allows others free access to it. This access results
in it being injected into the public domain such that the owner
will be unable to exert control over it.
Despite its importance, a trade secret owner only has to
undertake reasonable efforts to maintain secrecy; absolute
secrecy is not a prerequisite for trade secret protection.
This reasonable effort requirement is necessary to maintain
competition, since requiring absolute secrecy in many cases would
be economically prohibitive. Consequently, absolute secrecy
could reduce any competitive advantage derived from the
development and implementation of the trade secret.
Nevertheless, some efforts must be undertaken to prevent public
knowledge of the trade secret. In the absence of any degree
of secrecy, the secret is injected into the public domain and
thereby terminates any ability of the trade secret owner to
control its use. As a consequence, the property status of the
trade secret would end due to this lack of control. Requiring
only reasonable secrecy efforts strikes a balance between
protecting a trade secret owner's competitive advantage and
maintaining competition. This compromise is consistent with
regulating competition, which is an underlying policy of
intellectual property law.
These requirements that a trade secret must not be generally
known and must be a secret are therefore analogous to the novelty
requirement used in idea protection cases. Such requirements
make sense both with regard to idea protection and protection of
trade secrets in view of the fact that their purpose is
ultimately to determine if someone has possession of the idea or
Nevertheless, some courts disagree over whether know-how
must be novel, in addition to the other requirements, for it to
be a trade secret. This
disagreement stems from confusion
over what is meant by novel. A novelty requirement makes sense
if it is used as a word of art to simply refer to whether the
know-how is possessed by someone as opposed to being in the
public domain. This usage of the term is one generally found in
idea protection cases. An analogous use with regard to trade
secrets is both consistent and logical.
However, novel is sometimes used to mean that know-how must
be more than an obvious innovation. It must be sufficiently
innovative such that a skilled mechanic would view it as an
nnovative advance rather than a mere obvious change. In this
sense, novel is used to separate know-how into two categories.
First, know-how which anyone skilled in the technology at issue
would be capable of using or developing is not novel even if it
is new and original. For example, the substitution of a newly
developed material for a commonly used material would be an
obvious advance for a skilled mechanic. Therefore, the
substitution of plastic for certain metal body parts would be an
obvious advance that any skilled automotive designer could make
upon the initial development of structural plastic.
The second category of know-how refers to a new development
or discovery which is beyond the ability and skill of the typical
person skilled in the technology. Such know-how is novel because
it represents a technological contribution which advances the
state of the art. This use of novelty arises from analogy to
patent jurisprudence. Federal patent rights are granted only to
otherwise patentable innovations that fall into the second
category of know-how discussed above. However, this
definition of novelty is inappropriate with regard to trade
secret protection. Such a
distinction merely identifies
specific types of ideas which are subject to the heightened
protection granted by patent law. Ideas that fail to come within
this second category may still be property, although they may not
be capable of receiving the specialized treatment provided by the
Another well established rule is that a third party can
freely use a trade secret if she independently invents it.
Additionally, she is free to use it if she lawfully obtains
ownership of a product embodying the trade secret and via
disassembly of the product is able to reverse engineer the trade
discovery or reverse engineering may
also cause the trade secret to cease to exist. However, the
existence of a property interest in the trade secret following
independent invention or reverse engineering will depend upon
what the independent inventor or reverse engineer does with the
trade secret once possession is obtained. If the trade secret is
publicly disclosed, any property interest in it is destroyed
since secrecy is a necessary element. However, if secrecy is
maintained, the original trade secret owner's property interest
should continue to exist since she can still exert dominion and
control over the trade secret, can still alienate it, and can
still use it.
The independent inventor or reverse engineer can likewise
claim a property interest in the trade secret.86 This analysis
would seem to suggest the anomalous result that two persons could
independently own property interests in the same thing. This
result would not be possible with tangible property, since the
independent owners' rights to exert dominion and control over the
property, use the property, and freely alienate the property
would interfere with each other. In contrast, this problem is
not necessarily present when an intangible thing such as a trade
secret is involved. Two persons can independently use and
possess a trade secret, can independently exert dominion and
control over it, and can independently alienate it without
interfering with one another. Additionally, more than two
parties can maintain know-how as a trade secret without
terminating property rights in the trade secret. The question
is not how many persons know the trade secret but whether the
independent owners can come within the bundle of rights
definition of property. At some point, the number of persons who
know the trade secret, even though they maintain it as a secret,
will eliminate the ability of any of the trade secret possessors
to exert dominion and control over the trade secret and to
alienate the trade secret. At that point the property rights in
the trade secret cease to exist, since the only right the trade
secret possessors now have is the right to use the trade secret
like any other member of the public.
Although trade secrets, consistent with their property
status, can be alienated, it is a truism that such transfers must
be pursuant to an agreement that the transferee maintain the
secrecy of the know-how.
Such secrecy agreements can be in
the nature of express or implied agreements that are enforceable
under contract law. On
one level, such a requirement can be
viewed as a restriction or partial restraint on alienation. This
is significant since one of the basic rights associated with
classifying something as property is the right to freely alienate
it. Nevertheless, such a restriction is really a means of
maintaining the property status of the trade secret since such
status is based on the trade secret not being generally known.
Therefore, unrestricted transfer of the trade secret would enable
the transferee to inject it into the public domain, which would
in turn destroy its property status. Consequently, any partial
restraint on alienation would be peripheral to the main purpose
of maintaining the property status by preventing public
accessibility to the trade secret. This argument is buttressed
by the fact that the number of transferees of an interest in the
trade secret does not determine its trade secret status; rather,
it is the type of transfer that is significant. For example, a
single unrestricted disclosure of confidential know-how can
inject the know-how into the public domain. In contrast,
granting over a thousand licenses to use confidential know-how
may not inject the know-how into the public domain if every
license is conditioned on an obligation that the licensee must
In light of the above discussion, the various legal rules
that have developed with regard to trade secrets are consistent
with trade secrets having property status. Employing a property
model allows the distinctions between the Restatement and the
Uniform Act definitions of a trade secret to be examined to
determine which approach is consistent with property theory. The
Restatement, unlike the Uniform Act, rejects isolated and
ephemeral data from the domain of trade secret law. Such a
distinction is misguided. The focus should be on whether the
information at issue is within the generic definition of property
defined on the basis of whether the owner of the information can
possess, use, and alienate it. If isolated or ephemeral data is
original and maintained in secrecy by its creator, it fits within
the definition of property. This approach is the one taken by
the Uniform Act.
The Restatement has also been held to require that know-how
can be subject to trade secret status only if it is actually used
in the owner's business to gain an advantage over competitors.
Such a requirement is contrary to the idea that an owner of
something is free to use or not use it as she sees fit. The
generic definition of property previously developed includes the
right to use something as contrasted with requiring actual use.
This allows the owner of the thing the discretion to decide
whether to exercise that right. For example, if you own a car,
you have the right to use or not use it. Your property rights
are not determined by your use or non-use of the car. If you
allow the car to sit in your backyard and deteriorate, it does
not cease to be your property because you are not using it. In
fact, the law of abandonment specifically holds that non-use of
property by itself does not terminate property rights in the
non-use coupled with an intent to
surrender property rights results in a termination of property
rights due to abandonment.
In contrast, the Restatement definition requires actual use
of know-how for it to be treated as a trade secret.
Consequently, an explanation for this requirement must be sought
in the underlying policy considerations of intellectual property
law. One such policy is the ability of the public to secure the
benefit of the innovation. Absent use of secret know-how, no
public benefit is obtained from it. However, if the know-how is
used by its possessor to gain a competitive advantage in the
marketplace, the public has benefitted. The public may get a
superior product. For example, the product may be produced less
expensively. This can help increase marketplace efficiency by
injecting price competition into the market, which will in turn
directly benefit consumers.
Competitors will also be spurred to develop alternative
innovations in an effort to maintain their existing market share.
This often benefits both consumers and society due to the
resultant development of other innovations that further increase
market efficiency. The use requirement therefore furthers one of
the underlying policies of intellectual property law by insuring
that the public obtains the benefit of the trade secret. Under
this analysis, the use requirement functions in the same way the
concrete requirement functions with regard to the protection of
ideas. Both requirements represent determinations that property
status should be withheld in certain cases on the basis of public
Despite the above policy considerations, some courts and
the Uniform Act have
rejected this use requirement. The
Uniform Act substitutes an economic value requirement in lieu of
the use requirement. Under the Act, know-how must have actual or
potential economic value to be a trade secret. Focusing on
economic value appears on its face to be inconsistent with the
definition of property. If you possess something, the existence
of your property rights in the thing should not be measured by
its value. Economic value should only be relevant with regard to
remedies for violation of your property rights since our legal
system is based primarily on a compensatory damage model.
