Patent Relations of Emplovers and Employees v
KARLFENNING, National Press Building, Washington, D. C.
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is a specific clause in the contract of employment definitely relating to inventions and patents, the contract controls and may be enforced by the Courts.
Every erson who purchases of the inventor or discoverer, or, with his inowledge or consent, constructs any newly invented or discovered machine, or other patentable article, prior t o the application by the inventor or discoverer for patent, or who sells or uses one so constructed shall have the right to use, and vend to others t o be used, the specific thing so made or purchased, without liability therefor.
RELATIOXS UNDER DEFINITE CONTRACT I n the Lientz Oil Furnace Company us. Barker (10 U. S. Pat. Q. 203) the United States District Court for Missouri said : When there is an express contract, whether written or oral, that an employee is to devote all his time and talents t o inventing or improving a patentable art, the entire result of his labors is the property of the employer and the contract will be enforced in equity to the extent that the employee will be compelled to assign patents obtained by him. . . . It might have been performed within one year and therefore is not unenforceable under the statute of frauds.
H E relations of employer and employee with respect to patents and inventions are extremely diverse. Patents are creatures of statute and we should, therefore, first consult the patent statutes. While there is no specific mention in these statutes of employers and employees, R. S. 4899 reads:
I n Wade us. Metcalf [I6 Fed. Rep. 130 (affirmed 129 U. S. 202)] the Court says: This section of the statute which first appeared in the law of 1839 has been usually applied to the case of employer and work-
Such contracts are, however, strictly construed against the employer. A review of some decided cases will indicate man. If the workman, by using the tools and time and money of his employer with his consent, makes an invention and applieg some of the problem involved. I n White Heat Products it in his employer’s business, the employer may continue to use Company us. Thomas (109 Atl. Rep. 685) the employee agreed it. If the improvement is a process, it has been held that the to give to the company all the inventions he might make employer may continue to practice the process for the whole relating to “bricks, stone products, earthenware products, period of the patent. Citing McClurg us. Kingsland (42 U. S. and collateral products.’’ The company was making build202). ing material and it was held that the contract did not cover In McClurg us. Kingsland, one Harley was employed by a composition abrasive wheel to be used for grinding iron, defendants a t their foundry in Pittsburgh receiving wages steel, and other hard metals invented during the employfrom them by the week; while so employed he claimed to ment, but independently, and partially developed indehave invented the improvement patented (relating to cast- pendently. Again in Detroit Testing Laboratories us. Robinson (191 ing rolls), and after several unsuccessful experiments made a successful one in October, 1834; the experiments were N. W. Rep. 218) the Michigan Court had before it a case carried out a t the defendants’ foundry, and wholly a t their where the inventor was employed as an expert chemist and expense, while Harley was receiving his wages which were analyst under a written agreement to devote his entire increased on account of the useful result. Harley continued time and attention to the development and supervision of in their employment on wages until January or February, the dairy and food department of the commercial testing 1835, during all of which time he made rollers for them laboratory. While so employed, but through outside inhe often spoke of procuring a patent, and prepared more centive, he developed a coffee-seasoning process. Although than one set of papers for the purpose; he made his appli- the work was done in the testing laboratory, the Court held cation February 17, 1835, for patent; it was granted that the patent did not belong to the employer. I n the Missisippi Glass Company us. Franzen (143 Fed. Rep. RiIarch 3, 1835, and assigned to the plaintiff March 16, pursuant to a n agreement made in January. The defendants 501) in the Circuit Court of Appeals for the Third Circuit, continued to make rollers on Harley’s plan. The present the inventor on August 31 signed a contract to assign all action was brought in October, 1835, without any previous his inventions to his employer. He did not, however, enter notice to them. The Supreme Court held that section 7 the employment of the company until September 5. The of the Act of 1839 protected the defendants from any lia- Court held that there was a consideration for the contract to assign, that it was valid and enforceable, and ordered a patent bility or damages for the use of the invention. In a recent case, Barton us. Nevada Copper Company granted on an application filed after leaving the company (13 U. S. Pat. Q. 20), decided on April 15, 1932, the inventor but for an invention made while in the employment of the entered the employ of the Nevada Company to set up a plant company to be assigned to the company. I n Sharples us. lLIcCornack (99 Atl. Rep. 153), McCornack for making cast-steel grinding balls, and actually installed and operated the plant as early as the middle of 1925, and was employed by Sharples from 1894 to 1897 and again in thereafter in September, 1926, filed application for patent. 