Universal Winding Co. v. Clarke

• Decision Date: 02 July 1952
• Docket Number: Civ. A. No. 3308.
• Citation: 108 F. Supp. 329
• Parties: UNIVERSAL WINDING CO. v. CLARKE et al.
• Court: U.S. District Court — District of Connecticut

108 F. Supp. 329

UNIVERSAL WINDING CO. v. CLARKE et al.

Civ. A. No. 3308.

United States District Court D. Connecticut.

July 2, 1952.

Dike & Sanborn and Robert S. Sanborn, Boston, Mass., for plaintiff.

Gumbart, Corbin, Tyler & Cooper, Morris Tyler, New Haven, Conn., Raymond E. Hackett, William H. Timbers and Morgan P. Ames, all of Stamford, Conn., Henry E. Rockwell, New Haven, Conn., of counsel, for defendant.

HINCKS, Chief Judge.

In this case the defendants moved to sever the issue raised by their second defense and for trial in advance of the issue thus severed; viz., whether, as the defendant contends, the agreement on which the complaint is based was void ab initio and unenforcible "as against public policy."

The motion for severance was granted and now after trial on the severed issue the defendants contend on brief that the agreement is not a binding contract because of (1) lack of consideration, (2) indefiniteness, and (3) want of mutuality. These contentions all lie outside the scope of the severed issue and I feel that I may not properly rule on them at this stage: the parties are at liberty, if so advised, and if consistent with Rule 8(c), Fed.Rules Civ. Proc. 28 U.S.C.A., to supplement the record of fact thus far made before these contentions may be deemed finally submitted and ripe for final ruling. I therefore pass these contentions now and turn directly to the task of determining the compatibility of the agreement with public policy.

The agreement purported to obligate the defendant Clarke to assign to the plaintiff any inventions or improvements that he might design during the course of his employment by the plaintiff or within one year thereafter which "related to": (1) the subject-matter of his employment; or (2) any subject matter or problem with respect to which he might become informed by reason of his employment; or (3) any article manufactured or to be manufactured by the plaintiff; or (4) any experimental work carried on by the plaintiff.

To determine the legal effect of this agreement, its intended scope must first be determined. What is meant by the promise to assign "improvements"? Does the phrase "inventions and improvements" include anything more than patentable inventions? Although, as defendant's counsel correctly observes on brief, the defendant could have no assignable property right in an unpatentable design, nevertheless he has a right at least to apply for a patent on any machine design evolved by him. And this inchoate right, although not a property right, is assignable. It is a matter of common knowledge that there is a fairly broad borderland, impossible of accurate definition, between patentable machine designs and those not patentable. Not until a patent application is prosecuted to final termination can the designer surely know whether a patent will be granted: and if a patent issues, not until it has been litigated can he surely know whether it has validity. In the light of these observations as applicable to the background of this case, it is scarcely sensible to construe the agreement to mean that the defendant-employee reserved the right to judge for himself which of his designs were patentable and the right to retain free from his covenant any actually or purportedly believed by him to be unpatentable. Instead, I interpret the agreement to mean that the defendant-employee assumed an obligation to disclose to the plaintiff all designs which he might make in the specified field within the time limited and to vest in the plaintiff all his inchoate right to apply for a patent on any machine evolved by him (within the qualifying classes enumerated) irrespective of its patentability as that should eventually be determined.

The next point as to which the agreement needs interpretation is the scope of the field within which the defendant-employee thus agreed to make assignments. The agreement is inherently ambiguous in that the inventions and improvements which it includes are defined not at all by the letter of the writing but only by several references to "the subject-matter of my employment" or to problems "with respect to which I have or shall become informed by reason of my employment, etc." It is thus necessary so to interpret the agreement as to give effect to the intention of the parties existing when the agreement was made. At that time the plaintiff's only activity, existing or contemplated, was in the field of winding machinery. It is, therefore, a natural inference that by the "subject-matter of my employment" the parties meant the design of winding machines and by "any article manufactured or to be manufactured" by the plaintiff they meant particular winding machines so manufactured. And so, since the parties restricted the scope of the agreement to inventions and improvements, "relating" to the "subject-matter of my employment" and other generally stated categories, I interpret the language to mean that only such inventions and improvements were intended to be included as had some peculiar pertinence or affinity to winding machines and not such, per contra, as had equal pertinence to other kinds of machines. This interpretation, though largely the product of inference, is not inconsistent with any underlying evidence but on the contrary is supported by some direct testimony. And, certainly, at the time neither party was shown to have had any incentive to make a contract of broader scope.