However, one of the fundamental purposes of intellectual property
law is to secure for the public benefits flowing from
intellectual creations. It is therefore implicit that
intellectual property law is oriented to protecting products of
the mind that have value, since there is little public benefit to
be gained from worthless products of the mind.
It can be argued that the Restatement's use requirement is
designed to advance the same underlying policy furthered by the
value requirement in the Uniform Act. This argument is premised
on the belief that secret know-how will be used if it has value.
Therefore, failure to actually use the know-how indicates its
lack of value. Although this argument is valid in many cases, it
may actually discourage innovation among individual inventors and
small business enterprises. First, many innovative individuals
lack the ability to convert useful inventive ideas into practical
working forms that result in a product or service that benefits
individual innovators and many small
businesses lack adequate capital to use secret know-how.
The value standard protects such individual inventors and
small businesses and thereby encourages them to be creative and
innovative. This advantage is in contrast to the use requirement
which would actually penalize such parties. Additionally, the
value standard recognizes the changing state of the American
economy. The United States is increasingly becoming the world
leader in the production of technological know-how in lieu of
tangible goods; such know-how itself has become a valuable and
salable commodity. Consequently, the individual who lacks the
ability and the business enterprise that lacks the capital to
reduce know-how to a practical form can transfer that technology
to an enterprise that has the necessary expertise and capital.
This transfer encourages innovation and allows the public to
obtain the benefit of the innovation, thus fulfilling an
underlying policy of intellectual property law. Consequently,
the value requirement is superior to the use requirement because
the value requirement focuses directly on whether this underlying
policy is furthered.
On its face, this value standard may appear to conflict with
the concrete requirement. The concrete requirement bars
protection of ideas until they are sufficiently developed to
benefit the public. The policy underlying this prerequisite is
that it will spur reduction of the idea to a useful form which in
turn will benefit the public. In contrast, the value
standard potentially allows protection of a secret idea prior to
its reduction to a useful form. Nevertheless, the purpose of the
value standard, as discussed above, is consistent with the
underlying purpose of the concrete requirement. The trade
secret, even if it is not reduced to a working form, must still
be sufficiently developed so that it can be transferred to
another party who can then utilize the trade secret such that the
public receives its benefit. If the secret innovation is merely
an abstract idea that requires the transferee of the idea to
engage in substantial experimentation to reduce the secret to a
usable form, then the secret idea is not concrete and therefore
should not be subject to protection under property law. The
concrete requirement and the value standard are therefore
The property status of negative information depends on
whether the Restatement's use requirement or the Uniform Act's
value standard is applied to trade secrets. For example,
knowledge that a certain procedure or line of experimentation
will not succeed may be valuable in a research and development
environment. Such knowledge will allow resources to be devoted
to other lines of inquiry which could prove successful, thus
providing an economic advantage over competitors lacking the
negative information. This advantage means that the negative
information has value and therefore is potentially protectible as
a trade secret under the Uniform Act's value standard.
In contrast, such information, despite its value, could be
denied trade secret status under the Restatement since the use
requirement is not satisfied because the value of the negative
information is in knowing not to use it. From a property
perspective, the treatment of negative information under the
value standard, rather than under the use requirement, is more
appropriate because it recognizes the property status of the
negative information. This result is consistent with the bundle
of rights definition of property, provided that the information
is not known by others. Nevertheless, such property status
should be accorded to negative information only if the underlying
policies of intellectual property law are furthered. One of the
underlying purposes of intellectual property law is to allow the
public to obtain the benefits of creative innovations. Rejecting
property status for negative information could increase the
number of competitors whose research and development activities
are focused in profitable directions if the negative information
was disclosed. This could facilitate securing benefits for
society by maximizing the number of competitors who are avoiding
unprofitable lines of experimentation.
The use of such a policy argument to deny property status
for negative information is consistent with the treatment of
ideas in general. As previously discussed, the concrete
requirement is a policy based prerequisite to protection of an
idea. However, since the value of negative information is based
on not utilizing the information, it would be easy to maintain
such information as a secret. The resulting competitive
advantage would be a clear incentive for not freely disclosing
such information. Consequently, denying property status to such
information will not allow the public to secure the information
since it is likely the information will be maintained in secrecy
without regard to whether it is granted property status.
Additionally, denying property status to negative
information removes the protection afforded to such information
by trade secret law. This would encourage attempts by
competitors to engage in industrial espionage and other
commercially undesirable activities in an attempt to learn of the
existence of any negative information. The activities used to
ascertain such information, provided they are legal, would be
permissible. This is in contrast to trade secret law, which
prohibits commercially immoral methods of obtaining trade
secrets, even if they are legal, in an effort to regulate
business practices to achieve fair competition. Denying
negative information property status would deny the protection
afforded by trade secret law and encourage legal but commercially
immoral conduct to obtain it. Consequently, granting property
status to negative information is consistent with the Uniform
Act's value standard and the underlying policies of intellectual
An alternate view of trade secrets is that they are not
property. Instead, trade secret law can be viewed as a species
of tort law which regulates the methods that can be used to
obtain access to the trade secret. Under this approach,
trade secret law does not protect information or knowledge per
se. Instead, it limits the methods or means that can be used to
obtain secret knowledge or information. Stealing the trade
secret from its owner, using or disclosing the trade secret in
violation of a confidential contractual agreement, or engaging in
commercially immoral means of obtaining the trade secret are
prohibited by trade secret law. In contrast, obtaining the trade
secret via independent development or reverse engineering is an
acceptable method of obtaining a trade secret and one that is not
However, this alternate approach is misplaced because trade
secrets are within the bundle of rights definition of property.
The fact that reverse engineering or independent development can
destroy a trade secret merely reflects the fact that trade
secrets, like other things, can be destroyed or taken by third
parties. For example, property rights in real estate are not
denied just because the government has an absolute right to take
your property through the power of eminent domain. Moreover,
property rights are not denied just because private nuisance law
allows an adjacent landowner to obtain a portion of your property
rights without paying compensation. For example, a property
owner, pursuant to nuisance law, may be granted the right to
interfere with an adjacent landowner's use. This interference
may deprive the adjacent landowner of certain uses of her land.
Such a right is actually a servitude on the adjacent land and is
a recognized property interest. Likewise, a tenancy by the
entirety ownership interest is not denied property status because
the concurrent interest is destroyed by one party divorcing the
In addition, the law's rejection of certain methods of
obtaining trade secrets and allowance of other methods is
consistent with the regulation of competition that underlies
intellectual property law. This policy is reflected in the law's
balancing of individual rights against societal needs. Society
needs competition because it facilitates creative advances that
benefit society as a whole by preventing the domination of
certain segments of the economy by a single or limited number of
individuals or entities. An individual who develops a creative
innovation also must have some protection available as an
inducement for her to engage in the development of new ideas and
technological advances. In recognition of these two goals, trade
secret law strikes a balance by prohibiting certain, but not all,
methods of obtaining trade secrets. As a general proposition,
methods within the domain of fair and equitable competition are
permitted. Independent discovery is permitted because it
encourages creative activities. Additionally, denying an
independent developer the right to use her creation would
unfairly penalize her despite her inability to know that another
party was already in possession of a trade secret embodying the
innovation. Such a result would be unfair, and methods that
amount to unfair and inequitable competition are generally
prohibited. Obtaining a trade secret via illegal conduct, in
breach of a contractual obligation, or in breach of a fiduciary
duty is generally actionable.
The conclusion that trade secrets should be accorded
property status is consistent with the conclusion that ideas are
subject to the same status. Trade secret law is merely an
extension of the law of ideas, since trade secrets are merely
ideas that are maintained in secrecy and which provide the owner
with a competitive advantage. Trade secret law establishes the
legal rules that determine the property rights existing in ideas
that fall within the definition of a trade secret.
C. Patent Law
Rights granted by the patent law are in reality specialized
granted to certain categories of ideas.
The patent law essentially codifies the common law requirements
that are prerequisites to an idea being property. Specifically,
the novel requirement, which must be satisfied for an idea to be
property, is incorporated into the patent law. The statute
requires that an invention must be new, and it must not be known,
publicly used, or publicly disclosed for it to be potentially
granted protective status under the patent law.