1899. During the whole of the employment there was a The Court held that the plaintiff could not recover but that contract to assign the inventions to the employer. The the defendant was entitled to continue the use of the patented invention involved in the litigation was made between 189i and 1899 during the interval when McCornack was not in process under the statute. This statute is of very limited application, since a right the employ of Sharples. The Court refused to order the based on it must accrue by use prior to filing the applica- patent assigned, holding that the contract could not be expanded to cover inventions made in the period between emtion for patent. Aside from this limited statutory control, the relations ployments. I n Hulse us. Bonsack Machine Company (65 Fed. Rep. between employers and employees with respect to patents and inventions may be divided into two groups: (I) Where 864) there was a contract of employment to set up and there is no clause in the contract of employment relating operate cigarette machines, providing “in case he can make to patents and inventions, the matter is controlled by general any improvement in cigarette machines whether the same principles of law as laid down by the Courts; (2) when there be made while in the employment of said company or a t 343
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any time thereafter the same shall be for the exclusive use of the said company.” The employee left the company but subsequently reentered the employ, but without specifically renewing the contract. During the later period of employment he made a n invention which the court ordered transferred to the company, holding that the contract was not against public policy. This phase was further considered in Chadleloid Chemical Company us. H. B. Chalmers Company (243 Fed. Rep. 606). There several individuals organized a corporation and all agreed to assign both present and future inventions to it. The Court said the agreements did not “constitute that mortgage upon the future operation of man’s brain which has often been viewed with disfavor; the plain intent was to safeguard the future of one particular business, that of paint removers. This is not unconscionable nor in unreasonable restraint of trade. h’or does failure to limit the time during which agreeing parties were to surrender inventions vitiate the contract.” A peculiar case illustrating some of the difficulties which may arise between employer and employee is West Disinfecting Company us. United States Paper Mills, Inc. (6 U. S. Pat. Q. 55) where the Circuit Court of Appeals for the Third Circuit had before it a contract under letters patent of Winter, a n employee, which included “all improvements thereon or variations thereof.” Subsequently, and while Winter was still under the employment and pay of plaintiff , Winter in conjunction with Rosenthal, not an employee, invented a device which could be added to the old type of machine to take the place of the attachment of Winter’s first patent. The Court held that, since this new invention did not infringe Winter’s first patent, it was not covered by the contract. The appellate Court, however, held that the substitute device was covered by the contract and required Winter to transfer to the company his undivided half interest in the patent he had taken out with Rosenthal for their joint invention. This did not affect Rosenthal’s title to his half. RELATIOXS WITHOUT SPECIFIC CONTRACT The relations of employer and employee where there is no contract specifically relating to inventions are more complicated, but in general they may be divided into the following categories : 1. Inventions having no bearing upon the employee’s duties and made outside of office hours are the property of the employee, and the employer has no interest in them. Solomans us. United States (137 U. S. 342). 2. Inventions arising out of or made in connection with employee’s duties and incidental thereto, by an employee whose duties do not include the conducting of research or inventive work. Here the employee retains the title to the patent, but the employer is entitled to a shop right or a nonexclusive license. Gill us. United States (160 U. S. 426). 3. Inventions made by an employee in connection with and within the field of his work, where his duties include the conducting of research and inventive work: (a) Where the employee is specifically assigned to the task of making the invention, the entire property rights t o the invention vest in the employer. Standard Parts Company us. Peck (264 U. S. 52). ( b ) Where the invention is within the general field of the employee’s research and inventive work, but where he was not s cifically assigned t o develop the particular invention, the 8 u r t s generally have held that the patent and invention do not belong to the inventor. (This particular point is to be argued in the Supreme Court of the United States early in 1933 in the case of the United States us. Dublier Condenser Corporation, involving the radio patents of Lowell and Dunbar.)
