Employment Contracts - Advances in Chemistry (ACS Publications)

5 Employment Contracts J O H N P. S U T T O N 3000 Ferry Building, San Francisco, Calif.

94111

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The common provisions in current employment agreements relate to the disclosure of patentable inventions, tion in obtaining

coopera-

patents, assignment of inventions to

ployers, and protection of trade secrets. Wide

em-

variations

exist in the presentation of these provisions in the agreements. As instruments of corporate personnel policy, these agreements almost universally

favor the

author suggests that the American

employer.

Chemical

The

Society gather

data through efficiently conducted surveys and seek to make employment agreements bilateral, to abide by the ACS Guidelines

encouraging

for

employers

Employers.

' - p h e m a j o r i t y of i n v e n t i o n s m a d e i n the U n i t e d States t o d a y are m a d e J

~ b y e m p l o y e e s of corporations. T h e s e e m p l o y e d inventors a r e r e q u i r e d

t o s i g n w r i t t e n e m p l o y m e n t agreements i n 9 8 % of t h e cases ( J ) . are s u c h contracts so p o p u l a r ?

The common

a p p l i e s i f there is n o w r i t t e n a g r e e m e n t )

Why

l a w (i.e., t h e l a w t h a t

governing inventions b y

em-

p l o y e e s appears to b e s t r a i g h t f o r w a r d . Professor S t e d m a n p u t s i t this way: W h e r e the facts s h o w that the e m p l o y e e w a s s p e c i f i c a l l y h i r e d to m a k e i n v e n t i o n s , the i n v e n t i o n s t h a t r e s u l t b e l o n g to t h e e m p l o y e r , a n d t h e e m p l o y e e is r e q u i r e d to assign t h e m to h i m . T h i s d o c t r i n e a p p l i e s , h o w e v e r , o n l y to those i n v e n t i o n s that f a l l w i t h i n the field for w h i c h h e w a s a c t u a l l y h i r e d a n d not to i n v e n t i o n s he m a y m a k e i n other areas. . . . i f the e m p l o y e e engages i n i n v e n t i v e a c t i v i t y t h a t is e n t i r e l y i n d e p e n d e n t of his job, e.g., w o r k d o n e at h o m e i n areas not r e l a t e d to his e m p l o y m e n t a n d not i n v o l v i n g the use of his e m p l o y e r s facilities or t i m e , t h e i n v e n t i o n s that result b e l o n g e n t i r e l y to the e m p l o y e e just as t h o u g h he were unemployed ( 2 ) . D i s p u t e s a r i s i n g over w h e t h e r a n e m p l o y e e t h e scope of his w o r k assignment cause agreements,

w h i c h vary widely from

p l a c e d before a n e w l y h i r e d e m p l o y e e

is h i r e d to i n v e n t i n

the p r o b l e m s .

Employment

corporation to corporation, t o a v o i d these disputes.

45 Niederhauser and Meyer; Legal Rights of Chemists and Engineers Advances in Chemistry; American Chemical Society: Washington, DC, 1977.

are They

46

LEGAL

have common

RIGHTS

features y e t enormous

OF CHEMISTS AND ENGINEERS

differences.

Companies usually

m a k e a flat p a y m e n t of $100 to $200 t o e m p l o y e d i n v e n t o r s u p o n

filing

of a n a p p l i c a t i o n , issuance of a p a t e n t ( 2 , 3 ) , or b o t h . T h i s p r o v i d e s the i n c e n t i v e for a n e m p l o y e e to disclose his i n v e n t i o n a n d thus f u l f i l l t h e p u r p o s e of the p a t e n t system. R e c e n t l y , h o w e v e r , I c o n d u c t e d a s u r v e y of e m p l o y e d i n v e n t o r s i n C a l i f o r n i a ( J ) , w h i c h r e v e a l e d t h a t a l t h o u g h 5 7 % of c o r p o r a t e e m p l o y e r s h a d sales o v e r one m i l l i o n d o l l a r s a n n u a l l y , a majority of inventors responding ( 5 4 % )

i n d i c a t e d t h e y r e c e i v e d $1 o r

n o t h i n g i n d i r e c t c o m p e n s a t i o n for t h e i r i n v e n t i o n s . T h i s finding c o n t r a d i c t s N e u m e y e r a n d O ' M e a r a ( 2 , 3 ) w h o f o u n d


t h a t m o s t l a r g e c o m p a n i e s , 6 0 % of t h e m i n O ' M e a r a ' s e v a l u a t i o n , g a v e m o n e t a r y r e w a r d s to e m p l o y e d i n v e n t o r s . H a v i n g f a i l e d t o r e c e i v e a d e q u a t e s u p p o r t i n a n o t h e r s u r v e y of e m p l o y e r s i n o r d e r t o c l e a r u p the discrepancy, I have proposed that the A m e r i c a n C h e m i c a l Society ( A C S ) sponsor s u c h a s u r v e y since t h e y possess t h e resources to c o m p l e t e i t successfully.

