Though an agreement to give exclusive rights may be valid, an agreement to boycott those who interfere with such rights is illegal.14

§ 1646. Contracts not to divulge trade secrets are valid.

The law recognizes a right of property in trade secrets. 15 As such property loses its only value if the secret is disclosed, any one who acquires knowledge thereof in a confidential capacity, as that of an employee, is under an obligation, which equity will enforce, not to disclose the secret or use it for his own advantage, even if he makes no express contract to this effect.16 It necessarily follows that express contracts which prohibit the disclosure by those entrusted with knowledge of them are

use.

valid and may be as broad as is necessary to protect the owner from injury by the disclosure of the secret or its competitive Especially, contracts by employees may restrain them from disclosing secrets of their employment, 17 and the owner of a secret on selling it, may effectively promise not to compete by making use of the process himself or divulging it to others. 18 Indeed the sale of a secret process as such carries with it the implied obligation not to disclose it to others. 19 But the fact that an article is manufactured by a secret process will not validate a system of contracts for maintaining the price of the article. 20 And if a trade secret relates to an article of prime necessity, 21 or if the effect of restriction will virtually preclude an employee from ever using his professional or technical skill except in the promisee's employ, 22 it is open to question whether courts of equity at least will lend their aid to the enforcement of the promise by injunction. It has been said: 23 "Trade Secrets, the names of customers, all such things, which in sound philosophical language are denominated objective knowledge these may not be given away by a servant; they are his master's property, and there is no rule of public interest which prevents

17 Thibodeau v. Hildreth, 124 Fed. 892, 60 C. C. A. 78, 63 L. R. A. 480; Magnolia Metal Co. v. Price, 65 N. Y. App. Div. 276, 72 N. Y. S. 792; Witkop & Holmes Co. v. Boyce, 61 N. Y. Misc. 126, 112 N. Y. S. 874. A contract also is enforceable by which the employee's compensation is diminished if he leaves his employment for a competitive occupation. Knapp v. S. Jarvis Adams Co., 135 Fed. 1008, 70 C. C. A. 536; Bossert v. S. Jarvis Adams Co., 135 Fed. 1015, 70 C. C. A.

23.

18 Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U. S. 373, 402, 55 L. Ed. 502, 31 Sup. Ct. 376; Chicago Board of Trade v. Christie Grain & Stock Co., 198 U. S. 236, 49 L. Ed. 1031, 25 Sup. Ct. 637; C. F. Simmons Medicine Co. v. Simmons, 81 Fed. 163; Thum v. Tloczynski, 114 Mich. 149, 72 N. W. 140, 38 L. R. A. 200,

68 Am. St. Rep. 469; Grand Rapids Wood Finishing Co. v. Hatt, 152 Mich. 132, 115 N. W. 714; Vulcan Detinning Co. v. American Can Co., 67 N. J. Eq. 243, 58 Atl. 290; Tode v. Gross, 127 N. Y. 480, 28 N. E. 469, 13 L. R. A. 652, 24 Am. St. Rep. 475.

19 Central Transportation Co. v. Pullman's Palace Car Co., 139 U. S. 24, 53, 35 L. Ed. 55, 11 Sup. Ct. 478; Vickery v. Welch, 19 Pick. 523.

20 Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U. S. 373, 55 L. Ed. 502, 31 Sup. Ct. 376.

21 See Mallinckrodt Chemical Works v. Nemnich, 83 Mo. App. 6, 13, affd. 169 Mo. 388.

22 See Taylor Iron & Steel Co. v. Nichols, 73 N. J. Eq. 684, 69 Atl. 186, 24 L. R. A. (N. S.) 933, 133 Am. St. Rep. 753.

23 Herbert Morris, Ltd., v. Saxelby. [1916] 1 A. C. 688, 714, per Lord Shaw,

a transfer of them against the master's will being restrained. On the other hand, a man's aptitudes, his skill, his dexterity, his manual or mental ability-all those things which in sound philosophical language are not objective, but subjective—they may and they ought not to be relinquished by a servant; they are not his master's property; they are his own property; they are himself. There is no public interest which compels the rendering of those things dormant or sterile or unavailing; on the contrary, the right to use and to expand his powers is advantageous to every citizen, and may be highly so for the country at large." The importance of the distinction thus suggested may be conceded, but it will not solve all difficulties arising from restrictive covenants by employees. The objective is frequently so entwined with the subjective, that as a practical matter, a former employee cannot use his subjective skill in competition with his former employer without utilizing objective knowledge gained in his old employment. In such a case all circumstances must be considered, and unless excessive and unreasonable hardship is thereby caused a covenant exacted to protect the employer's business should be enforced even though the employee is thereby deprived of exerting his subjective skill in a particular direction.