A fair statement of the law is given in Bowers us. Woodman (14 U. S. Pat. &. 32), decided June, 1932. The Court said:
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At the outset we are met with the general proposition, firmly established, that “a manufacturing corporation which has employed a skilled workman, for a stated compensation, to take charge of its works, and to devote his time and services t o devising and making improvements in articles there manufactured, is not entitled to a conveyance of patents obtained for inventions made by him while s; employed, in the absence of express agreement t o that effect. Dalzell us. Dueber Watch Case Manufacturing Company (149 U. s. 315, 320). See also Hapgood us. Hewitt (119 U. S. 226) and Ingle us. Landis Tool Company (272 Fed. Rep. 464). This general rule has been applied in cases where the employee inventor was charged with the duties of supervising the work of his employer: Pressed Steel Car Compan VS. Hansen (137 Fed. Rep. 403), certiorari denied (199 U. 608); Johnson Furnace and Engineering Company us. Western Furnace Company (178 Fed. Rep. 819, 823); Hapgood us. Hewitt, supra to cases where, as incidental to his general duties, the employee was required to devote his skill and energy to im roving or per. fecting the machinery, processes, or products o?his emplo er. Hapgood us. Hewitt, supra; Dalsell us. Dueber Watch 6ase Manufacturing Company, supra; Amdyco Corporation us. Urquhart (39 Fed. Rep. [2nd] 943); and to cases where the device invented was developed by the employee durin his employment, with the aid of his fellow employees, and witf the use of his employer’s machiner tools, and materials: Hapgood us. Hewitt, supra; Pressed &eel Car Company us. Hansen, supra; Dalzell vs. Dueber Watch Case Manufacturing Company, supra; Manton-Gaulin Manufacturing Company, Inc., us. Colony (255 Mass. Rep. 194). The relationship of employer and employee, the nature of the employment, and the development of the invention during hours of employment, and at the employer’s expense, are circumstances which have universally been held sufficient to confer upon the employer an irrevocable license t o use the invention without payment of any royalty, especially when he has tacitly and expressly consented t o such use. Solomans us. United States (137 U. S. 342); McAleer us. United States (150 U. S. 424); Lane and Bodley Company us. Locke (150 U. S. 193); Keyes us. The Eureka Consolidated Mining Company (158 U. S. 150); Gill us. United States (160 U. S. 426); Houghton VY. United States (23 Fed. Rep. [2nd] 386).
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I n regard to the relations between the Government and its employees, the Supreme Court said in Solomans us. United States (137 U. S. 342): “There is no difference between the Government and any other employer in this respect.” The last pertinent case in the Supreme Court of the United States was Standard Parts Company vs. Peck (264 U. S. 52). On August 23, 1915, Peck entered into a contract with Hess-Pontiac Spring and Axle Company providing for him “to devote his time to the development of a process and machinery for the production of the front spring now used on the product of the Ford Motor Company. First party is to pay second party for such service the sum of $300 per month. That should said process and machinery be finished a t or before the expiration of 4 months from August 11, 1915, second party is to receive a bonus of $100 a month. That when finished the second party is to receive a bonus of $10 for each per cent of reduction from direct labor, as disclosed by the books of first party.” He was so employed and the payments made. The Standard Parts Company succeeded t o the entire assets, business, and goodwill of the Hess-Pontiac Company, including all rights in said contract and devices. Peck took out a patent for the invention and sued the Standard Parts Company for infringement. On a counterclaim the Supreme Court held that the invention and the patent belong to the employer and directed Peck to transfer the title to the Standard Parts Company saying: I t cannot be contended that the invention of a specific thing cannot be made the subject of a bargain and pass in execution of it. . . . By the contract Peck was engaged to “devote his time to the development of a process and machinery” and was to receive therefor a stated compensation. Whose property was the “process and machinery’, to be developed? The answer would seem to be inevitable and resistless-of him who engaged the services and paid for them, they being his inducement and
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compens,tion, they being not for temporary use but for perpetual use, a provision for a business, a facility in it, and an asset of it, therefore contributing to it whether retained or sold. The contract involved in this case did not specifically mention either patents or inventions. Kevertheless, the Supreme Court required the patent and invention to be transferred to the employer. I n Magnetic Manufacturing Company us. Dings Magnetic Separator Company (16 Fed. Rep. \2nd] 739) the Court said: No formal words of agreement were necessary; nor, under the laws as they exist today, need the contract for employment have been in writing. If the minds of the arties met, and both understood that the employee for part o f his compensation was to devote a part or all of his time and use his knowledge and skill in making a new magnetic separator or developing an improvement in the one appellee was marketing, the case falls within the Peck (264 U. S. 52) decision.
The fact that a scientist is employed by the %ate of Louisiana to do experimental Jvork does not prevent his obtaining a patent for his invention; this was held in Kational Pigments Company vs. Shreveport Chemical Company (15 U. S. Pat. Q. 2). The Court said that only the state could complain, and a n infringer of the patent could not attack the title of the inventor to his patent. I n Houghton us. United States (23 Fed. Rep. [2ndl 386) the Court said: It matters not in That capacity the employee may originally have been hired; if he be set to experimenting with the view of making an invention and accepts pay for,such work, it is his duty to disclose t o his employer what he discovers in making the experiments, and what he accomplishes by the experiments belongs to the employer.
But in City of Boston
US.