Additionally, a patent may not be granted when the effect is to
remove from or restrict free access to information or knowledge
in the public domain.
This requirement ensures that an idea
in the public domain, which is not property, is not subject to
property rights. Such an idea does not fall within the
definition of property because if it is in the public domain, it
is not subject to the dominion and control of anyone.
Likewise, the concrete requirement is also expressly
included in the patent law. A patent will be granted only if
the inventor can provide the government with a written
description of the invention that explains precisely how to make
and use it. The description must be sufficiently adequate for
someone skilled in the relevant technology to be able to make and
use the invention based on the description. Furthermore, it
must describe the best method of using the invention that is
known to the inventor. The patent statute also expressly
mandates that the invention must be useful  and more than a
merely obvious new innovation. These requirements are
consistent with the application of the concrete requirement in
idea cases. The concrete requirement is used to determine, from
a policy perspective, which ideas should be subject to property
rights based on whether the underlying policies of intellectual
property law are furthered. Typically, the concrete requirement
is used to ensure that only ideas which secure a benefit for
society are granted property status. The usefulness, obviousness,
and best method requirements, discussed above, ensure that only
ideas that provide societal benefits are granted patent rights.
Additionally, the patent law secures for the public the
benefit of the patented innovation in other ways while regulating
competition with regard to the innovation. Upon issuance of a
patent, the information contained in the patent is immediately
available for public inspection. This availability allows the
public to secure any benefit that flows from knowledge of the
patented invention. Such knowledge may be useful in development
of new innovations in other areas, it may spur new and innovative
improvements to the patented innovation, or it may provide ideas
for alternative inventions. Additionally, patent rights are
subject to durational limits so the patent owner has an incentive
to make the patented innovation available to the public in order
to reap financial rewards before the patent rights terminate.
This also allows the public to secure the benefit of the
innovation. Finally, at the end of the patent term the
innovation is freely available and usable by the public.
Typically, the free accessibility to the patented innovation
upon granting of a patent would terminate any property rights in
the innovation. Granting exclusive rights to such ideas is "at
odds with the inherent free nature of disclosed ideas."
Nevertheless, the law grants to the patent owner the exclusive
right to make, use, and sell the patented innovation in the
United States for a limited time period. Such statutorily
granted exclusive rights are necessary to avoid the cessation of
property rights in the innovation upon public use or disclosure
of the invention. Absent these exclusive rights, the patent
owner would be unable to exert dominion and control over the
innovation much as the owner of an idea or a trade secret loses
control upon public disclosure. Therefore, these statutory
rights are necessary for patent rights to be property since they
ensure that the patent owner has the right to possess, use, and
alienate the patent rights.
This approach also furthers the underlying policies of
intellectual property law. It induces an inventor to freely
disclose her innovation by granting property rights in the
innovation in return for the disclosure. These rights also
provide a financial incentive to the inventor. In addition, the
durational limit of the property rights is an attempt to regulate
competition. After a limited time period, competitors are free
to use the patented innovation. However, the property rights
provide the inventor with a temporary market advantage. This
result is equitable in light of the fact that the inventor is
responsible for providing the innovation to the public while
subsequent competitors who utilize the innovation are merely
getting a free ride by avoiding the research and development
costs associated with creation of the innovation.
The property status of patents can be subject to question in
several situations. Improvement patents, which are expressly
authorized by statute,
raise some questions with regard to
their property status. Such patents can be granted for
improvements in existing patented innovations. While the owner
of such a patent has the exclusive right to prevent others from
making, using, or selling the improvement, she lacks the right to
use the patented improvement herself if using the improvement
involves use of the preexisting patented innovation. This lack
of a right to use the improvement raises the question of whether
something can be subject to property rights absent a right of
use. While this conclusion seems contrary to the definition of
property rights, it is actually analogous to future interests in
realty. Assume you are given a future interest in Blackacre
which follows a life estate owned by another individual. Upon
receiving the future interest, you have received a property
interest even though you have no immediate right to possess or
use Blackacre. Your right to possess and use Blackacre only
arises upon termination of the life estate. The same is true
with regard to the above described improvement patent. The
inventor of the improvement simply has a future interest in the
improvement provided by the patent. Once the preexisting patent
expires, the inventor will be free to use his improvement without
regard to the preexisting patent rights because upon expiration
of the preexisting patent, it ceases to be property just as the
life estate ceases to be property upon the death of the life
Additionally, the patent statute allows an inventor to
obtain a patent on an innovation after freely releasing the
innovation to the public domain. The only stipulation is that
the patent must be applied for within one year of injecting the
innovation into the public domain. This requirement produces
an anomalous result. An invention can be freely surrendered to
the public domain and hence cease to be subject to property
rights in any one person. However, if the inventor applies for a
patent within one year of this surrender, she obtains exclusive
rights in the innovation upon granting of a patent. The
invention becomes subject to property rights upon issuance of the
patent. This scenario appears to allow an inventor to extinguish
property rights by relinquishing control to the public and to
recreate the rights by filing for a patent within a year of such
relinquishment. The validity of this argument with regard to the
property status of patents can be examined via the following
Assume X invents a machine on January 1 and publicly
discloses it on January 2. Subsequent to this disclosure Y
constructs a machine utilizing the technology disclosed by X. On
June 1, X applies for a patent on the machine which subsequently
issues. Upon issuance of the patent, X has the exclusive rights
to make, use, and sell the technology embodied in the machine.
Pursuant to her patent rights, X can prevent Y, and anyone else,
from using the technology. Can this result be supported by a
property theory? At the time the patent issues, is the
technological know-how embodied in the machine X's property or
has any property status been surrendered by the prior public
disclosure of the machine? Arguably, X's disclosure should
terminate property rights. Upon her disclosure she has given up
any dominion and control over the machine and the ability to
alienate it since it is now in the public domain. Under the
bundle of rights definition of property, a property interest
arguably does not exist in the idea embodied in the machine
subsequent to January 2. The subsequent issuance of the patent
effectively withdraws an innovation from the public domain.
However, a contrary conclusion can be reached which is
consistent with property theory. At the time X developed the
innovation it was her idea, and prior to disclosure she had
dominion and control over it. Additionally, the patent law
created the right for X to receive patent protection for her
innovation provided it met the requirements of the patent law.
This statutorily created property right under the patent law
existed upon development of her innovation. As of that time X
had the right to seek patent protection provided she did not
abandon her invention or wait more than one year to file
subsequent to public use or disclosure of the invention.
Consequently, X can be viewed as merely allowing Y to
permissively use her property rather than as abandoning or
dedicating her innovation to the public. By comparison, if X
owned Blackacre she would have the right to deny members of the
general public the right to use Blackacre. Nevertheless, if X
freely allowed Y to utilize Blackacre, X would not lose her
property rights in Blackacre. Y's use would merely be deemed
permissive and such use would not divest X of her property
interest in Blackacre. Likewise, Y's use of X's innovation can be
viewed as merely permissive use.
Another area of concern arises when one person develops an
innovation and maintains it as a trade secret while another
individual independently develops the same innovation and seeks
patent protection for it. The law has developed clear rules as
to who has ownership of the innovation in such situations. The
question to be addressed, however, is whether those rules are
consistent with property law in general. The following
hypotheticals examine this question.
Assume that X invents a machine on January 1 and keeps it
secret until she files for a patent on January 15. Assume that Y
independently invents the same machine on January 10 and that Y
maintains her machine as a trade secret. A patent is
subsequently issued to X eighteen months later. Under the patent
law, X is the owner of the innovation, and she can bar Y's use of
consistent with property law. Between X
and Y, X is the first inventor. Therefore, X is the owner of the
innovation based on her being first in time to have possession of
Assume that X invents a new chemical compound on January 1,
but she abandons it without disclosing it to anyone.
Subsequently, on January 5, Y invents the same compound which she
maintains as a trade secret. Then on June 1, X applies for a
patent on the new chemical compound. Should X be granted the
patent? In this situation X is not entitled to obtain a patent
because she has abandoned her property interest in the
Y has a property interest in the
compound which she is maintaining as a trade secret. This result
is consistent with property law which provides that abandonment
of property rights terminates any ownership interest.
Additionally, if X subsequently discloses her previously invented
chemical compound to the public, Y's property rights will
terminate since the trade secret status would end upon public
disclosure. The result would be a dedication to the public of
the chemical compound. Such a result is consistent with the
property interest existing in a trade secret.
Assume that X invents a new process for curing rubber on
January 1. X maintains the process as a trade secret. On
February 1, Y independently invents the same process. On
February 15, Y files a patent application for the process. Two
years later the patent issues to Y. Who owns the process after
the patent is issued?
