Teets v. Chromalloy Gas Turbine Corp.

• Decision Date: 07 May 1996
• Docket Number: 95-1389,Nos. 95-1379,s. 95-1379
• Citation: 83 F.3d 403,38 USPQ2d 1695
• Parties: J. Michael TEETS, Plaintiff/Cross-Appellant, v. CHROMALLOY GAS TURBINE CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 403

83 F.3d 403

38 U.S.P.Q.2d 1695

J. Michael TEETS, Plaintiff/Cross-Appellant, v. CHROMALLOY GAS TURBINE CORPORATION, Defendant-Appellant.

Nos. 95-1379, 95-1389.

United States Court of Appeals,

Federal Circuit.

May 7, 1996.

Rehearing Denied; Suggestion for Rehearing In Banc Declined

July 1, 1996.

Appealed from: United States District Court for the Southern District of Florida; Davis, Judge.

Robert E. Pershes, Pershes & Schwartz, P.A., Coral Springs, Florida, argued, for plaintiff/cross-appellant.

Stanley H. Lieberstein, Ostrolenk, Faber, Gerb & Soffen, L.L.P., New York City, argued, for defendant-appellant. With him on the brief were Douglas A. Miro and Marc A. Lieberstein.

Before NEWMAN, MICHEL, and RADER, Circuit Judges.

Opinion for the court filed by Circuit Judge RADER, Circuit Judge NEWMAN concurs in the result.

RADER, Circuit Judge.

Chromalloy Gas Turbine Corporation (Chromalloy) and J. Michael Teets dispute ownership of an invention called the hot forming process (HFP). Following a bench trial, the United States District Court for the Southern District of Florida concluded that Teets solely owned the HFP and enjoined Chromalloy from certain uses of the HFP. Because the district court erred in concluding Teets owned the process, this court reverses.

BACKGROUND

The General Electric Aircraft Company (GE) developed a more powerful and fuel efficient jet engine called the GE90. In conjunction with this development, GE designed a composite turbine engine fan blade which was lighter than existing metal fan blades. These lightweight blades, however, fractured more frequently from contact with birds, freezing rain, and other debris.

GE tried to solve this problem by fitting the leading edge of the blade with a hard protective covering of electroform nickel. After initially failing to manufacture the edge internally, GE asked DRB Industries, a division of Chromalloy, to devise a method of manufacturing the leading edge for the new composite blades. GE specified that DRB should make the leading edge of one piece of titanium. In fact, GE offered DRB a long-term contract if it was successful.

DRB labelled this project the GE90 Project. Less than a month later, in November 1991, Douglas R. Burnham, General Manager of DRB, assigned Teets as the Chief Engineer on the GE90 Project. Teets spent at least 70% of his time on the GE90 Project. At this time, Teets was an employee at will and had no written employment contract addressing ownership of inventive work. Burnham, on the other hand, had contractually On November 1, 1991, DRB proposed several initial manufacturing designs. All the proposals involved welding or diffusion bonding several pieces together to form the leading edge. On November 12, 1991, GE agreed to purchase some welded and bonded fan blades. In that agreement, however, GE indicated its desire that DRB continue to work toward a one-piece leading edge. In fact, GE specifically stated in the purchase agreement that it would enter into a long-term contract with DRB for production quantities of leading edges if DRB successfully developed a cost-effective method of manufacturing the one-piece leading edge.

agreed to assign any inventive rights to DRB.

In early 1992, GE discovered problems with DRB's weld method. The welds were porous, distorted, and suffered breakage at the joints. In response, GE ordered design changes. On March 12, 1992, Burnham and Teets met to discuss GE's required changes. During this meeting, Teets showed Burnham sketches he had drawn at home depicting Teets's initial idea for the HFP. Burnham thought the idea had potential. Nonetheless he instructed Teets to make changes in the welding process because GE would not alter its delivery schedule for design changes. Teets refined the HFP idea while still working on GE's changes to the welding process. Other employees at DRB assisted Teets in his refinement of the HFP process.

On April 21, 1992, Teets submitted a more detailed sketch of the HFP idea to Douglas Burnham and to Nigel Bond, GE's lead engineer on the GE90 Project. DRB also proposed other new approaches at this meeting. GE rejected all of the proposals.

In July 1992, GE tested the welded leading edges. Test results showed a complete composite failure. By August 1992, however, Teets had successfully tested the HFP at DRB. On the basis of this test data, DRB gained approval from GE. In October 1992, GE ordered 450 pieces using the HFP. Thereafter, GE continued to order one-piece leading edges manufactured with the HFP. In fact, GE still uses the HFP to manufacture leading edges for its GE90 engines.