B a s e d o n the s m a l l a m o u n t of response ( 2 0 % )

I received

i n m y s u r v e y , h o w e v e r , a n d o n 10 other e m p l o y m e n t agreements g i v e n t o m e b y the A C S C o u n c i l C o m m i t t e e o n P r o f e s s i o n a l R e l a t i o n s , I h a v e f o u n d c e r t a i n c o m m o n features i n these agreements. O n l y one c l a u s e w a s c o m m o n

to e v e r y one of t h e agreements

I

s t u d i e d i n d e t a i l : a d u t y of c o o p e r a t i o n b y the e m p l o y e e w i t h respect to p a t e n t i n g of i n v e n t i o n s . T h e s e c o n d m o s t c o m m o n feature is a d u t y o n t h e p a r t of t h e e m p l o y e e to disclose i n v e n t i o n s to his e m p l o y e r . common

Another

feature was a d u t y to refrain f r o m disclosing trade

secrets

b e l o n g i n g to the e m p l o y e r , a n d a d u t y o n the p a r t of t h e e m p l o y e e

to

assign his i n v e n t i o n s to t h e e m p l o y e r . I t is f a i r to state t h a t these are t h e usual provisions. B e s i d e s these f o u r s i m i l a r i t i e s , h o w e v e r , other correlations d o exist to a n y great extent.

not

M o s t of the agreements h a v e a p r o v i s i o n t h a t

states t h a t t h e a g r e e m e n t is b i n d i n g u p o n t h e successors a n d assigns of t h e e m p l o y e e , the e m p l o y e r , o r b o t h . U s u a l l y t h e a g r e e m e n t is b i n d i n g o n the employee's heirs a n d assigns a n d n o t o n t h e e m p l o y e r ' s .

This

raises a n i m p o r t a n t aspect of e m p l o y m e n t agreements. W h e n o n e t h i n k s o f a n agreement, h e t h i n k s of promises m a d e b y t w o parties as t h e y r e l a t e t o e a c h other. H o w e v e r , t h e r e is a k i n d of c o n t r a c t — a u n i l a t e r a l c o n t r a c t — w h i c h b i n d s o n l y one p a r t y . I n m y m o d e s t s u r v e y I d i d n o t s i n g l e e m p l o y e r w h o p r o m i s e d to d o a n y t h i n g for t h e e m p l o y e e .

find

a

O n e of

t h e m p u r p o r t e d t o h a v e p r e s e n t e d a b i l a t e r a l agreement, b u t there w a s n o p r o v i s i o n f o r t h e e m p l o y e r t o sign. S u c h a n agreement w o u l d n o t b e b i n d i n g , o r d i n a r i l y , o n a n y p a r t y w h o does not s i g n a contract.

O n the

other h a n d , the m a j o r i t y of contracts p r o v i d e d to m e b y the C o u n c i l Committee on Professional Relations were bilateral a n d i n c l u d e d a place f o r the e m p l o y e r to s i g n , b i n d i n g h i m to the terms of the agreement.

Niederhauser and Meyer; Legal Rights of Chemists and Engineers Advances in Chemistry; American Chemical Society: Washington, DC, 1977.

5.

S U T T O N

47

Emnlovment Contracts

W h e t h e r t h e agreement

w a s bilateral o r unilateral, none of the

e m p l o y e r s p r o m i s e d his e m p l o y e e a n y t h i n g other t h a n c o n t i n u e d e m p l o y ment f o r a n unspecified time.

I n o n l y o n e agreement, f r o m a s m a l l

s o u t h e r n m a n u f a c t u r i n g c o m p a n y , w a s there a n y p r o v i s i o n f o r c o m p e n sation, a n d this agreement s i m p l y s a i d t h a t the e m p l o y e r m a y c o m p e n s a t e the e m p l o y e e f o r i n v e n t i o n s . N o n e o f the agreements i n e i t h e r category m a d e a p r o m i s e t o p a y e v e n the t r a d i t i o n a l $100 a w a r d . T h e s e a w a r d programs appear to b e governed entirely b y corporate policy a n d n o t b y contract. T h i s means t h a t the c o r p o r a t i o n m a y c h a n g e the p o l i c y a t w i l l without consulting the employee.