Arguably, X is first in time to have possession of the
process and that supports her ownership of the process. However,
the patent law provides that Y is entitled to the patent in this
case because X concealed the process. If Y is entitled to
the patent then X's rights must be extinguished if a property
theory is applicable. Upon issuance of the patent, as already
discussed, the information in the patent is placed in the public
domain. Since Y independently developed the process, her public
disclosure of the process, via the patent, is analogous to
someone independently developing and disclosing a trade secret.
Such behavior would end the secret status of the trade secret and
terminate its existence. Therefore, the granting of a patent to
Y and the termination of X's property rights in the trade secret
are consistent with property theory. This result also helps to
further secure for the public the benefit of the process and is
consistent with an underlying policy of intellectual property
law. The public disclosure that accompanies issuance of a patent
provides more benefit to the public than the public benefit
received if the process was maintained as a secret pursuant to
trade secret law.
A basic or generic definition of property recognizes that
property law merely defines the relationship between things and
persons. It determines the rights that persons have in things.
Typically, the existence of such rights is predicated on two
factors: (1) whether the person has sufficient ability to control
possession, use, and transferability of the thing; and (2)
whether the underlying policies of the law are furthered by
bestowing property rights on the thing.
When a person has the unrestricted right to possess, use,
and transfer a thing, it is granted property status and the
person is the owner of the thing. When a person has no rights of
possession, use, and alienation, the thing is denied property
status, and it becomes part of the public domain. If the right
to possess, use, and transfer a thing is within these two
extremes, the determination of whether to grant or withhold
property status must be based on what will further the underlying
policies of the relevant body of law. This conclusion is
supported by the numerous things that are granted property status
despite the existence of limitations and restrictions on the
possession, use, or transferability of the thing.
There are two basic underlying policies of intellectual
property law. The first is to secure for the public the benefits
of intellectual property. Granting property status to ideas
provides an incentive for innovators to develop new ideas by
giving the innovator the right to control use of the idea. As a
result, the public will gain the benefit of the idea because
economic motives will spur the innovator to share it with the
The second policy underlying intellectual property law is to
regulate and manage competition. Innovators should be entitled
to monetary gain from their ideas. Nevertheless, the control of
ideas is inimical to a free society because it may allow
monopolization of ideas. Therefore, intellectual property law
attempts to regulate or manage competition by granting or
withholding property status. This regulation strikes a balance
between rewarding a person for intellectual achievement and the
societal importance of maintaining marketplace competition.
The granting of property status to ideas is consistent with
the basic definition of property. Ideas that can be exclusively
possessed, used, and transferred by a person are granted property
status. Once control of an idea is lost to the public, property
status ends. The concept of novelty has been developed to
determine whether a person has control of an idea. If a person
develops a new idea that is not generally known, the idea is
novel and potentially subject to property status. This result is
consistent with the basic definition of property because it
recognizes that an idea that is both new and not generally known
can be controlled by its creator. Likewise, an idea which is not
new or is generally known cannot be controlled by an individual;
hence, it is not appropriate subject matter for property status.
In addition, the underlying policies of intellectual
property law may be frustrated by granting certain novel ideas
property status. Consequently, the concept of concreteness has
developed to determine which novel ideas are appropriate for
property status. If attaching property rights to a novel idea
will secure a benefit to the public, the novel idea is granted
property status. Furthermore, granting an idea property status
is appropriate if it will result in a balance of the creator's
individual rights in the idea with maintaining competition.
Under this approach, mere untested and undeveloped ideas are
denied property status on lack of concreteness grounds without
regard to their novelty. In contrast, novel ideas that have been
reduced to a working form are worthy of property status. The
concreteness determination merely represents a determination of
whether assigning or denying property rights to the idea will
further or frustrate, respectively, the policies of intellectual
The protection of ideas pursuant to trade secret law
represents a specialized body of law for protecting a specific
type of idea. Ideas used in a business are subject to protection
via trade secret law if they are not generally known and they are
maintained in secret by the business owner. Additionally, the
trade secret must have value by providing a competitive
advantage. These requirements are consistent with the novel and
concreteness requirements for common law idea protection.
The requirement that the trade secret is not generally known
ensures control of it by the owner. This requirement is
necessary for the trade secret to have property status.
Maintaining the secrecy of the trade secret is also consistent
with ensuring control over it. Once secrecy is lost, the trade
secret is in the public domain, and the owner has lost control of
it. This is consistent with trade secret status terminating upon
public disclosure as a result of independent development or
Trade secret law requires only reasonable secrecy efforts
rather than absolute secrecy. This standard is necessary to
maintain marketplace competition since absolute secrecy could be
more costly than the economic advantage provided by the trade
The requirement that a trade secret must have actual or
potential value is consistent with the concrete requirement. The
concrete requirement ensures that granting property status
secures a benefit for the public. Likewise, the value
requirement provides that trade secret status is reserved for
ideas that can provide a benefit to the public.
Trade secret law requires that alienation of trade secrets
must be in confidence pursuant to an agreement that the
transferee maintain secrecy. This mandate is also consistent
with the basic definition of property. Property status in an
idea ceases to exist once an idea is beyond the control of its
owner; consequently, transfers must require secrecy to ensure the
continuation of the property status of a trade secret.
The patent law also represents a system designed to provide
exceptional rights to certain specific categories of ideas.
Ideas which fall within the realm of patent law are subject to
exclusive rights of control for a substantial time period, and
these rights are unaffected by independent development or reverse
engineering. Nevertheless, the basic requirements of common law
idea protection are codified in the patent law. The novel
requirement is a statutory prerequisite to patent protection, and
the concrete requirement is also codified. A written description
that explains precisely how to make and use the best mode of the
invention must be provided. The description must be adequate for
someone skilled in the relevant art to make and use the
invention. Additionally, the idea must be useful, and it must be
more than a mere obvious innovation to someone skilled in the
The patent law also furthers the underlying policies of
intellectual property law. The mandatory public disclosure of
patents ensures public access to the ideas and knowledge
protected by patent law. The durational limitation of patent
rights spurs patent owners to make their ideas available to the
public so they can reap financial rewards. Consequently, the
public gains the benefit of the idea and therefore fulfills an
underlying goal of intellectual property law. Additionally, the
exclusive rights granted to a patent owner provide strong
inducement to disclose the idea as a necessary aspect of
obtaining a patent.
1. Professor of Law, Ohio Northern University Pettit College of
Law, Ada, Ohio.
2. RESTATEMENT (FIRST) OF PROPERTY, ch. 1, Introduction at 3
(1936). The existence of property rights is also one of the
essential differences between capitalism and Marxism. Paul
Heckel, Proprietary Rights: The Software-Patent Controversy, 9
No. 12 COMPUTER LAW. 13, at 14 (December, 1992).
3. JOHN E. CRIBBET & CORWIN W. JOHNSON, PRINCIPLES OF THE LAW OF
PROPERTY 4 (3d ed. 1989). "Property and law are born together,
and die together. Before laws were made there was no property;
take away laws and property ceases." Id. (quoting Jeremy
Bentham, Theory of Legislation, Principles of the Civil Code, pt.
I, at 112 (Charles Kay Ogden ed. & Etienne Dumont & Richard
Hildreth trans. 1864)).
4. See United States v. General Motors Corp., 323 U.S. 373, 377-
78 (1945) (the Court stated that the term "property" used in the
Takings Clause of the Constitution did not mean physical things,
but rather the group of rights defining the relationship between
an individual and the thing).
5. See, e.g., Article 2 of the Uniform Commercial Code which
applies to contracts governing the sale of "goods." Rather than
defining the scope of Article 2 in property terms, it defines it
in terms of tangible things. Section 2-105 states "[g]oods means
all things . . . which are movable at the time of identification
to the contract for sale . . . ." U.C.C. . 2-105 (1993).
6. In Yuba River Power Co. v. Nevada Irrigation Dist., 279 P.
128, 129 (Cal. 1929), the California Supreme Court stated that
property interests could exist in "`every species of estate, real
and personal, and everything which one person can own and
transfer to another. It extends to every species of right and
interest capable of being enjoyed as such upon which it is
practicable to place a money value.'" (citations omitted). The
Supreme Court had determined that numerous interests other than
realty are property under the Takings Clause of the Constitution.