Moreover, the inquiry is pertinent whether an employer as a condition of developing a high degree of even purely subjective skill in an employee, may not fairly exact a promise that the skill shall not later be exercised in competition with himself. If the scope of the promise leaves ample opportunity for the exercise of the employee's skill where he will not compete with his old employee, there seems no reason why the promise should be regarded as opposed to public policy, and the American decisions support this conclusion.24

§ 1647. Patented and copyrighted articles.

The owner of a patent acquires a legal monopoly. He needs no contract or combination in restraint of trade to make his monopoly complete and secure. He may keep his invention out of use altogether, 25 and may exercise "the power of grant24 See supra, § 1643, n. 90. S. 405, 52 L. Ed. 1122, 22 S. Ct.

25 Paper Bag Patent Case, 210 U. 748.

ing it to some and withholding it from others, a right of selection of persons and terms." 26 But the ownership of competing patents by different persons gives them no right to make a monopolistic combination of their rights. Any such combination involving interstate commerce is obnoxious to the Sherman Act,27 and contracts in furtherance of the monopolistic purpose of such a combination are invalid. 28 Moreover, there is a limit to the right of a patentee to impose conditions on licenses or grants, or to exact promises in return for them. The conditions or promises must not be illegal, and if they have for their object the creation of a monopoly broader than that granted by the patent, as by subjecting a whole industry to a plan for fixing prices 29 or even for the fixing of resale prices for the patented article itself, 30 or for the wholesale admission of the validity of the patents of the licensor, 31 the patent laws afford no protection. Whether at common law by contract or condition the purchasers of a patented article can be restricted to the exclusive use of supplies or other goods from the patentee is not so clear. 32 Probably this depends on whether such a contract or condition is part of a scheme to obtain a monopoly wider than that of the patented article. 33 Certainly this result cannot be achieved by mere notices on patented articles. 34 The principles governing copyrighted articles are doubtless similar.35 The Clayton Act has now made

26 United States v. United Shoe Mach. Co., 247 U. S. 32, 62 L. Ed. 968, 38 S. Ct. 473, 482.

27 United Shoe Machinery Co. v. La Chappelle, 212 Mass. 467, 99 N. E. 289, Ann Cas. 1913 D. 715. See also United States v. United Shoe Mach. Co., 247 U. S. 32, 62 L. Ed. 968, 38 S. Ct. 473.

28 United Shoe Mach. Co. v. La Chapelle, 212 Mass. 467, 99 N. E. 289, Ann. Cas. 1913 D. 715.

29 Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20, 57 L. Ed. 107, 33 S. Ct. 9.

30 Boston Store v. American Graphophone Co., 246 U. S. 8, 62 L. Ed. 551, 38 S. Ct. 257, Ann. Cas. 1918 C. 447. See further § 1649.

31 Pope Mfg. Co. v. Gormully, 144 U. S. 224, 36 L. Ed. 414, 12 Sup. Ct. Rep. 637.

32 That such restrictions may be imposed in a lease of patented machinery as distinguished from a sale was held in United States v. United Shoe Mach. Co., 247 U. S. 32, 38 S. Ct. 473, 62 L. Ed. 968.

33 See supra, § 1645.

34 Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U. S. 502, 61 L. Ed. 871, 37 S. Ct. 416, L. R. A. 1917 E. 1187, Ann. Cas., 1918, A. 959.

35 See Bobbs-Merrill Co. v. Straus, 210 U. S. 339, 52 L. Ed. 1086, 28 S. Ct. 722; Scribner v. Straus, 210 U. S. 352, 52 L. Ed. 1094, 28 S. Ct. 735; Straus

such contracts by one engaged in Interstate Commerce illegal. 36

§ 1648. Agreement among competitors to limit competition or maintain prices.

Numerous agreements have been made, especially prior to 1900, by competing firms or corporations having for their object fixing prices, pooling profits, limiting output, controlling supply, or dividing territory, for the purpose either of limiting competition for business or of precluding the lowering of prices by means of competition. Such agreements have been almost universally held invalid because of their tendency to injure the public.37 Under the English law it is not clear that a contract