T h e e m p l o y e e , o n t h e other h a n d ,

c a n n o t v a r y a n y o f the terms o f t h e e m p l o y m e n t agreement. Downloaded by MONASH UNIV on May 21, 2018 | https://pubs.acs.org Publication Date: June 1, 1977 | doi: 10.1021/ba-1977-0161.ch005

S e v e r a l o f the agreements t h a t w e r e s t u d i e d h a d express p r o v i s i o n s r e q u i r i n g a n e m p l o y e e n o t t o engage i n a n y outside e m p l o y m e n t w i t h i n t h e a r e a o f interest o f the e m p l o y e r .

Perhaps a moonlighting policeman

o r fireman c o u l d w o r k f o r these c o m p a n i e s as a chemist, b u t a c h e m i s t c o u l d not use a n y o f his skills a n d t e c h n i c a l t r a i n i n g i n m o o n l i g h t i n g jobs w h e n e m p l o y e d b y these c o m p a n i e s — e v e n i f h e w o r k s o n projects u n r e l a t e d i n p r o d u c t lines of his first e m p l o y e r .

I t is e n o u g h i n these agree-

ments f o r the first e m p l o y e r to m e r e l y h a v e a n interest i n a n area, w h e t h e r o r n o t h e a c t u a l l y does business i n t h a t area. A n u m b e r o f t h e contracts w e n t f u r t h e r t h a n s i m p l y r e q u i r i n g t r a d e secrets a n d i n v e n t i o n s t o b e p r o t e c t e d . T h e y i n c l u d e d a p r o v i s i o n t h a t a p r o p e r t y right e x i s t e d i n the r e c o r d s , d r a w i n g s , a n d o t h e r m a t e r i a l s u s e d i n the e m p l o y m e n t , so that the e m p l o y e e w o u l d b e b o u n d w h e t h e r o r n o t t h e i n v e n t i o n s o r t r a d e secrets c o n t a i n e d i n the records w e r e p r o t e c t a b l e . I n n o n e o f t h e agreements r e c e i v e d as a r e s u l t o f m y s u r v e y w a s there a n o n c o m p e t i t i o n clause. T h i s is a p r o v i s i o n b y w h i c h a n e m p l o y e e promises not to c o m p e t e w i t h his e m p l o y e r f o r a specified p e r i o d o f t i m e . I n three o f t h e agreements p r o v i d e d t o m e f r o m A C S , h o w e v e r ,

there

w e r e n o n - c o m p e t i t i o n p r o v i s i o n s . T h e most onerous one w a s a p r o m i s e n o t t o c o m p e t e for one y e a r p l u s the d u r a t i o n o f a n y l i t i g a t i o n t h a t m i g h t arise c o n c e r n i n g the subject m a t t e r o f t h e agreement.

T h i s means t h a t

i f t h e e m p l o y e e w e r e s u e d w i t h i n a y e a r after his d e p a r t u r e , h e w o u l d n o t b e a b l e t o c o m p e t e u n t i l t h e r e h a d b e e n a final d e t e r m i n a t i o n f r o m w h i c h no appeal could b e made.

T h i s c o u l d easily b e five years i n a l l ,

g i v e n t h e c r o w d e d dockets o f t r i a l a n d a p p e l l a t e courts. W h i l e a promise not to compete was rare, i t was commonplace to h a v e a p r o v i s i o n t h a t i n v e n t i o n s c o m p l e t e d w i t h i n six m o n t h s o r a y e a r after t e r m i n a t i o n o f e m p l o y m e n t w o u l d h a v e t o b e r e a s s i g n e d t o t h e former employer.

I f this p r o v i s i o n w e r e r i g o r o u s l y e n f o r c e d , a n e w e m -

p l o y e r w o u l d b e r e l u c t a n t t o assign a n e w e m p l o y e e t o a n y a r e a w h e r e h e w o u l d b e l i k e l y t o m a k e a n i n v e n t i o n w i t h i n the first six m o n t h s o r a year. I d o not b e l i e v e s u c h p r o v i s i o n s are r i g o r o u s l y e n f o r c e d .

American Chemical Society Library 1155 16th St. N. W.

Niederhauser and Meyer; Legal Rights of Chemists and Engineers Washington, D.Society: C. 20036 Advances in Chemistry; American Chemical Washington, DC, 1977.

48

LEGAL

RIGHTS OF CHEMISTS A N D

ENGINEERS

A f a i r l y c o m m o n p r o v i s i o n i n t h e agreements w a s a r e q u i r e m e n t t h a t t h e e m p l o y e e r e t u r n a l l p r o p e r t y t o t h e e m p l o y e r u p o n t e r m i n a t i o n of employment.

C h e m i s t s are f r e q u e n t l y p a c k rats, a n d i t is difficult to

d e t e r m i n e p r e c i s e l y w h a t belongs t o t h e e m p l o y e r a n d w h a t b e l o n g s t o the e m p l o y e e .