See, e.g., Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003-04
(1984) (trade secrets); Armstrong v. United States, 364 U.S. 40,
44, 46 (1960) (materialman's lien pursuant to state law);
Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 596-
602 (1935) (real estate lien); Lynch v. United States, 292 U.S.
571, 579 (1934) (valid contracts). See also Early v. Early, 604
N.E.2d 17 (Mass. 1992) (pension benefits treated as property in
divorce proceeding dividing property); ARTHUR L. CORBIN, CORBIN
ON CONTRACTS 860, at 791 (1952) (contract rights are the
subject matter of property rights).
7. Felix S. Cohen, Dialogue on Private Property, 9 RUTGERS L.
REV. 357, 374 (1954). See International News Serv. v. Associated
Press, 248 U.S. 215 (1918). "Property depends upon exclusion by
law from interference." Id. at 246 (Holmes, J., dissenting).
"An essential element of individual property is the legal right
to exclude others from enjoying it." Id. at 250 (Brandeis, J.,
dissenting). See also Ruckelshaus v. Monsanto Co., 467 U.S. 986,
1003 (1984) (noting Blackstone's and Locke's notion that property
is broader than realty and tangible goods because it "includes
the products of an individual's `labour and invention.'"); Carol
M. Rose, Possession as the Origin of Property, 52 U. CHI. L. REV.
73 (1985) (under the common law possession is the origin of
8. Richard A. Epstein, Possession as the Root of Title, 13 GA. L.
REV. 1221 (1979); see Alevizos v. Metropolitan Airports Comm'n of
Minneapolis & St. Paul, 216 N.W.2d 651, 661 (Minn. 1974); Smith
v. Erie R.R. Co., 16 N.E.2d 310, 313 (Ohio 1938). See also Moore
v. Regents of the Univ. of Cal., 271 Cal. Rptr. 146, 176 (Cal.
1990) (Mosk, J., dissenting) (Property is a bundle of rights
including the right to possession of the property, use of the
property, exclusion of others from the property, and the right to
dispose of the property by sale or gift.), cert. denied, 449 U.S.
936 (1991). See generally United States v. General Motors Corp.,
323 U.S. 373, 377-78 (1945).
9. For example, granting a license, a profit, or an easement in
realty amounts to disposal of the owner's exclusive use rights in
10. "Every landowner must continue to endure that level of
inconvenience, discomfort, and loss of peace and quiet which can
be reasonably anticipated by any average member of a vibrant and
progressive society." Alevizos v. Metropolitan Airports Comm'n
of Minneapolis & St. Paul, 216 N.W.2d 651, 662 (Minn. 1974).
11. In its simplest form, private nuisance law states that an
owner of property rights is free to exercise her property rights
as she sees fit, provided such exercise does not unreasonably
interfere with the ability of another owner of property rights to
exercise her property rights as she desires. See generally ROGER
A. CUNNINGHAM ET AL., THE LAW OF PROPERTY 7.2, at 417 (2d ed.
12. Factors to be considered in this balancing include the
following: whether the activity is customary or suited to the
area; whether the activity causes observable effects that most of
us would find disagreeable, independent of whether they actually
harm the party alleging a nuisance; whether the activity is
carried on by methods that produce more disturbance than other
available methods; the value of the activity to the person
engaging in it; the value of the activity to society; and when
the activity was begun. Id. at 418.
13. Id. at 421.
14. See Pennell v. City of San Jose, 485 U.S. 1, 11-15 (1988).
15. 11 U.S.C. 548(a) (1988 & Supp. IV 1992).
16. See, e.g., Moore v. Regents of the Univ. of Cal., 271 Cal.
Rptr. 146, 177 & n.10 (Cal. 1990) (Mosk, J., dissenting) (under
California law a licensed sportswoman can give away wild fish and
game that she has caught or killed, but she cannot sell them),
cert. denied, 449 U.S. 936 (1991). See generally CAL. FISH &
GAME CODE, 3039, 7121 (1984 & West Supp. 1993).
17. See, e.g., O'Brien v. O'Brien, 485 N.Y.S.2d 548, 549-50 (N.Y.
App. Div. 1985) (court stated medical license not property, in
part because it cannot be inherited, transferred, or pledged).
18. See Moore v. Regents of the Univ. of Cal., 271 Cal. Rptr.
146, 158-59 (Cal. 1990), cert. denied, 449 U.S. 936 (1991).
19. The court stated that "the statute eliminates so many of the
rights ordinarily attached to property that one cannot simply
assume what is left amounts to `property' or `ownership' for
purposes of conversion law." Id. at 159.
20. See generally Sproul v. Gilbert, 359 P.2d 543 (Or. 1961). In
Sproul, the court stated the following test to evaluate the
property interest of a property occupant: "Does he have
sufficient control over the premises to warrant the label of
possession?" Id. at 550. The court applied that test to grazing
permits granted to individuals that allowed them to graze their
livestock on federal land. The court first evaluated the various
possible uses of the land at issue. It then examined the amount
of control the permit holders had over the different possible
uses of the land. The court found that the permit holders had
significant control over only one use of the land (i.e.,
grazing). However, the court concluded that grazing was one of
the only major uses of the land, and therefore, the permit
holders had sufficient control over the land to say that they had
possession of the land. Consequently, the court held that the
permit holders had a property interest in the land which made
them subject to property tax liability.
21. See CUNNINGHAM, supra note 10, 3.1, at 85-87.
22. John Chipman Gray's generally accepted statement of the rule
is the following: "No interest is good unless it must vest, if at
all, no later than twenty-one years after some life in being at
the creation of the interest." RALPH E. BOYER, SURVEY OF THE LAW
OF PROPERTY 158 (3d ed. 1981) (quoting from JOHN C. GRAY, RULE
AGAINST PERPETUITIES 191 (4th ed. 1942)).
23. The owners of future interests are granted the right to bring
an action for waste against the party in possession of the
property at issue. Waste is defined as "an unreasonable use of
the property by the owner of the possessory estate which reduces
the value of a future estate." OLIN L. BROWDER ET AL., BASIC
PROPERTY LAW 253 (5th ed. 1989). See, e.g., Brokaw v. Fairchild,
237 N.Y.S. 6 (N.Y. Sup. Ct. 1926) (future interest owner
succeeded in prohibiting a life estate owner from demolishing a
house which could not be rented and erecting an apartment house
under a waste theory), aff'd, 245 N.Y.S. 402 (N.Y. App. Div.
1930), aff'd, 177 N.E. 186 (N.Y. 1931).
24. See CORNELIUS J. MOYNIHAN, INTRODUCTION TO THE LAW OF REAL
PROPERTY 7, at 110 (2d ed. 1988). Today, most contingent
future interests are alienable. Id. at 110-11.
25. See CUNNINGHAM, supra note 10, at 85-87.
26. See U.S. CONST. amend. V, which states that ". . . private
property [shall not] be taken for public use, without just
27. See Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886,
2893-94 (1992). See also Penn Central Transp. Co. v. City of New
York, 438 U.S. 104 (1978) (landmark preservation law which
prohibited property owner from constructing a multi-story office
building over designated landmark was not a taking).
28. Rent control statutes may significantly interfere with the
use of residential rental property. Nevertheless, such
interference with property rights is permissible governmental
action which is not a "taking" under the Fifth Amendment. See
Pennell v. City of San Jose, 485 U.S. 1 (1988).
29. See generally U.S. CONST. art. I, sec. 8, cl. 8, which states
that "[t]he Congress shall have power . . . [t]o promote the
Progress of Science and useful Arts, by securing for limited
Times to Authors and Inventors the exclusive Right to their
respective Writings and Discoveries . . . ." This clause
provides congressional authority for the Patent law (see 35
U.S.C. 1-376 (1988)) and the Copyright law (see 17 U.S.C. ..
30. See Stanley v. Columbia Broadcasting Sys., Inc., 221 P.2d 73,
84-85 (Cal. 1950) (Traynor, J., dissenting) (law must balance
granting individuals reward for their creativity with securing
for society benefits of such creativity).
31. "The necessity of good faith and honest, fair dealing, is the
very life and spirit of the commercial world." Kewanee Oil Co.
v. Bicron Corp., 416 U.S. 470, 481-82 (1974) (quoting National
Tube Co. v. Eastern Tube Co., 3 Ohio C.C. (n.s.) at 462). See
also E.I. duPont deNemours & Co. v. Christopher, 431 F.2d 1012,
1016 (5th Cir. 1970) ("[o]ur devotion to free wheeling industrial
competition must not force us into accepting the law of the
jungle as the standard of morality expected in our commercial
relations."), cert. denied, 400 U.S. 1024 (1971). See generally
Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 481 ("The
maintenance of standards of commercial ethics and the
encouragement of invention are the broadly stated policies behind
trade secret law.").
