Milliken & Co. v. Morin

• Decision Date: 01 August 2012
• Docket Number: No. 27154.,27154.
• Citation: 34 IER Cases 271,399 S.C. 23,731 S.E.2d 288
• Court: South Carolina Supreme Court
• Parties: MILLIKEN & COMPANY, Respondent, v. Brian MORIN, Petitioner.

399 S.C. 23

731 S.E.2d 288

34 IER Cases 271

MILLIKEN & COMPANY, Respondent,

v.Brian MORIN, Petitioner.

No. 27154.

Supreme Court of South Carolina.

Heard March 20, 2012.

Decided Aug. 1, 2012.

John S. Nichols and Blake Hewitt, Bluestein, Nichols, Thompson, & Delgado, both of Columbia, for Petitioner.

Charles E. Carpenter, Jr., Carpenter Appeals & Trial Support, LLC, of Columbia, Henry L. Parr, Jr., David H. Koysza, and Martin M. Tomlinson, Wyche Burgess Freeman, & Parham, and John C. Glancy, Ogletree, Deakins, Nash, Smoak, & Stewart, all of Greenville, for Respondent.

Justice HEARN.

Milliken & Company sued Brian Morin after he resigned from the company and started a new venture using Milliken's proprietary information. The crux of its suit was that Morin breached the confidentiality and invention assignment agreements he signed when he started working for Milliken. A jury found for Milliken, and the court of appeals affirmed. Milliken & Co. v. Morin, 386 S.C. 1, 11–12, 685 S.E.2d 828, 834–35 (Ct.App.2009). We granted certiorari to review the narrow issue of whether these agreements are overbroad as a matter of law. We hold they are not and affirm as modified.

FACTUAL/PROCEDURAL BACKGROUND

Morin began working for Milliken as a research physicist in 1995 in its Spartanburg, South Carolina facility. As a condition of his employment, Morin had to sign an “Associate Agreement” which contained provisions regarding confidentiality and the assignment of certain inventions. The confidentiality agreement reads as follows:

CONFIDENTIAL INFORMATION means all competitively sensitive information of importance to and kept in confidence by Milliken, which becomes known to me through my employment with Milliken and which does not fall within the definition of Trade Secret above.¹ Such Confidential Information may be valuable to Milliken because of what it costs to obtain, because of the advantages Milliken enjoys from its exclusive use, or because its dissemination may harm Milliken's competitive position.

....

B. EXCEPT as required in my duties to Milliken, I will never, either during my employment by Milliken or thereafter, use or disclose, modify or adapt any ... Confidential Information as defined in paragraph 3 hereinabove until three (3) years after the termination of my employment except as authorized in the performance of my duties for Milliken.

Morin's duty to assign his inventions to Milliken is somewhat longer:

4. INVENTIONS means discoveries, improvements and ideas (whether or not shown or described in writing or reduced to practice), mask works (topography or semiconductor chips) and works of authorship, whether or not patentable, copyrightable or registerable, (1) which relate directly to the business of Milliken, or (2) which relate to Milliken's actual or demonstrably anticipated research or development, or (3) which result from any work performed by me for Milliken, or (4) for which any equipment, supplies, facility or Trade Secret or Confidential Information of Milliken is used, or (5) which is developed on any Milliken time.

....

A. With respect to Inventions made, authored and conceived by me, either solely or jointly with others, (1) during my employment, whether or not during normal working hours or whether or not at Milliken's premises; or (2) within one year after termination of my employment,² I will:

a. Keep accurate, complete and timely records of such Inventions, which records shall be Milliken property and retained on Milliken's premises.

b. Promptly and fully disclose and describe such Inventions in writing to Milliken.

c. Assign (and I do hereby assign) to Milliken all of my rights to such Inventions, and to applications for letters patent, copyright registrations and/or mask work registrations in all countries and to letters patent, copyright registrations and/or mask work registrations granted upon such Inventions in all countries. d. Acknowledge and deliver promptly to Milliken (without charge to Milliken but at the expense of Milliken) such written instruments and to do such other acts as may be necessary in the opinion of Milliken to preserve property rights against forfeiture, abandonment or loss and to obtain, defend and maintain letters patent, copyright registrations and/or mask work registrations and to vest the entire right and title thereto in Milliken.

NOTICE: This is to notify you that paragraph A of this Milliken “Associate Agreement” you are being asked to sign as a condition of your employment does not apply to an Invention for which no equipment, supplies, facility or proprietary information of Milliken was used and which was developed entirely on your own time, and (1) which does not relate (a) directly to the business of Milliken or (b) to Milliken's actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by you for Milliken.