I t is reasonable, h o w e v e r , to r e q u i r e t h a t t h e e m p l o y e r s

property be returned. A n o t h e r c o m m o n p r o v i s i o n is a n o p p o r t u n i t y f o r t h e e m p l o y e e exclude inventions made i n prior employment.

to

S o m e space is p r o v i d e d

f o r the e m p l o y e e to list o n the agreement i n v e n t i o n s w h i c h he has p r e v i o u s l y m a d e a n d w h i c h b e l o n g to p r i o r e m p l o y e r s .


T h e agreements w h i c h w e r e s t u d i e d i n d e t a i l w e r e s u r p r i s i n g l y free of the b o i l e r - p l a t e legalese w h i c h one often associates w i t h license agreem e n t s a n d other contracts.

S e v e r a l i n c l u d e d p r o v i s i o n s that the g o v e r n -

i n g l a w w o u l d b e that of a p a r t i c u l a r state, that p r o v i s i o n s w h i c h w e r e u n e n f o r c e a b l e w o u l d b e s e v e r e d f r o m the a g r e e m e n t so t h a t the r e m a i n i n g provisions w o u l d be enforced,

a n d , as m e n t i o n e d p r e v i o u s l y , that

t h e terms of the agreement w o u l d b e b i n d i n g o n successors a n d assigns. T h e l a c k of a n o n - c o m p e t i t i o n clause i n t h e agreements d e r i v e d f r o m the employer

s u r v e y a p p a r e n t l y reflect a c o n c e r n

m i g h t n o t b e enforceable.

that s u c h a

clause

I n C a l i f o r n i a , for e x a m p l e , the B u s i n e s s a n d

Professions C o d e §16,600 v o i d s s u c h clauses. T h i s p r o v i s i o n w a s r e c e n t l y u p h e l d b y U . S. S u p r e m e C o u r t ( 4 ) .

I n other j u r i s d i c t i o n s , there is a

s u b s t a n t i a l risk t h a t a clause p r o h i b i t i n g a c h e m i s t f r o m e n g a g i n g i n his profession w i t h another employer w o u l d be r u l e d unenforceable u n c o n s c i o n a b l e contract of a d h e s i o n .

as a n

I t seems the t r e n d of t h e l a w is

to r e c o g n i z e the d o c t r i n e of contracts of a d h e s i o n as b e i n g u n e n f o r c e a b l e . A contract of a d h e s i o n occurs w h e n the terms are p r e p a r e d e n t i r e l y f o r t h e benefit of one of t h e parties, a n d the o t h e r p a r t y does not h a v e sufficient b a r g a i n i n g p o w e r to alter the terms. agreement is a c o n t r a c t of a d h e s i o n .

T o d a y the

employment

W h e t h e r i t is enforceable

d e p e n d s o n w h e t h e r i t is u n c o n s c i o n a b l e .

or n o t

Automobile warranties, insur-

a n c e contracts, a n d other k i n d s of contracts h a v e , i n some instances, b e e n r u l e d u n c o n s c i o n a b l e contracts of a d h e s i o n . H o w e v e r , I k n o w of n o case d e a l i n g w i t h a n o r d i n a r y e m p l o y m e n t a g r e e m e n t a l t h o u g h t h e r e is at least one case p e n d i n g w h i c h raises this issue. N o t one of t h e agreements that I r e v i e w e d i n d e t a i l p r o v i d e s

for

t h e e m p l o y e e to share i n the benefits d e r i v e d f r o m his i n v e n t i o n . L e g i s l a t i o n is p e n d i n g i n the U . S . C o n g r e s s a n d i n C a l i f o r n i a w h i c h w o u l d r e q u i r e the e m p l o y e r to share the benefits r e c e i v e d f r o m a n i n v e n t i o n b y a n e m p l o y e e , b e a r i n g i n m i n d t h e p o s i t i o n of t h e e m p l o y e e , his d u t i e s , t h e v a l u e of t h e i n v e n t i o n , a n d the c o n t r i b u t i o n of the e m p l o y e r . l a w s are p a t t e r n e d after s i m i l a r l e g i s l a t i o n i n other countries.

These Nearly

e v e r y i n d u s t r i a l i z e d c o u n t r y has l e g i s l a t i o n m a n d a t i n g e x t r a c o m p e n s a -


5.

SUTTON

49

Employment Contracts

t i o n f o r e m p l o y e d inventors w i t h the e x c e p t i o n of countries w h o s e l a w is d e r i v e d f r o m the E n g l i s h c o m m o n l a w ( U . K . , C a n a d a , U . S . , a n d A u s tralia) (5).

T h i s l e g i s l a t i o n is u n l i k e l y t o pass i n t h e foreseeable f u t u r e .