32. This is evident by reference to the antitrust laws. For
example, unreasonable restraints of trade and attempts to
monopolize a market can be felonies punishable by fines up to one
million dollars and imprisonment. See 15 U.S.C. 1-2 (1988)
(Sherman Act). Another section of the antitrust law mandates
trebling of damages and payment of reasonable attorney fees by
the losing party. See 15 U.S.C. 15 (1988) (Clayton Act).
Finally, an assortment of injunctive relief is available upon a
mere showing of potential competitive injury. See, e.g., 15
U.S.C. 18 & 26 (1988) (business merger that may substantially
lessen competition or tend to create a monopoly can be enjoined).
See also 15 U.S.C. 45 (1988) (Federal Trade Commission Act)
(which states that "[u]nfair methods of competition in or
affecting commerce, and unfair or deceptive acts or practices in
or affecting commerce, are hereby declared unlawful.").
33. 433 U.S. 36 (1977).
34. Id. at 38.
35. 15 U.S.C. 1 (1988) (Sherman Act).
36. "[I]ntrabrand competition is the competition between the
distributors -- wholesale or retail -- of the product of a
particular manufacturer." Continental, 433 U.S. at 52 n.19.
37. "Interbrand competition is the competition among the
manufacturers of the same generic product . . . ." Id.
38. 472 U.S. 585 (1985).
39. Id. at 591 n.9.
40. Id. at 598 n.23.
41. United States v. Aluminum Co. of Am., 148 F.2d 416 (2d Cir.
42. Id. at 430.
43. They are not the building blocks of all innovations because
some innovations are the result of mistakes or accidental
discoveries. It has been argued by some that ideas should not be
protected. One commentator stated that
All men have a tendency to copy and adapt ideas; if
they did not, we would never have gotten far . . . .
Indeed, the trait is not confined to the human race;
and the copying of ideas cannot be too evil, for, as
the elder Dumas said, God created man but even He could
not avoid the use of a Prototype.
Harry R. Olsson, Jr., Dreams for Sale, 23 LAW. & CONTEMP. PROBS.
34, 61 (1958). In contrast, one state provides statutory
protection for certain products of the mind. CAL. CIV. CODE ..
980-990 (West Cum. Supp. 1993).
44. See, e.g., Sellers v. American Broadcasting Co., 668 F.2d
1207, 1210 (11th Cir. 1982) (an idea or theory must be "novel,"
among other things, for an action for misappropriation to
prevail); see also Granoff v. Merrill Lynch & Co., Inc., 775 F.
Supp. 621, 627 (S.D.N.Y. 1991), aff'd without opinion, 962 F.2d 2
(2d Cir. 1992).
45. One commentator concludes that a novel idea is one that is
new or not formerly known. Melville B. Nimmer, The Law of Ideas,
27 S. CAL. L. REV. 119, 144 (1954). See also Margreth Barrett,
The "Law of Ideas" Reconsidered, 71 J. PAT. [& TRADEMARK] OFF.
SOC'Y 691, 710-12 (1989) (discussion of the novelty requirement).
46. Hamilton Nat'l Bank v. Belt, 210 F.2d 706, 709 (D.C. Cir.
1953) (the law protecting ideas "must be careful to avoid
attributing to individual ownership that which is in reality
common property . . . .").
47. Murray v. National Broadcasting Co., Inc., 844 F.2d 988, 993
(2d. Cir.), cert. denied, 488 U.S. 955 (1988).
48. Sellers v. American Broadcasting Co., 668 F.2d 1207 (11th
49. Id. at 1209.
51. Id. at 1210 & n.5.
52. Granoff v. Merrill Lynch & Co., Inc., 775 F. Supp. 621
(S.D.N.Y. 1991), aff'd without opinion, 962 F.2d 2 (2d Cir.
53. Id. at 630.
54. How J. Ryan & Assoc. v. Century Brewing Ass'n, 55 P.2d 1053
55. Marcus Advertising, Inc. v. M.M. Fisher Assoc., Inc., 444
F.2d 1061 (7th Cir. 1971).
56. Downey v. General Foods Corp., 286 N.E.2d 257 (N.Y. 1972).
57. Many courts have concluded that protecting ideas as property
would allow an idea to be removed from the public domain thereby
reducing the ideas available for development and exploitation.
Nimmer, supra note 44, at 120.
58. Richter v. Westab, Inc., 529 F.2d 896 (6th Cir. 1976).
59. Id. at 898.
60. Masline v. New York, N. H. & H. R. Co., 112 A. 639 (Conn.
61. Id. at 641.
62. In Hamilton National Bank v. Belt, 210 F.2d 706 (D.C. Cir.
1953), the court noted that in the field of radio broadcasting a
continuum existed with regard to when ideas for radio shows would
be protectible. At the first end of the continuum exists a "mere
generality" for a radio show which is unprotectible. At the
opposite end of the continuum is "a full script containing the
words to be uttered and delineating the action to be portrayed"
which is protectible. Id. at 709. If an idea falls between the
two ends of the continuum, the idea must be evaluated to
determine if it is far enough along on the continuum to be
protectible as property. Id. at 709-10. See also Bowen v.
Yankee Network, 46 F. Supp. 62, 63-64 (D. Mass. 1942) (idea must
be fixed in some concrete form before property rights can arise);
Educational Sales Programs, Inc. v. Dreyfus Corp., 317 N.Y.S.2d
840, 843 (N.Y. Sup. Ct. 1970) ("Not every `good idea' is a
legally protectible idea.").
63. In Belt v. Hamilton National Bank, 108 F. Supp. 689, 691
(D.D.C. 1952), the court stated that an idea "must be more than a
mere abstraction" to be protected by property law. It must be
novel and reduced to a concrete detailed form.
64. See Richter v. Westab, Inc., 529 F.2d 896 (6th Cir. 1976)
The law does not favor the protection of abstract ideas
as the property of the originator. An idea should be
free for all to use at least until someone is able to
translate such idea into a sufficiently useful form
that it may be patented or copyrighted. Thus
competition in the use of ideas is a social good,
hastening the process of invention.
Id. at 902. See also Stanley v. Columbia Broadcasting Sys.,
Inc., 221 P.2d 73, 84 (Cal. 1950) (Traynor, J., dissenting).
65. See Pierson v. Post, 3 Cai. R. 175 (N.Y. Sup. Ct. 1805).
66. "In essence the requirement of concreteness would seem to be
but another way of requiring that the idea be sufficiently
developed so as to constitute `property.'" Nimmer, supra note
44, at 140. See also Barrett, supra note 44, at 712-16
(discussion of the concrete requirement).
67. Frequently, courts assert the novelty and concrete
requirements as prerequisites to any cause of action involving an
idea. See, e.g., Bowen v. Yankee Network, Inc., 46 F. Supp. 62,
63 (D. Mass. 1942) ("Ideas not reduced to concrete form are not
protected."); Bram v. Dannon Milk Prod., Inc., 307 N.Y.S.2d 571
(N.Y. App. Div. 1970) ("Lack of novelty in an idea is fatal to
any cause of action for its unlawful use."); Ed Graham Prod.,
Inc. v. National Broadcasting Co., Inc., 347 N.Y.S.2d 766, 769
(N.Y. Sup. Ct. 1973) ("where plaintiff's idea is wholly lacking
in novelty, no cause of action in contract or tort can stand for
the alleged misappropriation of that idea.").
This analysis is misguided. A cause of action for use of an
idea based on breach of an express or implied contract should be
evaluated under a contract theory, not a property theory. If the
elements of offer, acceptance, and consideration are present, an
enforceable contractual bargain exists. This can best be
understood by comparing contracts for the sale of a car with the
sale of an idea. If A agrees to sell B a car, a contract exists.
If A does not own the car, even though B is unaware, a contract
still exists. If both A and B know the car belongs to X,
consideration is absent, and a contract does not exist.
Therefore, if A agrees to sell B an idea, the existence of a
valid contract depends on the knowledge of both A and B with
regard to who owns the idea that is the subject of the agreement.
If the idea is not novel, A does not own the idea, which means
that others have access and the right to use the idea.
