Sunday, May 13, 2012

Supreme Court of Wyoming: Continued Employment Is Sufficient Consideration for Invention Assignment Agreement

Invention assignment agreements are often important for employees who work in a highly technical field, creating patentable or trade secret material used to give a company a competitive advantage. As long as that technology is within an employer's line of business, that employer should have every expectation that the employee's invention will become the employer's property. That is, after all, what the employer is paying a good wage for.

Assignment clauses are part and parcel of most confidentiality agreements. If they are a species of a non-compete, they're not a particularly onerous one. Still, they do give rise to some litigation, most frequently when an invention falls within a so-called "trailer" clause - a clause extending the assignment for a short period of time past the end of employment.

In Preston v. Marathon Oil, the Supreme Court of Wyoming answered a certified question from the United States Court of Appeals for the Federal Circuit on invention assignment clauses. The Court held that an employee's continued employment is sufficient consideration for such a clause, even though Wyoming is in that group of states holding that continued employment is not sufficient consideration for a covenant not to compete. The court had little trouble differentiating the types of contracts, reasoning that the continued employment rule in the non-compete context clashed with an employee's right to earn a living.

Keep in mind that in the absence of an express assignment, an employer still has a shop right to an employee's inventions - in effect, a paid-up, royalty-free license to use it - but the employee is still the owner. Illinois also has a statute which technically requires an assignment clause to carve-out certain classes of inventions, essentially those having nothing to do with the employer's line of work or R&D. I am not aware of any case addressing the consequences, though, of a non-compliant assignment clause in Illinois.

A copy of the Preston opinion can be found here.

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