Seventh Circuit Emphasizes The Necessity Of A Written Invention Assignment Agreement

• Published date: 24 August 2022
• Subject Matter: Employment and HR, Intellectual Property, Contract of Employment, Patent, Trade Secrets
• Law Firm: Foley Hoag LLP
• Author: Mr Robert Haney Jr and Paul F. Downs

Key Takeaways:

• Written invention assignment agreements provide critical protection for employers because without one, employees generally own patent rights to employment related inventions. Assignment agreements can also be necessary to prosecute trade secret claims against former employees who use or disclose research or inventions developed while employed.
• To successfully litigate a trade secrets claim, a plaintiff must identify the precise contours of its alleged trade secret and how it provides independent economic value.

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In July 2022, the Seventh Circuit issued an opinion making it clear that employers must put in place written invention assignment agreements if they want to ensure ownership of employee inventions. Employers bringing trade secret misappropriation claims cannot rely on an implied contract to secure ownership of inventions created by employees, except in very limited circumstances. REXA, Inc. v Chester, 2022 U.S. App. LEXIS 20893 (7th Cir. July 28, 2022). The Court also reconfirmed that identifying broad areas of technology is insufficient for a trade secrets claim. Instead, a plaintiff must give specific descriptions of the new invention and identify the specific aspects that were unknown in the field and have independent economic value. Id.

Background

REXA sued a former engineer of an affiliate, Koso America, Inc., for misappropriation of trade secrets and breach of an "implied" invention assignment contract. The former engineer had worked on a prototype valve for a hydraulic actuator (a component responsible for making something move). Koso shelved the project in 2002 and the employee departed the company. A decade later, the former engineer created a successful actuator, called the Hawk, for another company, MEA, Inc. MEA filed a successful patent application. The district court granted the former engineer summary judgment on both REXA's trade secret claim and its implied assignment contract claim.

Implied Assignment Contract

The Seventh Circuit upheld the dismissal of REXA's implied contract claim, holding that "an individual owns the patent rights to the subject matter of which he is an inventor, even though he conceived it or reduced it to practice in the course of his employment." Id. at *26 (citation omitted). Parties can contract around this principle using an assignment provision'which provides broader employer protection. No such agreement was entered by...