The Slippery Slope of Secrecy: Why Patent Law Preempts Reverse-Engineering Clauses in Shrink-Wrap Licenses

Article excerpt

As the world enters the twenty-first century, the U.S. economy is becoming increasingly driven by the value of ideas. (1) The United States has experienced a sharp increase during the past decade in the number (2) and value of patents filed, (3) primarily as a response to the rapid growth of high technology industry. In fact, the "competitive battles once fought for control of markets and raw materials are now increasingly being waged over the exclusive rights to new ideas and inventions." (4)

This growth and competition has created new legal challenges for America's intellectual property (IP) system. (5) One important challenge to this system is the proliferation of avoidance techniques threatening the underlying policies behind federal copyright and patent laws. One technique increasingly being employed is the use of "shrink-wrap" licenses in an attempt to contract around the policies behind IP law. (6)

The policy behind federal patent law--allowing limited exclusivity in exchange for long-term contribution to the public domain--runs counter to some of the clauses contained in these license agreements. When courts uphold these agreements under state contract law they are expanding the degree of exclusivity enjoyed by patent holders. Therefore, a conflict arises between federal patent law and state contract law over exactly how rights are to be held. (7) It is well settled that when federal and state law directly conflict, the doctrine of preemption holds that the state law is subordinate to the goals of the federal government. (8) Patent law should thus preempt the portions of these license agreements that run counter to the federal policy. This Note asserts that patent law preempts specific clauses of shrink-wrap licenses, primarily those restricting reverse-engineering, decompilation, and disassembly of a particular item, and should continue to do so, barring a change to current patent law.

The policy behind granting patent holders the right to exclude in exchange for public disclosure of their inventions is the promotion of the continued development of technology. (9) Some limited contravention of the policy is acceptable. For example, trade secret law runs contrary to this policy but is acceptable because it does not restrict valid reverse engineering (10) of unpatentable subject matter. (11) In fact, the Supreme Court has held that valid reverse engineering that reveals trade secrets negates any protection of unpatentable subject matter once the secret becomes public. (12) To allow state contract law, through the mechanism of shrink-wrap licenses, to prevent reverse engineering runs contrary to the policy surrounding the development of patent law, and would create a slippery slope that could result in all new inventions being shrouded in shrink-wrap with a license clause prohibiting reverse engineering. This secrecy would result in a drastic slowdown in the development of novel ideas, and would suppress the competitive spirit inherent in the U.S. economy.

This Note contains three parts. The first section discusses the historical development of the patent law, including its constitutional basis and the policy behind it at the time of the drafting of the Constitution. This portion also delineates the development of patent law from the years following the American Revolution to the present, and discusses recent overseas developments regarding the Trade Related Aspects of Intellectual Property (TRIPS) (13) agreement as part of the Uruguay Round of General Agreement on Tariffs and Trade (GATT) (14) talks. (15)

The second section of this Note provides an overview of preemption law, including its historical basis in the Constitution, its early exposition in landmark cases such as McCulloch v. Maryland (16) and Gibbons v. Ogden, (17) and the current state of preemption law. (18) This section then concentrates on the preemption history associated with patent law in particular, including policy justifications, and reviews the current state of the law in this area. …