E v e n t h o u g h the s t u d y I h a v e c o n c l u d e d does n o t s h o w s u c h agreements, e m p l o y m e n t

contracts

w h i c h provide

t h a t the e m p l o y e e

will

r e c e i v e a specified p e r c e n t a g e of a n y r o y a l t y i n c o m e d e r i v e d f r o m l i c e n s i n g the i n v e n t i o n d o exist. T h i s p r o v i s i o n is f a i r l y c o m m o n i n the aerospace i n d u s t r y b u t g e n e r a l l y n o w h e r e else. substantial value a n d be

S h o u l d the invention have

w i d e l y licensed, the inventor c o u l d

s u b s t a n t i a l l y m o r e t h a n the u s u a l p a y m e n t of $100 to $200.

derive

In my

first


s u r v e y of C a l i f o r n i a i n v e n t o r s , o n l y 3 % of t h e inventors r e c e i v e d b e t w e e n $500 a n d $5000 for t h e i n v e n t i o n , a n d n o t one r e c e i v e d m o r e t h a n $5000. A s p r e v i o u s l y i n d i c a t e d , 5 4 % r e c e i v e d $1 o r n o t h i n g . Some of the p r o v i s i o n s i n i n d i v i d u a l e m p l o y m e n t agreements s u r p r i s i n g l y o n e - s i d e d i n f a v o r of the e m p l o y e r . p r o v i s i o n that t h e agreement

One had an

does not b i n d t h e c o m p a n y

were

express

to p a y

any

s a l a r y to t h e e m p l o y e e or to e m p l o y the e m p l o y e e f o r a n y p e r i o d of t i m e . A n o t h e r agreement p r o v i d e d that the e m p l o y e e m u s t p a y attorney's fees and

expenses a n d consent to a p r e l i m i n a r y i n j u n c t i o n i n the event

of

l i t i g a t i o n over a b r e a c h or t h r e a t e n e d b r e a c h of a n y p r o v i s i o n of

the

agreement.

has

It seems grossly u n f a i r to r e q u i r e the e m p l o y e e ,

who

r e l a t i v e l y f e w resources c o m p a r e d w i t h t h e e m p l o y e r , t o p a y these fees a n d expenses m e r e l y u p o n t h e existence of w h a t the e m p l o y e r regards as a t h r e a t e n e d b r e a c h of s o m e t e r m i n the e m p l o y m e n t

agreement.

A n o t h e r e m p l o y m e n t a g r e e m e n t has a n express p r o v i s i o n t h a t t h e employee

m u s t serve f a i t h f u l l y a n d to the best of his a b i l i t y a n d to

d e v o t e his entire t i m e , energy, a n d s k i l l to p r o m o t e the corporate i n t e r ests. It c o u l d b e a r g u e d that m a n y every d a y activities of a n

employee

d o n o t p r o m o t e t h e corporate interest, s u c h as g o i n g h o m e at five o ' c l o c k e v e n t h o u g h a n e x p e r i m e n t is not c o m p l e t e d . O n e agreement, p r e s u m a b l y i n t e n d e d to s h o w t h e m a g n a n i m i t y of the e m p l o y e r , p r o v i d e s t h a t i t " w i l l g i v e c o n s i d e r a t i o n to t h e r e a s s i g n m e n t to t h e e m p l o y e e of a n y i n v e n t i o n s . . . w h i c h i t m a y find to b e of n o p o t e n t i a l v a l u e t o the c o m p a n y . "

T h e r e is n o p r o m i s e t o d o a n y t h i n g

except consider. T h i s a t t i t u d e is t h e same as t h a t expressed b y N e u m e y e r (2)

regarding award plans:

M a n y of these h a v e t h e c h a r a c t e r of a p a t r i a r c h a l , 1 8 t h - C e n t u r y a t t i t u d e t o w a r d the e m p l o y e e , a p a t o n the s h o u l d e r b y the p a t r o n , w h o k n o w s best. M y s t u d y of e m p l o y m e n t agreements g a v e b r o a d l y s i m i l a r results as r e p o r t e d i n 1965 b y O ' M e a r a , t h o u g h a m a j o r d i s t i n c t i o n is the a p p a r e n t l e s s e n i n g t o d a y of p o s t - e m p l o y m e n t restrictions. T h a t is, i n 1965, 2 5 %