Over the next nine years with Milliken, Morin was promoted twice, first to Senior Research Physicist and then to Team Leader for the Advanced Yarns Team. During the time Morin was in charge of the Advanced Yarns Team, one of Milliken's goals was to investigate the use of additives and equipment modifications to create a new type of fiber. To seek out potential uses for such a product, Milliken sent Morin to a trade show in Anaheim, California, in the Fall of 2003. Shortly thereafter, he began drafting a business plan for his own company, Innegrity, which would manufacture this new fiber. He then resigned from Milliken on May 19, 2004, and filed a patent for the fiber, which he labeled Innegra, the following November.

Milliken first caught wind of Morin's plans after he invited his former colleagues to attend a presentation he was giving at a gathering of venture capitalists in Greenville, South Carolina. After noting the similarities between Innegrity's business plan and certain projects being conducted at Milliken, Milliken raised concerns that Morin had violated the Associate Agreement. This suit soon followed.

Milliken brought several claims against Morin, but only its claims for breach of the confidentiality agreement, breach of invention assignment provisions, breach of the duty of loyalty, and violation of the South Carolina Trade Secrets Act were submitted to the jury. The jury found for Milliken on its breach of the confidentiality and invention assignment agreement claims, but it found for Morin on the remaining causes of action. In the end, the jury awarded Milliken $25,324 in damages.³ Morin appealed, arguing that these agreements are overbroad and therefore unenforceable, but the court of appeals disagreed and affirmed. Milliken, 386 S.C. at 11–12, 685 S.E.2d at 834–35. We granted certiorari.

STANDARD OF REVIEW

An action for breach of contract is an action at law. Sterling Dev. Co. v. Collins, 309 S.C. 237, 240, 421 S.E.2d 402, 404 (1992). On appeal from an action at law tried by a jury, we sit merely to correct errors of law. Erickson v. Jones St. Publishers, L.L.C, 368 S.C. 444, 464, 629 S.E.2d 653, 663–64 (2006). “Whether a contract is against public policy or is otherwise illegal or unenforceable is generally a question of law for the court.” 17B C.J.S. Contracts § 1030. We review questions of law de novo. Town of Summerville v. City of N. Charleston, 378 S.C. 107, 110, 662 S.E.2d 40, 41 (2008).

LAW/ANALYSIS

I. APPLICABLE STANDARD

We must first resolve a question left unanswered by the court of appeals, which is under what rubric we are to evaluate the enforceability of these agreements. Morin argues that we should analyze them as non-compete agreements and thus strictly construe them in favor of the employee. We disagree.

“According to the early common law of England, an agreement in restraint of a man's right to exercise his trade or calling was void as against public policy.” Standard Register Co. v. Kerrigan, 238 S.C. 54, 59, 119 S.E.2d 533, 536 (1961). The rationale behind this categorical rule was that at the time a man had to be apprenticed in his trade and was bound by law to exercise it. Id. at 59–60, 119 S.E.2d at 536. “Hence, to enforce such an agreement was to deny such person the right to earn his living and to require him to violate an express provision of the law.” Id. at 60, 119 S.E.2d at 536. As the law and realities of employment have progressed, however, there has been “ ‘some amelioration of the ancient disfavor.’ ” Id. (quoting Welcome Wagon, Inc. v. Morris, 224 F.2d 693, 698 (4th Cir.1955)).

“Modern courts have usually, in passing on these contracts, employed three criteria: (1) Is the restraint, from the standpoint of the employer, reasonable in the sense that it is no greater than is necessary to protect the employer in some legitimate business interest? (2) From the standpoint of the employee, is the restraint reasonable in the sense that it is not unduly harsh and oppressive in curtailing his legitimate efforts to earn a livelihood? (3) Is the restraint reasonable from the standpoint of a sound public policy?”

Id. (quoting Welcome Wagon, 224 F.2d at 698). We reaffirmed and expounded upon these principles in Rental Uniform Service of Florence, Inc. v. Dudley, 278 S.C. 674, 301 S.E.2d 142 (1983). In doing so, we reiterated that “[r]estrictive covenants not to compete are generally disfavored and will be strictly construed against the employer” and added that they must also be reasonably limited “with respect to time and place.” Id. at 675, 301 S.E.2d at 143. This is the framework Morin would have us apply here.

The agreements under review, however, are not in restraint of trade. See Louis Altman & Malla Pollack, Callmann on Unfair Competition, Trademarks and Monopolies § 14:6 (4th ed.2009) (“An employee's express commitment not to disclose his employer's confidential information, whether or not it comprises trade secrets, ‘unlike the covenant not to compete cannot be challenged as an unreasonable restraint of trade.’ ” (quoting Lear Siegler, Inc....