In late 1992, Teets discussed with Burnham the need to seek patent protection for the HFP. On January 25, 1993, Teets sent a letter describing the HFP to Mitchell Bittman, patent counsel for Sequa Corporation, Chromalloy's parent company. In that letter, Teets states that DRB developed the HFP. On January 26, 1993, Teets and Burnham completed an invention disclosure form in preparation for a patent application. Teets identifies Burnham as co-inventor on that form. Both Teets and Burnham later assisted Bittman in the prosecution of a patent application for the HFP. The record in this appeal does not indicate if a patent has issued.

Teets first asserted sole ownership of the HFP process in April 1993. He, however, continued to assist in the prosecution of the patent application. On June 18, 1993, Teets filed this action against Chromalloy, seeking, among other things, a declaration of ownership of the HFP. On a summary judgment motion, the court concluded that Chromalloy held a shop right in the process. The district court then proceeded to try the issue of ownership. After a bench trial, the district court concluded that Teets solely owned the HFP and enjoined Chromalloy from licensing, selling, or transferring the HFP for third-party use. The district court made comprehensive findings of fact which the parties do not dispute.

DISCUSSION

The party challenging a district court decision bears the burden of demonstrating reversible error. King Instruments Corp. v. Perego, 65 F.3d 941, 945, 36 USPQ2d 1129, 1131 (Fed.Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 1675, 134 L.Ed.2d 778 (1996). This court will not set aside a trial court's findings of fact unless an appellant demonstrates clear error in those findings. Fed.R.Civ.P. 52. A finding of fact is clearly erroneous if the record lacks adequate evidence to support it "so that our review of the entire record leaves us with the definite and firm conviction that a mistake has been made." Reich v. Department of Conservation Ownership springs from invention. The patent laws reward individuals for contributing to the progress of science and the useful arts. See U.S. Const. art. I, § 8. As part of that reward, an invention presumptively belongs to its creator. See Beech Aircraft Corp. v. EDO Corp., 990 F.2d 1237, 1248, 26 USPQ2d 1572, 1582 (Fed.Cir.1993); Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574, 1578, 19 USPQ2d 1513, 1516 (Fed.Cir.1991). This simple proposition becomes more complex when one creates while employed by another person.

& Natural Resources, 28 F.3d 1076, 1082-83 (11th Cir.1994) (quotations omitted).

Consistent with the presumption that the inventor owns his invention, an individual owns the patent rights even though the invention was conceived and/or reduced to practice during the course of employment. Hapgood v. Hewitt, 119 U.S. 226, 233-34, 7 S.Ct. 193, 197-98, 30 L.Ed. 369 (1886). At the same time, however, the law recognizes that employers may have an interest in the creative products of their employees. Solomons v. United States, 137 U.S. 342, 346, 11 S.Ct. 88, 89, 34 L.Ed. 667 (1890). For example, an employer may obtain a shop right in employee inventions where it has contributed to the development of the invention. McElmurry v. Arkansas Power & Light Co., 995 F.2d 1576, 1581-82 (Fed.Cir.1993). A shop right permits the employer to use the employee's invention without liability for infringement. Id. at 1580.

In addition, contract law allows individuals to freely structure their transactions and employee relationships. An employee may thus freely consent by contract to assign all rights in inventive ideas to the employer.

Without such an express assignment, employers may still claim an employee's inventive work where the employer specifically hires or directs the employee to exercise inventive faculties. United States v. Dubilier Condenser Corp., 289 U.S. 178, 187, 53 S.Ct. 554, 557, 77 L.Ed. 1114 (1933); Standard Parts Co. v. Peck, 264 U.S. 52, 59-60, 44 S.Ct. 239, 241, 68 L.Ed. 560 (1924). When the purpose for employment thus focuses on invention, the employee has received full compensation for his or her inventive work. See generally McCoy v. Mitsuboshi Cutlery, Inc., 67 F.3d 917, 920-21, 36 USPQ2d 1289, 1291 (Fed.Cir.1995) (finding implied license to sell patented goods by aggrieved seller where patentee breaches sales contract), cert. denied, --- U.S. ----, 116 S.Ct. 1268, 134 L.Ed.2d 215 (1996). To apply this contract principle, a court must examine the employment relationship at the time of the inventive work to determine if the parties entered an implied-in-fact contract to assign patent rights.

An implied-in-fact contract is an agreement "founded upon a meeting of the minds, which, although not embodied in an express contract, is inferred, as a fact from conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding." Baltimore & Ohio R.R. v. United States, 261 U.S. 592, 597, 43 S.Ct. 425, 426, 67 L.Ed. 816 (1923). By comparison, an implied-in-law contract is a "fiction of law where a promise is imputed to perform a legal duty, as to repay money obtained by fraud or duress." Hercules Inc. v. United States, --- U.S. ----, ----, 116 S.Ct. 981, 986, 134 L.Ed.2d 47 (1996).

As a matter of common law, after the Supreme Court's...