50

L E G A L RIGHTS O F CHEMISTS A N D ENGINEERS

of t h e agreements s t u d i e d l i m i t e d t h e employees a c t i v i t i e s after t e r m i n a t i o n of e m p l o y m e n t , a n d m y s t u d y s h o w e d v e r y f e w s u c h l i m i t a t i o n s . P r e s e n t - d a y e m p l o y m e n t agreements v a r y w i d e l y , e v e n t h o u g h t h e y h a v e f o u r g e n e r a l features: t h e y r e q u i r e a s s i g n m e n t of i n v e n t i o n s ; t h e y r e q u i r e n o n - d i s c l o s u r e of t r a d e secrets; t h e y r e q u i r e d i s c l o s u r e of i n v e n t i o n s ; a n d t h e y r e q u i r e c o o p e r a t i o n i n p r o s e c u t i n g patents. T h e e m p l o y m e n t agreements of t o d a y d o n o t b i n d t h e e m p l o y e r to c o m p e n s a t e the employee for m a k i n g an invention, a n d they do not recognize any subs t a n t i a l rights of the e m p l o y e e .

A s i n s t r u m e n t s of c o r p o r a t e p e r s o n n e l

policy, they are oppressive a n d unfair, b u t universal. B y contract, e m p l o y e r s i n the U n i t e d States h a v e effectively d e f e a t e d t h e p r o v i s i o n i n Downloaded by MONASH UNIV on May 21, 2018 | https://pubs.acs.org Publication Date: June 1, 1977 | doi: 10.1021/ba-1977-0161.ch005

t h e U n i v e r s a l D e c l a r a t i o n of H u m a n R i g h t s a d o p t e d b y t h e U n i t e d N a tions G e n e r a l A s s e m b l y o n D e c e m b e r 10, 1948. I n A r t i c l e 2 7 ( 2 ) i t states: E v e r y o n e has the r i g h t to the p r o t e c t i o n of the m o r a l a n d m a t e r i a l interests r e s u l t i n g f r o m a n y scientific, l i t e r a r y , or artistic p r o d u c t i o n of w h i c h h e is the a u t h o r . T h e A m e r i c a n C h e m i c a l S o c i e t y s h o u l d seek to h a v e e m p l o y m e n t agreements m a d e b i l a t e r a l , w i t h the e m p l o y e r a g r e e i n g to a b i d e b y t h e G u i d e l i n e s for E m p l o y e r s . I h a v e n e v e r seen a n e m p l o y m e n t

agreement

r e m o t e l y s i m i l a r to t h e p r o v i s i o n s of t h e G u i d e l i n e s f o r E m p l o y e r s . I n d i v i d u a l employees

w i l l n o t b e a b l e to m o d i f y e m p l o y m e n t

b e c a u s e of t h e i r r e l a t i v e l y w e a k b a r g a i n i n g p o w e r .

I f the

agreements agreements

are to b e c o m e f a i r a n d e q u i t a b l e to t h e interests of e v e r y o n e , t h e b a l a n c e b e t w e e n the e m p l o y e e a n d his e m p l o y e r w i l l h a v e t o b e r e a d j u s t e d , e i t h e r b y a profession-wide

o r g a n i z e d effort o r b y l e g i s l a t i o n to r e p a i r the

imbalance.

Literature Cited 1. Sutton, J. P., "Compensation for Employed Inventors," Chem. Technol. (Feb. 1975) p. 86. 2. Neumeyer, F., "The Employed Inventor in the United States," MIT Press, 1971. 3. O'Meara, "Patent and Secrecy Agreements," National Industrial Conference Board No. 199, New York, 1965. 4. Merrill Lynch, Pierce, Fenner, and Smith, Inc. vs. Ware, 410 U.S. 908 (1973). 5. Neumeyer, F., "Systems to Stimulate Employee-Inventions in Europe," NBS Special Publication 388, U.S. Dept. of Commerce, Bureau of Standards, 1973. RECEIVED September 17, 1976.

Discussion Q . I w a s c u r i o u s a b o u t y o u r c o m m e n t s that the state of C a l i f o r n i a has v o i d e d a l l n o n - c o m p e t i t i o n agreements. A r e there a n y c i r c u m s t a n c e s u n d e r w h i c h the state of C a l i f o r n i a w o u l d r e c o g n i z e s u c h a n a g r e e m e n t ?


5.

A.

51


SUTTON

I n the C a l i f o r n i a statute, there are specific p r o v i s i o n s t h a t are

exceptions t o this. O n e is t h a t a p a r t n e r s h i p t h a t d i s b a n d s c a n h a v e a r e s t r i c t i o n so t h a t t h e r e is n o c o m p e t i t i o n b e t w e e n the p a r t n e r s i n a g e o g r a p h i c a l area. T h e sale of a business c a n h a v e a p r o v i s i o n t h a t t h e r e is n o c o m p e t i t i o n b e t w e e n t h e b u y e r s a n d t h e sellers f o r s o m e p e r i o d of t i m e . I d i d n ' t c o v e r the e x c e p t i o n s — t h e r e are three or f o u r of t h e m — b e c a u s e t h e y a r e q u i t e specific a n d t h e y d o n t a p p l y to 9 9 % of t h e c h e m ists w h o w o u l d b e here t o d a y , b u t there are exceptions. Q.

