employment agreement Archives

Getting to the Core of It: Assignment Clause Is Ambiguous

by Katherine Pappas | May 30, 2024 | Patents

The US Court of Appeals for the Federal Circuit vacated and remanded a district court’s grant of summary judgment, finding that the language used in an invention assignment clause was subject to more than one reasonable interpretation (i.e., ambiguous) and thus remand was necessary for further fact finding. Core Optical Tech., LLC v. Nokia Corp., Case Nos. 23-1001; -1002; -1003 (Fed. Cir. May 21, 2024) (Dyk, Taranto, JJ.) (Meyer, J., dissenting).

Core Optical filed complaints against three groups of defendants alleging patent infringement. The lead defendant, Nokia, moved for summary judgment, arguing that Core Optical did not have standing to bring the patent infringement suit. Nokia argued that by virtue of an invention assignment clause in an employment-related agreement signed in 1990, the inventor, Dr. Core, had assigned the patent rights to TRW, his employer at the time of the invention. In the agreement, Dr. Core “agreed to disclose to TRW and automatically assign to TRW all of his inventions that ‘relate to the business or activities of TRW’ and were ‘conceived, developed, or reduced to practice’ during his employment with TRW.” Nokia argued that by virtue of that earlier assignment, the subsequent assignment to Core Optical was ineffective. The agreement had a carveout from the assignment for inventions “developed entirely on [Dr. Core’s] own time” that was unrelated to his work for TRW. According to Nokia, based on the assignment, Core Optical did not have standing to assert the patent. The district court agreed and granted Nokia’s motion for summary judgment. Core Optical appealed.

The Federal Circuit reviewed the district court’s grant of summary judgment de novo, following Ninth Circuit and California law relating to the underlying contract dispute and related factual determinations. Under California law, the “fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties” (citing City of Atascadero v. MLPF&S (1998)). In granting summary judgment, the district court had held that the 1990 invention assignment agreement’s carveout did not encompass Dr. Core’s PhD research, which undisputedly led to the invention claimed in the patent. That finding was based in part on the TRW fellowship program that supported and enabled Dr. Core’s PhD work. However, Core Optical presented evidence that “Dr. Core was careful not to work on his PhD research while ‘on the clock’ at TRW and not to use TRW equipment, facilities, or supplies when working on his PhD research.”

The Federal Circuit disagreed with the district court that the matter was subject to resolution on summary judgment. The Court agreed with Core Optical that the “entirely-own-time” phrase did not unambiguously express a mutual intent to designate all the time Dr. Core spent performing his PhD research as his own time or, as Nokia argued, to indicate that some of the time Dr. Core spent performing his PhD research was partly TRW’s time (as the district court held). The Federal Circuit walked through the undisputed facts, including that Dr. Core sought funding from TRW for his PhD research and [...]

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Fifth Circuit Rejects Recruiter’s Trade Secret Misappropriation and Contract Defenses

by Amol Parikh | Apr 18, 2024 | Trade Secrets

The US Court of Appeals for the Fifth Circuit affirmed a district court’s decision finding trade secret misappropriation and breach of contract based on a recruiter’s improper use of confidential client information. Counsel Holdings, Incorporated v. Jowers, Case No. 22-50936 (5th Cir. Apr. 1, 2024) (King, Ho, Engelhardt, JJ.) (per curiam).

In April 2006, Evan Jowers was hired by MWK (whose successor is Counsel Holdings) as a legal recruiter. Jowers signed an employment agreement with noncompete and nonsolicitation covenants. During his employment, Jowers relocated to Hong Kong, where he began recruiting for law firms in Asia. Jowers resigned from MWK in December 2006, after which he began working for another recruiting firm in Hong Kong called Legis Ventures.

