Aetna-Standard Engineering Co. v. Rowland

• Decision Date: 31 May 1985
• Docket Number: AETNA-STANDARD
• Citation: 493 A.2d 1375,343 Pa.Super. 64
• Parties: , 228 U.S.P.Q. 292 ENGINEERING COMPANY, Appellant, v. Leroy R. ROWLAND.
• Court: Pennsylvania Superior Court

Page 1375

493 A.2d 1375

343 Pa.Super. 64, 228 U.S.P.Q. 292

AETNA-STANDARD ENGINEERING COMPANY, Appellant, v. Leroy R. ROWLAND.

Superior Court of Pennsylvania.

Argued Dec. 4, 1984.

Filed May 31, 1985.

Walter J. Blenko, Jr., Pittsburgh, for appellant.

William H. Logsdon, Pittsburgh, for appellee.

Before CIRILLO, TAMILIA and MONTGOMERY, JJ.

CIRILLO, Judge:

Appellant Aetna-Standard Engineering Co. ("Aetna") challenges a final decree in equity of the Court of Common Pleas of Butler County, entered May 12, 1983. That decree dismissed both appellant's and appellee Leroy V. Rowland's exceptions, and adopted the trial court's December 30, 1982, order. That order, in turn: 1) declared appellee to be the sole owner of the subject matter in certain enumerated claims in United States Patent 4,037,453; 2) declared appellee to be a joint inventor, with Robert A. Remner, of certain other enumerated claims in the patent; 3) required appellant to execute any documents appellee needed to perfect his ownership interest in the patent; and 4) gave appellant a shop right in the patent limited to the project contract with Ishikawajima-Harima Heavy Industries ("IHI"), a Japanese firm for which the patented article was invented.

Appellant now presents three questions:

1.) Where an employee is hired as a skillful designer of machinery and is assigned to devote his time and skill to solve a specific problem by designing a new machine, does the employer own any invention in the new machine?

2.) Assuming, arguendo, that the employer does not own an invention made by the employee as a result of his work assignment, does the employer receive an irrevocable, royalty-free license or "shop right"?

3.) Where United States Letters Patent issue as a result of a joint invention, does each inventor hold an undivided interest in the entire patent? ¹

We conclude that appellant is not entitled to an assignment of appellee's invention, but that it has a shop right for the invention's use. In addition, appellee, as a joint inventor, holds an indivisible joint interest in the patent.

We note first that the present controversy does not concern the validity or an infringement of the involved patent; such disputes are for a federal court's resolution. See generally 35 U.S.C. §§ 281-294 (remedies for infringement); Healy v. Sea Gull Specialty Co., 237 U.S. 479, 35 S.Ct. 658, 59 L.Ed. 1056 (1914); Rubens v. Bowers, 136 F.2d 887 (9th Cir.1943). Appellant Aetna's questions presented pertain instead to the assignment and divided ownership of patent rights and to shop rights in a patented invention. These "incidental and collateral" issues of property rights in an invention a state court may entertain. Quaker State Oil Refining Co. v. Talbot, 315 Pa. 517, 174 A. 99, appeal after remand 322 Pa. 155, 158, 185 A. 586, 587 (1936). See also Van Products Co. v. General Welding & Fabricating Co., 419 Pa. 248, 213 A.2d 769 (1965); Slemmer's Appeal, 58 Pa. 155 (1868).

We also note that appellant does not allege that appellee, by retaining his interest in the instant patent, has misappropriated any trade secrets of appellant. Such an allegation would be separate from and independent of assignment, joint inventor and shop right issues. ²

The major body of law on an employer's and employee's respective rights in the inventive or creative work of the employee evolved in the nineteenth and early twentieth centuries during our nation's industrial revolution. ³ The United States Supreme Court has announced several rules for defining these rights. In the leading case of United States v. Dubilier Condenser Corp., 289 U.S. 178, 53 S.Ct. 554, 77 L.Ed. 1114 (1933), the Court stated that the mere existence of an employer-employee relationship does not of itself entitle the employer to an assignment of any inventions which the employee devises during the employment.

At the same time, however, the absence from the employment contract of an express agreement to assign will not preclude the employer as a matter of law from asserting a claim to the employee's invention. See Agawam Co. v. Jordan, 74 U.S. (7 Wall.) 583, 19 L.Ed. 177 (1868). Instead, a court must closely scrutinize the employment contract, so that, absent an express contrary agreement, an employee must assign his invention to his employer if he was hired for the purpose of using his inventive ability to solve a specific problem or to design a certain procedure or device for the employer; in such a case, the invention is the precise subject of the employment contract. Dubilier Condenser, supra; Standard Parts Co. v. Peck, 264 U.S. 52, 44 S.Ct. 239, 68 L.Ed. 560 (1924); Solomons v. United States, 137 U.S. 342, 11 S.Ct. 88, 34 L.Ed. 667 (1890). Given the personal, intellectual nature of the inventive process, the courts must otherwise hesitate to imply agreements to assign. Dubilier Condenser, supra. See generally N. Alam, "Employers' Obligations Regarding Employee Inventions--A New Perspective," 8 Empl.Rel.L.J. 463 (1982-83); Comment, "Reform for Rights of Employed Inventors," 57 S.Cal.L.Rev. 603 (1984).