I n past years the S u p r e m e C o u r t of P e n n s y l v a n i a has h e l d t h a t


a n e m p l o y e e c a n n o t b e p r e s e n t e d w i t h a n o n - c o m p e t i t i o n a g r e e m e n t to s i g n w i t h the i m p l i e d t h r e a t t h a t i f h e doesn't, h e w i l l b e agreements are n o l o n g e r enforceable.

fired.

Such

H o w e v e r , if a potential employee

is p r e s e n t e d s u c h a n agreement, a n d i t constitutes one of t h e terms b y w h i c h h e is h i r e d f o r the job, t h e n t h e a g r e e m e n t c a n b e e n f o r c e d

as

l o n g as there is c o n s i d e r a t i o n , a n d this has to b e m o n e t a r y i n f o r m . A.

D o y o u k n o w t h e n a m e of that case? I a m n o t f a m i l i a r w i t h i t .

Q.

M y a t t e n t i o n has b e e n d r a w n r e c e n t l y t o a n e m p l o y m e n t agree-

m e n t w h i c h r e q u i r e s the p r o s p e c t i v e e m p l o y e e to s i g n a n a u t h o r i z a t i o n b y a n e m p l o y e r to a l l o w a c o n s u m e r r e p o r t i n g a g e n c y to i n q u i r e i n t o m a n y p e r s o n a l aspects of his life.

D o e s n ' t this seem to go as a r a t h e r

u n d u e i n v a s i o n of p e r s o n a l p r i v a c y to ask a n i n d i v i d u a l to s i g n s u c h a n agreement? A.

T h i s is i n f u l f i l l m e n t of P u b l i c L a w N o . 91-508.

I a m not f a m i l i a r w i t h i t . N o t h i n g l i k e t h a t w a s b r o u g h t i n t o t h e

s u r v e y I c o n d u c t e d o r i n a n y of the agreements t h a t I s t u d i e d . I h a v e n ' t seen a n y t h i n g l i k e a n i n v a s i o n of p r i v a c y at a l l . T h e r e c o u l d b e some f e d e r a l l a w that d e m a n d s that, b u t I a m not f a m i l i a r w i t h i t . R E S P O N S E

F R O M

A U D I E N C E :

I b e l i e v e that t h a t is a response to the

P r i v a c y A c t w h i c h n o w r e q u i r e s that i f y o u d o u t i l i z e s u c h sources

of

i n f o r m a t i o n , there has to b e a release f r o m the i n d i v i d u a l i n v o l v e d . Q.

M y q u e s t i o n relates to this reassignment clause. A p p a r e n t l y the

e m p l o y e e has to reassign his i n v e n t i o n to the e m p l o y e r for $1 w i t h o u t k n o w i n g w h a t the v a l u e is g o i n g to b e . D o a n y courts h a v e a r u l e a b o u t this? A.

Y o u don't e v e n h a v e to h a v e $1. T h e m e r e fact is that e m p l o y -

m e n t is sufficient i n the m a j o r i t y of the cases.

O n e of the f o u r of the

u n i v e r s a l p r o v i s i o n s I f o u n d w a s t h a t y o u assign i n a d v a n c e , as a c o n d i t i o n of e m p l o y m e n t , a n y i n v e n t i o n s y o u m a k e i n t h e f u t u r e . I n o t h e r w o r d s , o n d a y one y o u s i g n the agreement that w h a t e v e r the i n v e n t i o n


52

LEGAL

RIGHTS O F C H E M I S T S A N D E N G I N E E R S

v a l u e is a n d h o w e v e r t h e i n v e n t i o n s are r e l a t e d to t h e business, t h e y w i l l b e assigned. N o w , some of t h e m h a d a l i m i t a t i o n t h a t t h e y h a d to b e w i t h i n the areas of interest to t h e c o r p o r a t e e m p l o y e r , b u t some d i d not. Q.

D o y o u h a v e a n y suggestions as to b i l a t e r a l agreements?

What

t y p e of promises d o e m p l o y e e s h a v e to m a k e the e m p l o y e r for a b i l a t e r a l agreement?

H o w does a n e m p l o y e e get a b i l a t e r a l a g r e e m e n t b i n d i n g o n

the e m p l o y e r ? A.

I h a v e a l l k i n d s of suggestions.

