Guth v. Minnesota Mining & Mfg. Co.

• Decision Date: 01 October 1934
• Docket Number: No. 5105.,5105.
• Citation: 72 F.2d 385
• Parties: GUTH v. MINNESOTA MINING & MFG. CO.
• Court: U.S. Court of Appeals — Seventh Circuit

72 F.2d 385 (1934)

GUTH v. MINNESOTA MINING & MFG. CO.

No. 5105.

Circuit Court of Appeals, Seventh Circuit.

June 29, 1934.

Rehearing Denied October 1, 1934.

Francis E. McGovern, of Milwaukee, Wis., for appellant.

Whitman Taylor, of Chicago, Ill., and Leo Mann, of Milwaukee, Wis., for appellee.

Before EVANS, SPARKS, and FITZ HENRY, Circuit Judges.

EVANS, Circuit Judge (after stating the facts as above).

Appellant was employed by appellee in the year 1927 as a chemical engineer at a salary of $150 per month, which wage was thereafter increased from time to time until it reached $225 per month. His employment terminated in June, 1930. His work was in appellee's research laboratory. His assignment was to solve the problem presented by the laminating or tearing of paper tape when being unwound from the roll or removed from the surface to which it was adhered and also to endeavor to reduce the cost of adhesive tape manufacture.

Appellee for many years had been engaged in the manufacture of masking tape, abrasives, etc. Masking tape is a pressure sensitive tape made by placing pressure sensitive adhesive on paper backing made of paper which has been unified. The result is a paper that is wound in rolls and then unwound and placed on surfaces and which can be removed from the surface without splitting or laminating the tape; the avoidance of splitting permits the tape to be reused repeatedly. The paper backing is unified by saturating it with an adhesive solution which binds or welds the fibres together, thus unifying the paper so it will not laminate.

In appellee's laboratory and research department there were some thirty chemists and chemical engineers employed during the period covered by appellant's employment. All employees who were engaged in research work were required to sign contracts wherein they agreed, among other things, that inventions by them perfected should be assigned to the company. Appellant executed and delivered to appellee such a contract, a copy of which is herewith set forth.¹

In the course of appellant's employment he went to Green Bay, Wisconsin, to study methods of can drying which differed from the regular procedure of tungsten drying of adhesive creping. Following this trip, appellee purchased a machine for further experimental and testing purposes. Appellant continued his experiments with this machine with the result, as appellee claims and the court found, that about February 26, 1930, a new product was conceived for which appellant could validly apply for a patent and which patent appellee was entitled to because of the aforesaid agreement. After appellant left appellee's employment there was submitted to him an application for a patent which he refused to sign because he claimed he was not the inventor of the product covered thereby and disclosed therein, but that he was shown such a product in the Green Bay factory and that someone in that factory, rather than he, was the inventor. He also challenged the validity of the contract above set forth. It is unnecessary to go into detail in respect to the other invention because the foregoing fact statement is sufficient to present the issues which appellant has raised and which grow out of the aforementioned employment agreement. Both questions are of more than ordinary interest.

The two questions are: (a) Was the contract, which appellee relies upon to enforce the assignment of the patent application, against public policy and therefore void? (b) Upon the evidence here presented, was the court justified in requiring appellant to sign an application for a patent which necessitated his making an affidavit which contained material statements which he says he could not truthfully make?

The contract obligated appellant to assign:

"(a) all my rights to inventions which I have made or conceived, or may at any time hereafter make or conceive, either solely or jointly with others, relating to abrasives, adhesives or related materials, or to any business in which said company during the period of my employment by said company or by its predecessor or successor in business, is or may be concerned, and

"(b) all my rights to inventions which, during the period of my employment by said company or by its predecessor or successors in business, I have made or conceived, or may hereafter make or conceive, either solely or jointly with others, or in the time or course of such employment, or with the use of said company's time, material or facilities, or relating to any subject matter with which my work for said company is or may be concerned; and

"(c) I further agree, without charge to said company, but at its expense, to execute, acknowledge and deliver all such further papers, including applications for patents, and to perform such other acts as I lawfully may, as may be necessary in the opinion of said company to obtain or maintain patents for said inventions in any and all countries. * * *"

The right of an employer to contract for patentable discoveries made by its employee within certain limits is well recognized.²

Equally well settled is the proposition that such negative employment contracts are subject to legal limitations.³

Applying the rules of these decisions to the contract under review, it is worthy of note (a) that the agreement is not limited in point of time. It covers inventions which the employee has made or conceived or may at any time hereafter make or conceive. (b) It is not limited to the subject matter to which the employee directed his attention when in the employ of appellee, but extends to any business "in which said company during the period of my employment by said company or by its predecessor or successor in business is or may be concerned." In other words, if appellee's predecessor were engaged in any other business to which appellant's discovery might relate or its successor shall be or may be concerned, the contract applies.

Upon the facts peculiar to this case we are convinced that those provisions of the contract which were limitless in extent of time and in subject matter of invention were contrary to public policy. Guth was a chemical engineer. He was more or less successful in research work, as is shown by the fact basis of this litigation. He was a research man prepared to devote his life to discoveries of value to industry. Under this contract he was, however, if he worked in another laboratory or for another manufacturer, required to assign his discoveries to appellee. This would effectively close the doors of employment to him. Until the end of the chapter he was compelled either to work for appellee or turn over the children of his inventive genius to it. Such a contract conflicts with the public policy of the land,⁴ which is one that encourages inventions and discourages the exclusion of an employee from engaging in the gainful occupation for which he is particularly fitted for all time, anywhere in the United States.

Much closer, however, is the question which arises from the fact that the first invention here involved was made by appellant during the period of his employment and related to a subject matter upon which he worked as a laboratory research man for appellee. That is to say, the first invention was conceived while appellant was working for appellee on the latter's time and pay. The second invention was an improvement on the first. This fact presents the interesting question of whether a contract containing negative employment covenants which are against public policy may still be enforced to the extent that such negative covenant contract provisions are reasonable and legitimate. In short, may such a contract be void in part and valid as to certain provisions?

On this issue appellant occupies no more favorable position than appellee held on the other phase of this question. Appellant was employed as a researcher. His new product was conceived while he was so employed by appellee. It related to the very subject matter for which he was employed and covered the product which his employer was engaged in manufacturing.

Equity is as sensitive to the appeal of one party as it is to the other. It is willing to deny relief to anyone who has overreached the other. But said other should be in court with clean hands. His standing should be free from unfair advantage taken of his adversary.

The decisions are many on the subject.⁵ The statement appearing in Page on Contracts, § 788, we think, expresses the consensus of opinion and correctly states the rule of law which we must apply.

"If the parties have stipulated for an entire area without any division thereof into parts by the terms of the contract, the weight of authority is that the courts will not sever the contracts if the parties have not done so themselves, although there is authority indicating that the courts will sever such areas. In any event, the court will, if possible, construe the contract as severing the different areas. If a covenant in restraint of trade extends over too wide an area, it may be held valid as to a lesser area if the parties, by the terms of the contract, have stipulated for restraint of competition for several different areas, and such covenant is reasonable as to part and unreasonable as to the residue. Thus an agreement not to engage in business in a given county or elsewhere, or in a given country or state or the United States, may be in each case valid as to such county and void as to the rest of the area contracted for."

The contract before us contains stipulations capable of being construed separately. In short, the contract is divisible. Some of the covenants are contrary to public policy and non-enforceable. Others are valid and enforceable in a court of equity (although courts are not required in all cases to grant the specific performance of such contracts).

The two discoveries which are the subject matter of this litigation fell within the valid provisions of the agreement.

The second...