Aronson v. Quick Point Pencil Co

In Aronson v. Quick Point Pencil, 440 U.S. 257, 99 S.Ct. 1096, 59 L.Ed.2d 296 (1979), the Supreme Court held that federal patent law did not preempt state contract law regarding the enforcement of trade secret agreement if the "execution of the full purposes and objectives of Congress" in federal patent law were not thwarted. 440 U.S. at 262, 99 S.Ct. at 1099. In Aronson v. Quick Point Pencil Co., 440 U.S. 257, 99 S.Ct. 1096, 59 L.Ed.2d 296 (1979), the defendant had invented a new form of keyholder and applied for a patent. While the patent application was pending, the defendant entered into a licensing agreement with the plaintiff relating to her design. The agreement provided that the plaintiff-licensee would pay royalties of 5% of gross sales for use of the defendant's design. In the event that a patent was not obtained within five years, the royalty was to be reduced to 2 1/2% of gross sales. After the patent application was rejected, the plaintiff sought a declaratory judgment that the royalty agreement was unenforceable. The Supreme Court held that the agreement was not in conflict with federal patent law and was therefore valid and enforceable. The Court reasoned that the parties anticipated the risk that the patent would not issue, and specifically provided for this risk in the agreement. As consideration, the licensee received the benefit of inventor's new design immediately upon entering into the agreement, and was able to exploit the novelty of the device. The contract, the Court found, encouraged the federal interest in full disclosure of inventions or innovations. Therefore, the Court upheld the validity of the contract.