Kewanee v. Bicron: Can State Trade Secret Laws and Federal Patent Laws Work Together?

When you think about protecting your company’s big ideas, the first thought might be patents—a way to secure exclusive rights for your invention. But what happens when you decide to keep your innovation a secret instead? That’s where trade secrets come into play, and in Kewanee Oil Co. v. Bicron Corp., the Supreme Court tackled whether state trade secret laws could stand alongside federal patent law.

This case is a must-know for anyone working with intellectual property because it shows how different legal protections can work together (or not). Let’s break it down.

What Happened?

The story starts with synthetic crystals—special materials used to detect radiation. Kewanee Oil Co. developed a unique, confidential process to grow these crystals. Instead of applying for a patent, they kept it as a trade secret, making employees sign non-disclosure agreements to ensure the secret stayed under wraps.

But things went sideways when some employees left Kewanee and took jobs with Bicron Corp., a competitor. These employees shared Kewanee’s trade secret, and Bicron used it to grow their own crystals. Naturally, Kewanee wasn’t happy and sued Bicron under Ohio’s trade secret law, seeking to stop them from using the stolen process.

This image was created with Leonardo.ai.

This image was created with Leonardo.ai.

The Courtroom Drama

At first, Kewanee won. The District Court ruled in their favor and granted an injunction to stop Bicron from using the process. But on appeal, the Sixth Circuit Court flipped the decision. It agreed that Bicron had taken Kewanee’s trade secret but argued that Ohio’s trade secret law was preempted by federal patent law. In their view, Kewanee’s process didn’t qualify for patent protection, so they couldn’t protect it through trade secret laws either. Kewanee wasn’t ready to give up. They appealed to the Supreme Court, and the justices had to decide: Are state trade secret laws preempted by federal patent law?

The Supreme Court Weighs In The Supreme Court reversed the Sixth Circuit, ruling that state trade secret laws are not preempted by federal patent law. This decision was a big win for Kewanee and for the concept of trade secrets overall. Here’s what the Court had to say:

Why State Trade Secret Laws Are Safe

• Trade Secrets and Patents Are Different Tools
  Patents require public disclosure in exchange for exclusive rights for a limited time (20 years now, but 17 years back in the 1970s). Trade secrets, on the other hand, allow businesses to keep valuable information private for as long as it remains secret. Since trade secrets are vulnerable to lawful methods like reverse engineering, they don’t interfere with the public disclosure goals of patent law.
• Inventors Get to Choose
  The Court recognized that inventors have the right to choose between patent protection and trade secret protection. Patents offer stronger, time-limited protections, while trade secrets last indefinitely but are riskier to maintain.

• Trade Secrets Benefit the Economy
  
  The Court also highlighted the economic benefits of trade secret laws. They reduce the number of frivolous patent applications, keep the patent office from being overwhelmed, and encourage competition by allowing businesses to protect their innovations in different ways.

• Congress Didn’t Exclude Trade Secret Laws
  
  The Court found no evidence that Congress intended to preempt state trade secret laws when drafting federal patent laws. Without this intent, states are free to create and enforce their own trade secret protections.

The Decision: Trade Secrets and Patents Can Coexist

The Supreme Court’s ruling ensured that Kewanee could use Ohio’s trade secret law to protect its process for making synthetic crystals. The case was sent back to the District Court, which reinstated the injunction against Bicron. This case clarified that state trade secret laws don’t conflict with federal patent laws. Instead, they give inventors and businesses more options for protecting their ideas and innovations.

A Quick Word About the DTSA

Even with the newer Defend Trade Secrets Act (DTSA), state trade secret laws remain alive and well. The DTSA, which was passed in 2016, provides a federal cause of action for trade secret misappropriation, meaning plaintiffs can choose to bring their cases in federal court. However, the DTSA doesn’t preempt state laws—it works alongside them. Businesses now have both state and federal tools to protect their trade secrets.

This image was created with Leonardo.ai.

This image was created with Leonardo.ai.