Although an employer might not be entitled to an assignment of the employee's invention--that is, of his patent--the employer will likely have a license or "shop right" to use the invention without paying the employee any additional compensation as royalties; the shop-right rule thus creates an exception from the employee's patent right to exclude others from making or using his invention. As in the law on assignment of inventions, the employment relationship, standing alone, does not give the employer a shop right; the employer might have to show an express agreement for the right. See McAleer v. United States, 150 U.S. 424, 14 S.Ct. 160, 37 L.Ed. 1130 (1893). A shop right will arise, however, where the employee devises the invention on the employer's time and at the latter's expense, using his materials and facilities, and allows him to use the invention without special compensation. See Dubilier Condenser, supra; Gill v. United States, 160 U.S. 426, 16 S.Ct. 322, 40 L.Ed. 480 (1896); Keyes v. Eureka Consolidated Mining Co., 158 U.S. 150, 15 S.Ct. 772, 39 L.Ed. 929 (1895); Lane & Bodley Co. v. Locke, 150 U.S. 193, 14 S.Ct. 78, 37 L.Ed. 1049 (1893); Dalzell v. Dueber Watch Case Manufacturing Co., 149 U.S. 315, 13 S.Ct. 886, 37 L.Ed. 749 (1892); Solomons v. United States, supra; Wade v. Metcalf, 129 U.S. 202, 9 S.Ct. 271, 32 L.Ed. 661 (1889); Hapgood v. Hewitt, 119 U.S. 226, 7 S.Ct. 193, 30 L.Ed. 369 (1886); McClurg v. Kingsland, 42 U.S. (1 How.) 202, 11 L.Ed. 102 (1843). See also S.P. Sondrock, "Evolution and Modern Application of the Shop Right Rule," 38 Bus.Law. 953 (1983). Under this rule, an employee may not recover on an implied contract for payment for the shop right. Gill v. United States, supra.

The Pennsylvania courts, and the federal courts sitting in Pennsylvania, have long applied the Supreme Court's rules on employers' and employees' rights to inventions virtually verbatim. In the early case of Slemmer's Appeal, supra, the plaintiffs claimed to be joint inventors with the defendant employee of a patented invention. Our Supreme Court could not agree with the plaintiffs, as such a holding would invalidate the patent, an action beyond the Court's jurisdiction. Instead, the Court applied a license theory, and stated:

[I]f a person employed in the manufactory of another, while receiving wages, makes experiments at the expense of his employer, constructs the article invented and permits his employer to use it, no compensation for the use being paid or demanded, and then obtains a patent, these facts will justify the presumption of a license to use the invention.

Slemmer's Appeal, 58 Pa. at 167.

This principle was followed in Dempsey v. Dobson, 174 Pa. 122, 34 A. 459, appeal after remand 184 Pa. 588, 39 A. 493 (1898). There, the plaintiff employee was a color-mixer for a carpetmaker. His duties were to blend dyes for decorating the carpets, and then to record the dyes' formulae in "recipe books"; the employee wanted to take these books with him when he quit the employer's shop. The Court noted that the employee had been hired, and his wages fixed, with reference to his skill and experience in using dyes and making carpets, and that he was not an independent contractor using his own secret processes.

In the first appeal, the Court viewed Dempsey as a much stronger case for the employer than had been Slemmer's Appeal: in Dempsey, the dye experiments, recorded in the recipe books, were not only conducted at the employer's expense but also at his request and for use in his business. In addition, the employee had been hired because of his special skill and experience in working with dyes. Accordingly, the employee could use his own color books in his future employment, but his former employer had a license to do likewise. Dempsey, 174 Pa. at 130-31, 34 A. at 461.

The Court reiterated this rule in the appeal after remand, over the employee's claim that it was a trade custom for color-mixers to take their dye formulae with them when they left a particular manufacturer. Such a "custom," the Court said, was invalid as illegal and unreasonable: a mixer is employed because of his particular skill, and cannot harm his employer's business by removing the results of that skill and denying the employer's license to use them. Dempsey, 184 Pa. at 592-93, 39 A. at 493.

Other cases have applied these same rules on implied licenses or shop rights. See Ingle v. Landis Tool Co., 272 Fed. 464 (3d Cir.1921), cert. denied 257 U.S. 644, 42 S.Ct. 54, 66 L.Ed. 413 (1921); Pressed Steel Car Co. v. Hansen, 137 Fed. 403 (3d Cir.1905), cert. denied 199 U.S. 608, 26 S.Ct. 749, 50 L.Ed. 331 (1905); Wellington Print Works, Inc. v. Magid, 242 F.Supp. 614 (E.D.Pa.1965); Kurtzon v. Sterling Industries, Inc., 228 F.Supp. 696 (E.D.Pa.1964); Toner v. Sobelman, 86 F.Supp. 369 (E.D.Pa.1949).

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