Nevertheless, if B is unaware of the idea, a contract between A
and B to sell the idea to B is created. If the contract for sale
of the idea involves an idea that both A and B are aware of, then
consideration is lacking, and no contract is created. If an idea
lacks novelty, it is in the public domain. Therefore, it could be
argued that public domain status provides everyone with knowledge
of the idea such that an agreement to sell such an idea is not an
enforceable contract, for lack of consideration. However, not
everyone may be aware of the public domain status of an idea. If
B is actually unaware that a particular idea is in the public
domain and she enters a contract to purchase that idea from A, an
enforceable contract should exist. If B is actually unaware that
the idea she contracts to buy is in the public domain, such a
contract is a benefit to her since it gives her access to an idea
of which she was previously unaware. See Aronson v. Quick Point
Pencil Co., 440 U.S. 257 (1979) (enforcing contract to pay
royalties on new keyholder design despite public domain status of
design); Stanley v. Columbia Broadcasting Sys., Inc., 221 P.2d
73, 85 (Cal. 1950) (disclosure of a public domain idea can still
be consideration for and subject of enforceable contract). But
see Sellers v. American Broadcasting Co., 668 F.2d 1207, 1210 n.5
(11th Cir. 1982); Granoff v. Merrill Lynch & Co., Inc., 775 F.
Supp. 621, 627 (S.D.N.Y. 1991) (disclosure of idea cannot be
consideration for a contract when idea is not novel); Schonwald
v. F. Burkart Mfg. Co., 202 S.W.2d 7, 13 (Mo. 1947) ("contracts
to disclose ideas, which are widely known and generally
understood, are held to have no validity. When ideas . . . are
so known and understood by most people, contracts for their
disclosure may well be said to be without consideration . . . .").
Additionally, disclosure of an idea pursuant to a contract
can be viewed as a service. Therefore, the novelty or
concreteness of the idea should be irrelevant. Nimmer, supra
note 44, at 129-30. "The lawyer or doctor who applies
specialized knowledge to a state of facts and gives advice for a
fee is selling and conveying an idea. In doing so he is
rendering a service" for which he is entitled to be compensated
without regard to whether the idea conveyed is novel or concrete.
Desny v. Wilder, 299 P.2d 257, 266 (Cal. 1956).
Protection of an idea via contract law does not interfere
with the underlying policies of intellectual property law. A
contract is effective only between the parties to the contract.
It does not withdraw the idea from the public domain. Anyone not
a party to the contract can freely use the idea. Stanley v.
Columbia Broadcasting Sys., Inc., 221 P.2d 73, 85 (Cal. 1950)
(Traynor, J., dissenting).
68. This analytical approach is similar to the approach used in
the tort action of negligence. Negligence requires a showing of
causation which comprises establishing both "but for" causation
and "proximate cause." The chain of causation under the "but
for" test would be very long in many situations. However, the
law recognizes from a policy perspective that causation must be
cutoff at some point. This is the purpose of "proximate cause."
If policy or equity dictates extending liability to someone in
the "but for" causation chain, then proximate cause is found to
exist. However, if policy or equity dictates immunizing someone
in the "but for" causation chain from liability, a finding of no
"proximate cause" is made.
69. See Official Airlines Schedule Info. Serv., Inc. v. Eastern
Air Lines, Inc., 333 F.2d 672, 676 (5th Cir. 1964) (releasing
novel idea for a radio show into the public domain by public
broadcasting vitiated property rights in the idea).
70. RESTATEMENT (FIRST) OF TORTS 757, cmt. b (1939). For a
review of decisions adopting this definition, see JAY DRATLER,
JR., INTELLECTUAL PROPERTY LAW: COMMERCIAL, CREATIVE, AND
INDUSTRIAL PROPERTY 4.02, at 4-11 nn.4-5 (1993), and ROGER
M. MILGRIM, MILGRIM ON TRADE SECRETS 2.01, at 2-3 n.2 (1992).
71. UNIFORM TRADE SECRETS ACT 1-11, 14 U.L.A. 433 (1985).
72. UNIFORM TRADE SECRETS ACT, 14 U.L.A. 78 (Supp. 1993). This
act has been adopted by thirty-eight jurisdictions.
73. UNIFORM TRADE SECRETS ACT 1(4), 14 U.L.A. 438 (1985).
74. DRATLER, supra note 69, 4.02, at 4-11 to 4-12. See
Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 475 (1974) ("The
subject of a trade secret must be secret, and must not be of
public knowledge or of a general knowledge in the trade or
business."). See also Philip L. Burke, The `Non-Informing Public
Use' Concept and its Application to Patent-Trade Secret
Conflicts, 63 J. PAT. [& TRADEMARK] OFF. SOC'Y 459, 465-68
75. See Lehman v. Dow Jones & Co., Inc., 783 F.2d 285, 298 (2d
76. The Official Comment to section 1 of the Uniform Trade
Secrets Act states:
[t]he definition of "trade secret" contains a
reasonable departure from the Restatement of Torts
(First) definition which required that a trade secret
be "continuously used in one's business." The [Uniform
Act] definition . . . extends protection to a plaintiff
who has not yet had an opportunity or acquired the
means to put a trade secret to use.
UNIFORM TRADE SECRETS ACT 1, cmt., 14 U.L.A. 439 (1985).
77. DRATLER, supra note 69, 4.03, at 4-37.
78. What constitutes reasonable secrecy efforts can often be
determined by a mathematical comparison of the value of the trade
secret with the costs of various levels of secrecy. For example,
if a secret manufacturing process has a potential value of nine
hundred million dollars, an expenditure of one million dollars to
maintain its secrecy may be reasonable. In contrast, if a trade
secret only has a potential value of five hundred thousand
dollars, an expenditure of four hundred thousand dollars to
protect its secrecy may be unreasonable. See DRATLER, supra note
69, 4.03[a], at 4-42.
79. Courts generally require some degree of originality, novelty,
invention, or discovery before trade secret status is found to
exist. Despite the different terminology, such requirements are
really a short-hand way of determining if the know-how at issue
is generally known and therefore not subject to possession, or
whether it was not generally known and therefore subject to
possession by anyone. See MILGRIM, supra note 69, 2.08, at 2-
191. See also Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470,
80. See, e.g., Forest Lab., Inc. v. Formulations, Inc., 299 F.
Supp. 202 (E.D. Wis. 1969) (novelty unnecessary), rev'd in part,
452 F.2d 621 (7th Cir. 1971); Sarkes Tarzian, Inc. v. Audio
Devices, Inc., 166 F. Supp. 250, 265 (S.D. Cal. 1958) (some
degree of novelty required), aff'd, 283 F.2d 695 (9th Cir. 1960),
cert. denied, 365 U.S. 869 (1961). See also MILGRIM, supra note
69, 2.08, at 2-191.
81. See 35 U.S.C. 103 (1988). However, this use of novelty is
actually inaccurate since under the patent law, novelty means an
invention that is new and original to the inventor. Id. at
102. Limiting patent rights to inventions that are more than
mere obvious advances in technology is defined as the non-obvious
requirement. Id. at 103.
82. See Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476 (1974)
("Novelty, in the patent law sense, is not required for a trade
secret . . . .").
84. Id. See also DRATLER, supra note 69, 4.04[c], at 4-60
85. MILGRIM, supra note 69, 2.05, at 2-82.
86. Id. 5.04, at 5-139.
87. Id. 2.08, at 2-209. See also UNIFORM TRADE SECRETS ACT,
1, cmt., 14 U.L.A. 439 (1985) ("Because a trade secret need not
be exclusive to confer a competitive advantage, different
independent developers can acquire rights in the same trade
88. See Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 475
89. See Forest Lab., Inc. v. Formulations, Inc., 299 F. Supp. 202
(E.D. Wis. 1969), rev'd in part, 452 F.2d 621 (7th Cir. 1971).
See also RESTATEMENT (FIRST) OF TORTS 757 (1939) which states:
"One who discloses or uses another's trade secret, without a
privilege to do so, is liable to the other if . . . his
disclosure or use constitutes a breach of confidence reposed in
him by the other in disclosing the secret to him . . . ." In
addition to a contractual basis for maintaining secrecy, the
existence of certain relationships may require a party to
maintain secret know-how in confidence. For example, a fiduciary
relationship, which normally arises between employers and
employees and between principals and agents, may require an
employee or agent to maintain the confidences of her employer or
principal. See RESTATEMENT (SECOND) OF AGENCY 13, 387, 395
90. See Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1002 (1984).
91. See MILGRIM, supra note 69, 2.05, at 2-82 (courts
uniformly agree that an unprotected disclosure of secret know-how
terminates its trade secret status). See also Egbert v.
