## Facts

- In 1881 and 1885, Dr. J. J. Lawrence agreed to disclose the secret formula for Listerine to J. W. Lambert and Lambert Pharmacal Company in exchange for royalties.
- The agreements required royalties based on quantities of Listerine manufactured or sold, payable for as long as the licensee manufactured or sold Listerine.
- Warner-Lambert, as successor to Lambert, paid royalties for roughly 75 years, totaling more than $22 million and exceeding $1.5 million annually at the time of suit.
- Over time, the Listerine formula became public knowledge without wrongdoing by either side.
- Warner-Lambert sought a declaratory judgment that it had no further obligation to pay royalties and sought restitution of post-filing payments, arguing the royalty obligation should end when secrecy ended.
- Defendants, successors in interest to Dr. Lawrence, relied on the contract’s express terms and argued the risk of eventual disclosure was allocated to the licensee absent an express limitation.

## Issues

1. Whether a court should imply a term in a trade-secret royalty agreement that royalties end when the information ceases to be secret.
2. Whether patent or copyright policy requires limiting trade-secret royalties once the information enters the public domain.
3. Whether any public policy bars enforcing an agreement requiring royalties for as long as the licensee continues manufacturing or selling the product.

## Decision

- The district court granted defendants summary judgment and dismissed the complaint.
- The court refused to imply a “secrecy-duration” limitation not stated in the contracts.
- The court held Warner-Lambert remained obligated to pay royalties for as long as it manufactured or sold Listerine, even though the formula was no longer secret.
- The Second Circuit affirmed per curiam on the district court’s opinion.

## Legal Principles

- Courts generally enforce trade-secret royalty contracts according to their plain terms and will not add a termination condition tied to continued secrecy absent contractual language.
- A purchaser or licensee of a trade secret assumes the risk of future public disclosure unless the contract allocates that risk by limiting duration or providing for termination.
- Patent and copyright duration limits do not automatically apply by analogy to trade-secret licensing; absent a statutory limit, parties may agree to continuing royalties.
- In the absence of a contrary public policy, long-standing performance consistent with the contract supports enforcing the parties’ bargain as written.

## Conclusion

The courts enforced an open-ended trade-secret royalty obligation requiring payment for as long as Listerine was manufactured or sold, declining to imply a termination term based on loss of secrecy and rejecting patent- or copyright-based limits as controlling.


Warner-Lambert Pharm. Co. v. John J. Reynolds, Inc., 178 F. Supp. 655 (S.D.N.Y. 1959), aff’d, 280 F.2d 197 (2d Cir. 1960)