Allen 191 Fed. Rep. 248 (1
C.C. A.)] the North Ferry was rebuilt within two years before the patent in controversy issued (in 1884) in accordance with general plans made by the city engineer, but under the supervision and the immediate charge of Doten who was then the engineer of the ferry department. The most favorable aspect of the case for the plaintiff is t h a t the improvements covered by the patent were suggested by Doten during the rebuilding of the North Ferry, and while it was his duty t o use his skill as a mechanic and a n engineer in the interests of the city in carrying on that work; and that the improvements, while not material to the work, were incidental t o it, and apparently advantageous. Yo compensation was demanded by Doten for the use of the improvements at the North Ferry until 1885, after Doten had left the employment of the city, when he made a claim on the officers of the ferry department for reimbursement for the use of his improvements; this claim was not followed up. The title of the patent came t o the plaintiff in July, 1890, and subsequent t o that date the patented improvements were made use of by the city a t South Ferry. The Court held that Doten by building the North Ferry with the invention did not authorize its use a t South Ferry. The bonus system for improvements by inventors was adverted to in the recent case of Howard us. Howe [I5 U. S. Pat. Q. 93 (C. C. A. 7)]. The Court said the employee was under no contractual obligation t o use his time in making inventions for his employer or to assign such inventions as he might conceive t o the former. H e was only a faithful employee in performance of his general duties as pattern maker, foreman, assistant superintendent, and superintendent Members of the company, by constantly cultivating and enunciating the doctrine of paternalism, the Golden Rule, and good fellowship, built up morale and inspired reliance I
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upon them by eniployees; prizes and bonuses offered had no contractual character. The Court held that assignments of inventions were procured from the employees by fraudulent misrepresentations and false promises of such character as to create a constructive trust on the part of the corporation, its allies, and officers, and they were required to account to the inventor for the use of his inventions. It sometimes happens that the relations between employer and employee are personal. The individual employer may be a n inventor himself and may employ another to help with his inventive work. In general, supplemental or helpful suggestions made by an employee are not looked upon as separate inventions but merely as parts of the invention of the employer. Such a case came before t.he Supreme Court in Agawam Company m. Jordan (74 U. 8.583). The Court said: No one is entitled to a patent for that which he did not, invent unless he can show a legal title to the same from the inventor or by operation of law; but where a person has discovered an improved principle in a machine, manufacture, or composition of matter, and employs other persons to assist him in carrying out that principle, and they, in the course of experiments arising from that employment, make valuable discoveries ancillary to the plan and preconceived design of the employer, such suggested improvements are generally to be regarded as the property of the party who discovered the original improved principle, and may be embodied in his patent as a part of his invention. Suggestions from another, made during the progress of such experiments, in order that they may be sufficient t o defeat a patent subsequently issued, must have embraced the plan of the improvement, and must have furnished such information to the person to whom the communication was made that it would have enabled an ordinary mechanic, without the exercise of an ingenuity and special skill on his part, to construct and put til, improvement in successful operation. Persons employed, as much as employers, are entitled to their own independent inventions, but where the employer has conceived the plan of an invention and is engaged in experiments t o perfect it, no suggestions from an employee, not amount,ing to a new method or arrangement which in itself is a complete invention, is sufficient to deprive the employer of the exclusive property in the perfect,ed improvement. But where the suggestions go to make up a complete and perfect machine, embracing the substance of all that is embodied in the patent subsequently issued to the party t o whom the suggestions were made, the patent is invalid, because the real invention or discovery belonged to another.
There was a n unsuccessful effort to apply the same rule to two members of the faculty of the University of Minnesota, in Larsen us. Crowther (26 Fed. Rep. [2nd] 780). Larsen was professor of dentistry a t the University of Minnesota, and Crowther was mechanical assistant to various professors; the invention was immunizing material or vaccine in colloidal condition consisting of bacteria disrupted by internal gas pressure. In that case the Court held them independent of each other, saying: It is urged that Crowther was a mere employee of Larsen and hence that any suggestions on his part inured to the benefit of Larsen. . . . We do not see that Crowther was any more an employee of Larsen than that Larsen was an employee of Crowther. Both were employees of the University. They were working together on University time and were paid by the University.
It is clear from the Court decisions that the only safe procedure is t o have a definite written agreement with all employees covering all inventions relating t o the specifically defined field in which the employer is operating or interested, and whether made during the term of employment or afterward. RECEIVEDDecember 19, 193'7. Presented before the meeting of t h e American Institute of Chemical Engineers, Wafihington, D. C . , December 6 t o 9, 1932.