Lippmann, 104 U.S. 333 (1881) (finding unrestricted disclosure of
invention to one person was public use of invention under patent
law). See generally Videotronics, Inc. v. Bend Electronics, 564
F. Supp. 1471, 1475 (D. Nev. 1983) (public disclosure of trade
secret destroys basis of trade secret protection).
92. See, e.g., Cyborg Sys., Inc. v. Management Science Am., Inc.,
1978-1 Trade Cas. (CCH) 61,927 (N.D. Ill. 1978) (disclosure of
software, subject to a confidential agreement, to more than 1,300
customers did not destroy proprietary nature of the software).
93. See Lehman v. Dow Jones & Co., Inc., 783 F.2d 285, 298 (2d
94. See UNIFORM TRADE SECRETS ACT 1(4), 14 U.L.A. 438 (1985).
95. See, e.g., Victor Chem. Works v. Iliff, 132 N.E. 806, 812
(Ill. 1921). See also DRATLER, supra note 69, 4.02, at 4-
17. See generally MILGRIM, supra note 69, 2.02, at 2-29.
96. See, e.g., Graham v. Safe Harbor Water Power Corp., 173 A.
311, 312 (Pa. 1934). See also Silverman v. CBS, Inc., 870 F.2d 40
(2d Cir.) (non-use of trademarks for twenty-one years held not to
be abandonment of trademarks), cert. denied, 492 U.S. 907 (1989).
97. See, e.g., Roebuck v. Mecosta County Rd. Comm'n, 229 N.W.2d
343, 345-46 (Mich. Ct. App. 1975); Lindsey v. Clark, 69 S.E.2d
342, 344 (Va. 1952).
98. Courtesy Temporary Serv. v. Camacho, Inc., 272 Cal. Rptr.
352, 357 (Cal. Ct. App. 1990).
99. See, e.g., Ferroline Corp. v. General Aniline & Film Corp.,
207 F.2d 912, 921 (7th Cir. 1953), cert.denied, 347 U.S. 953
(1954); Courtesy Temporary Serv. v. Camacho, Inc., 272 Cal. Rptr.
352, 357 (Cal. Ct. App. 1990); Sinclair v. Aquarius Elec., Inc.,
116 Cal. Rptr. 654, 658 (Cal. Ct. App. 1974).
100. UNIFORM TRADE SECRETS ACT, 1, cmt., 14 U.L.A. 439 (1985).
101. Id. 1(4)(i), at 438.
102. Jones v. Ulrich, 95 N.E.2d 113, 118 (Ill. App. Ct. 1950).
103. Inadequate capitalization is a significant problem facing
many small and medium-size business enterprises and is a frequent
cause of business failure. Andrew Beckerman-Rodau, Selecting a
Business Entity for a Small Business: Non-Tax Considerations, 93
DICK. L. REV. 519, 539 (1989).
104. The current draft of the new RESTATEMENT (THIRD) OF UNFAIR
COMPETITION appears to adopt the value standard. Section 39 of
the Restatement defines a trade secret as "any information that
can be used in the operation of a business or other enterprise
and that is sufficiently valuable and secret to afford an actual
or potential economic advantage over others." 61 U.S.L.W. 2713
(May 25, 1993) (quoting from the RESTATEMENT (THIRD) OF UNFAIR
COMPETITION (tentative draft, 1993)).
105. See supra note 63 and accompanying text.
106. The legislative history of the Uniform Trade Secrets Act
expressly states that negative information can be a trade secret.
UNIFORM TRADE SECRETS ACT, 1, cmt., 14 U.L.A. 439 (1985).
107. Authority exists under the Restatement definition of trade
secrets that negative information cannot be a trade secret
because the use requirement is not satisfied. See DRATLER, supra
note 69, 4.02, at 4-17.
108. See E. I. duPont deNemours & Co. v. Christopher, 431 F.2d
1012 (5th Cir. 1970), cert. denied, 400 U.S. 1024 (1971).
109. See MILGRIM, supra note 69, 1.08, at 1-55 to 1-59
(discussion of cases that reject property theory for trade
secrets). See also DRATLER, supra note 69, 4.04, at 4-70 to
4-71. But see Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1001-04
(1984) (trade secrets held to be property under Fifth Amendment
Takings clause); Spiselman v. Rabinowitz, 61 N.Y.S.2d 138, 140
(N.Y. App. Div. 1946) (stating that trade secrets are property).
110. In Bove v. Donner-Hanna Coke Corp., 258 N.Y.S. 229 (N.Y.
App. Div. 1932), an industrial plant, located adjacent to
plaintiff's property, ran twenty-four hours per day. The
plaintiff alleged that the plant produced an unusual amount of
dirt and soot that prevented her from opening certain windows in
her house, affected her health, and reduced the rental value of
the apartments located on her property. Despite the fact that
plaintiff lived on the property prior to the plant opening, the
court refused to enjoin the plant operation or to require the
plant to compensate plaintiff.
111. A tenancy by the entirety interest is not subject to
attachment by a creditor of only the husband or the wife. In
contrast, upon divorce the tenancy by the entireties interest is
converted into a tenancy in common, and a creditor of either the
husband or the wife can acquire the husband's or the wife's
interest. Consequently, the permissible action of divorce by one
of the parties destroys part of the property rights of the
husband and wife. See CUNNINGHAM, supra note 10, 5.5, at 202-
112. Trade secret law prohibits commercially immoral methods,
even if they are legal, in furtherance of its underlying policy
of regulating competition to achieve fairness in business
practices among competitors. See E. I. duPont deNemours & Co. v.
Christopher, 431 F.2d 1012 (5th Cir. 1970), cert. denied, 400
U.S. 1024 (1971) (legal airplane flight over competitor's under
construction plant in order to learn about industrial process to
be used in the plant was commercially unfair and therefore an
improper means of obtaining information).
113. The patent law states that "patents shall have the
attributes of personal property." 35 U.S.C. 261 (1988).
114. Patent rights are limited to "any new and useful process,
machine, manufacture, or composition of matter, or any new and
useful improvement thereof," (35 U.S.C. 101 (1988)), "any new,
original and ornamental design for an article of manufacture,"
(35 U.S.C. 171 (1988)), and new and distinct plant varieties
that are asexually reproduced. (35 U.S.C. 161 (1988)).
Additionally, patent rights can be granted only for new
innovations that are non-obvious to someone skilled in the
relevant technology. 35 U.S.C. 103 (1988).
115. 35 U.S.C. 102(a)-(b) (1988). See also 35 U.S.C. 101
(1988) (invention must be "new"); 35 U.S.C. 171 (1988) (design
must be "new" and "original"); 35 U.S.C. 161 (1988) (plant must
116. See Graham v. John Deere Co. of Kansas City, 383 U.S. 1, 6
117. See 35 U.S.C. 112 (1988).
120. Id. 101.
121. Id. 103. See also Graham v. John Deere Co. of Kansas
City, 383 U.S. 1, 17-18 (1966) (stating the multi-part test for
determining if an invention is obvious).
122. A patent term is typically seventeen years. 35 U.S.C. 154
(1988). Patents issued for ornamental designs have a fourteen
year term. Id. 173. In certain limited cases, a patent term
can be extended. Id. 155-56.
123. Graham v. John Deere Co. of Kansas City, 383 U.S. 1, 9
124. See 35 U.S.C. 271(a) (1988).
125. Id. 101.
126. Id. 102(b). Additionally, an innovation can be placed in
the public domain for longer than one year without abandonment of
patent rights if such public use is necessary for experimental
purposes in order to perfect the invention. This additional time
period is granted pursuant to a judicially created doctrine.
City of Elizabeth v. American Nicholson Pavement Co., 97 U.S. 126
127. See 35 U.S.C. 102 (1988).
128. This is contrary to the Supreme Court's statement that a
patent may not be granted if the effect is to remove free access
to information in the public domain. Graham v. John Deere Co. of
Kansas City, 383 U.S. 1, 6 (1966).
129. See 35 U.S.C. 102 (1988).
130. See Pierson v. Post, 3 Cai. R. 175 (N.Y. Sup. Ct. 1805).
131. See 35 U.S.C. 102(c) (1988).
132. See id. 102(g); International Glass Co. v. United States,
408 F.2d 395, 403 (Cl. Ct. 1969) (concealment of invention will
result in loss of right to be granted a patent). See also
Gillman v. Stern, 114 F.2d 28, 31 (2d Cir. 1940), cert. denied,
311 U.S. 718 (1941); Burke, supra note 73, at 473.
top of page