T h e p r o b l e m is that unless y o u


are N o b e l L a u r e a t e y o u are n o t g o i n g to get those p r o v i s i o n s i n t o the contract. It's b a r g a i n i n g p o w e r t h a t gets f a i r c o n t r a c t p r o v i s i o n s . M a y b e i f y o u h a v e a N o b e l P r i z e i n the field y o u m i g h t b e a b l e to get a c h a u f f e u r a n d a l i m o u s i n e i n y o u r contract, o r y o u c o u l d get o t h e r p r o v i s i o n s w h i c h w o u l d b e s o m e w h e r e a l o n g the lines of t h e " G u i d e l i n e s for E m p l o y e r s . " T h o s e i n d e m a n d , l i k e c o r p o r a t i o n presidents, c a n w r i t e t h e i r o w n tickets. M o s t e m p l o y e e s cannot. Q.

W h a t about a situation where an employee

signs a

contract

w h e r e h e p r o m i s e s to i n v e n t b u t does n o t i n t e n d to d o so. A s s u m e h e does n o t i n v e n t . D o e s h e b r e a c h his c o n t r a c t ? A.

T h a t is the w a y it u s e d to b e i n the last c e n t u r y . I n fact, c h e m -

ists 100 years ago w e r e n ' t as p l e n t i f u l as t h e y are t o d a y , a n d t h e c h e m i s t w a s h i r e d b y t h e job.

A s s u m e y o u ' v e got this job r e q u i r i n g explosives,

a n d the c h e m i s t w a s a n expert i n explosives.

T h e c h e m i s t comes i n to

solve the p r o b l e m a n d he says, " p a y m e so m u c h to d o this job a n d p a y m e so m u c h i n royalties o n use of the e x p l o s i v e o r i f y o u l i c e n s e i t t o s o m e o n e else." U s u a l l y the agreement w o u l d h a v e some m o d e s t a m o u n t of l i v i n g expense w h i l e t h e c h e m i s t w a s w o r k i n g o n the p r o j e c t p l u s s o m e r e t u r n o n the i n v e n t i o n , s h a r i n g t h e benefits of t h e i n v e n t i o n . I f t h e i n v e n t i o n w e r e w i d e l y u s e d , the i n v e n t o r b e c a m e

rich,

but

those

days are l o n g past. Q.

So, y o u don't t h i n k a b i l a t e r a l agreement is profitable?

A.

O h , I c e r t a i n l y d o t h i n k i t is p r o f i t a b l e . Y e s , I d e f i n i t e l y t h i n k

t h a t i t is p r o f i t a b l e . Q.

Is t h a t t h e w a y b i l a t e r a l agreements w o r k t o d a y ?

A.

T h a t is t h e w a y i t o u g h t to be.

I a m t e l l i n g y o u that t h e b a r -

g a i n i n g p o w e r b e t w e e n a c h e m i s t a n d his e m p l o y e r is so grossly d i s p r o p o r t i o n a t e that h e is not g o i n g to b e a b l e to w r i t e t h a t k i n d of c o n t r a c t — fine c h e m i s t t h a t h e i s .


5.

S U T T O N

Q.

53


T o the c o n t r a r y , I t h i n k that e m p l o y e r s w o u l d b e g l a d to g i v e to

someone, a research p e r s o n , a n agreement i n w h i c h t h e c h e m i s t p r o m i s e s to i n v e n t s o m e t h i n g of v a l u e i n e x c h a n g e f o r his b e i n g p a i d . T h e e m p l o y m e n t agreement of t o d a y , I t h i n k , serves the p u r p o s e v e r y w e l l .

The

e m p l o y e r promises to p a y as l o n g as t h e e m p l o y e e m a k e s i n v e n t i o n s a n d does his job. Y o u t h i n k t h a t t h a t is n o t p r o p e r ? A.

I t h i n k i t is n o t f a c t u a l . T h e c h e m i s t is h i r e d to d o r e s e a r c h a n d

solve p r o b l e m s w h e t h e r t h e y a m o u n t t o i n v e n t i o n s or not.

If they

a m o u n t to i n v e n t i o n s , i t b e c o m e s a w i n d f a l l f o r t h e e m p l o y e r .

do

Inven-

tions are, b y d e f i n i t i o n , w i n d f a l l s for someone, b e c a u s e t h e y are creations Downloaded by MONASH UNIV on May 21, 2018 | https://pubs.acs.org Publication Date: June 1, 1977 | doi: 10.1021/ba-1977-0161.ch005

w h e r e n o t h i n g e x i s t e d b e f o r e . I b e l i e v e i n v e n t o r s , as i n d i s p e n s i b l e c r e ators, s h o u l d share i n the w i n d f a l l s w i t h t h e e m p l o y e r w h o p u t s c a p i t a l , poses t h e p r o b l e m , a n d p r o v i d e s t h e e n v i r o n m e n t .


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