MWK sued Jowers for trade secret misappropriation and breach of the restrictive covenants in the employment contract. MWK alleged that while Jowers was still employed with MWK, he submitted its candidates for employment through Legis Ventures. After a bench trial, the district court found in favor of MWK on both claims. As to the trade secret claim, the district court concluded that MWK’s customers’ “names, their clients, how much their practices were worth, their language skills, their goals for switching firms, and their law school records” constituted trade secrets. As for the contract claim, the district court found that enforcement of the restrictive covenants was justified because MWK’s client information was a legitimate business interest. Jowers appealed.

The Fifth Circuit affirmed. As to the trade secret claim, the Court explained that Jowers’s employment agreement explicitly required confidentiality and that MWK’s customers requested that Jowers keep their information secret. Despite the restrictions, Jowers divulged MWK’s customer information to others, including a competing recruitment firm, without authorization. The Fifth Circuit agreed with the district court’s determination that Jowers’s actions constituted trade secret misappropriation.

As to the breach of contract claim, Jowers argued that MWK lacked a “legitimate business interest.” The Fifth Circuit found no clear error with the district court’s determination that MWK’s client information was a legitimate business interest that justified enforcement of the restrictive covenant.

Making Waves: Post-Employment Contract Assignment Provision Invalid Under California Law

by Sarah Bro | Dec 3, 2020 | Patents

The US Court of Appeals for the Federal Circuit invoked “precedents that are relevant but not directly on point” to examine when employment contract provisions may require assignment of inventions conceived post-employment and without use of the former employer’s confidential information, finding that an intellectual property assignment provision in the employer’s predecessor’s employment agreement was void under California law. Whitewater West Industries, Ltd. v. Richard Alleshouse, et al., Case No. 19-1852 (Fed. Cir. Nov. 19, 2020) (Taranto, J.)

Richard Alleshouse began working for Wave Loch in 2007 as an engineer in the field of large-scale sheet-wave water attractions, which are surf and wave simulators sometimes seen on cruise ships and in water parks. Alleshouse’s many duties for the company included the inspection, assessment and improvement of the company’s wave rides; the development of new rides; and product management of the company’s branded FlowRider sheet wave attraction.

After almost five years with the company, Alleshouse consulted with a lawyer, Yong Yeh, regarding the scope of his employment agreement with Wave Loch, which included intellectual property assignment terms that survived termination of the employment agreement. Following that consultation, Alleshouse and Yeh discussed the idea of starting their own company to design sheet-wave attractions. In August 2012, Alleshouse resigned from Wave Loch, and in October 2012, Alleshouse and Yeh filed provisional patent applications that resulted in three different US patents describing and claiming certain “water attractions involving a flowing body of water on a surface” and “nozzle shapes and configurations which create a flowing body of water over a surface.”

In 2017, Whitewater West Industries, the successor to Wave Loch, sued Alleshouse, Yeh and their new company, Pacific Surf Design, in federal district court in California, asserting claims for breach of contract and correction of inventorship. In particular, Whitewater sought an assignment of the three patents under the terms of Alleshouse’s employment contract with Wave Loch, and claimed that Yeh was improperly listed as an inventor on each of the three patents. The district court ruled for Whitewater and found that the intellectual property assignment provision in Alleshouse’s employment agreement was valid and thus breached due to the failure to assign the patent rights at issue. Alleshouse appealed.

Alleshouse challenged the employment agreement’s intellectual property assignment provision as invalid under California Labor Code § 16600, which prohibits any contract provision that restrains a person from a lawful profession, trade or business, and under § 2870(a), which prohibits requiring an employee to assign over any invention that an employee developed entirely on her own time without using the employer’s equipment, supplies, facilities or trade secret information (with certain enumerated exceptions for employee inventions related to the employer’s business or the employee’s work for the business). The parties agreed on two factual points that were important to the Federal Circuit’s analysis on appeal: that the inventions at issue were not conceived until after Alleshouse left his job at Wave Loch, and that Alleshouse did not use any trade secret or confidential information belonging to Wave [...]

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