Warner-Lambert Pharmaceutical Co. v. John J. Reynolds, Inc

Brief Fact Summary.

The Warner-Lambert Pharmaceutical Co. (Plaintiff) claimed that since the formula for Listerine was no longer a trade secret, it was not required to make further payments to John J. Reynolds, Inc. (Defendant) pursuant to earlier licensing agreements.

Synopsis of Rule of Law.

Parties are free to contract in any manner with respect to a secret formula or trade secret.

Facts.

In 1881, Warner-Lambert Pharmaceutical Co. (Warner-Lambert) (Plaintiff) acquired the formula for Listerine and signed licensing agreements with John J. Reynolds, Inc. (Defendant).  Warner Lambert (Plaintiff) then argued that the formula was not longer a trade secret as it had gradually become a matter of public knowledge.  Plaintiff asked for a judgment declaring that it was no longer obligated to make periodic payments to Defendant.  Plaintiff argued that regardless of the language in the contract, the court should imply a limitation upon its obligation to pay measured by the length of time that the Listerine formula remained secret.  Defendant claimed that the terms of the contract should control.

Issue.

Are parties free to contract in any manner with respect to a secret formula or trade secret?

Held.

(Bryan, J.)  Yes.  Parties are free to contract in any manner with respect to a secret formula or trade secret.  An individual who acquires a trade secret or secret formula takes it subject to the risk that there may be a disclosure.  If the parties desire the payments or royalties should continue only until the secret is disclosed to the public, it may simply be a part of the contract.  But there is no justification for implying such a provision if the parties do not include it in their contract.

Discussion.

This ruling is different from the cases regarding patents or copyrights.  Federal law controls the length of time that a monopoly can be granted for a patent or a copyright.  However, contract law overrides trade secret law since there is no statutory limit on the scope of trade secret protection.  Other courts have ruled that agreements that protect information already in the public domain may be unreasonable restraints of trade. &nbsp.