I thus reject the defendant's contention that the agreement is so broad as to ostracize him from the entire field of machine design at least for a year. This contention the defendant has sought to support by argument that if within one year while employed by an automobile manufacturer, for example, he should design a clutch suitable for use in the automobile field, it would be subject to the agreement here involved if it could with equal facility or even with some adaptation be used in a winding machine. This argument is characteristic of the strategy often invoked in attacking the validity of patent claims, whereby it is sought to construe claims so broadly that findings of anticipation cannot be escaped. My interpretation of the agreement here, as stated above, avoids such a ground of criticism: I interpret the agreement more narrowly to mean that if a clutch were designed it would be free from the obligation of the agreement unless it included some feature which made it peculiarly pertinent to winding machines. Cf. Standard Plunger Elevator Co. v. Stokes, 2 Cir., 212 F. 893; Chadeloid Chemical Co. v. H. B. Chalmers Co., 2 Cir., 243 F. 606; Red Bird Farm, Inc., v. Providence Live Poultry Co., Inc., 64 R.I. 430, 12 A.2d 730.

As thus interpreted the scope of the agreement is vastly more limited than the defendant represents. See, particularly finding 20. Also it will be observed that the language of the agreement and the nature of the obligation directly imposed is wholly affirmative, viz.; to assign and disclose. Thus on the surface it is no more restrictive in nature than any contract to render services on a part-time basis.

Nevertheless, and notwithstanding the absence of any express negative covenant in the agreement, if we are realistic we must recognize that it has this practical restrictive effect, viz.; no competitor of the plaintiff in the field of winding machines would want to employ a designer who for the first year was under obligation to disclose the fruit of his labor to the plaintiff and in effect give the plaintiff a first option on any patentable rights. Naturally an employer taking on an additional designer would want to engage one whose inventive skill would not redound even in part to his former employer. Thus in this aspect the agreement savored of a covenant for the year following employment by the plaintiff not to work, or not to accept employment, for one year in the field of the design of winding machines.

Turning then from the interpretation of the contract to consideration of its legal effect, I note first that the agreement was executed in Rhode Island and that the plaintiff's plant was located in Cranston, R. I. It is reasonable to infer that the parties intended that the agreement should be performed there. Hence this court, with its seat in Connecticut, will apply Rhode Island law in determining the validity and effect of the contract. Klaxon Co. v. Stentor Elec. Mfg. Co., 1941, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477; Levy v. Daniels U-Drive Auto Renting Co., Inc., 1928, 108 Conn. 333, 143 A. 163, 61 A.L.R. 846; Cf. Illustrated Postal Card & Novelty Co. v. Holt, 1912, 85 Conn. 140, 81 A. 1061.

The only Rhode Island case touching on the question of the validity and effect of an agreement by an employee to assign his inventions and improvements to his employer is Silver Spring Bleaching & Dyeing Co. v. Woolworth, 1890, 16 R.I. 729, 19 A. 528. In that case the Rhode Island court ordered an assignment of certain inventions and discoveries. The court's opinion, however, appears to offer no aid here beyond the demonstration that such agreements are not necessarily in conflict with the public policy of Rhode Island.

However, the Rhode Island courts have decided the reasonableness of covenants by employees not to compete with their employers on at least three occasion. Koppers Products Co. v. Readio, 1938, 60 R.I. 207, 197 A. 441; Tillinghast v. Boothby, 1897, 20 R.I. 59, 37 A. 344; Herreshoff v. Boutineau, 1890, 17 R.I. 3, 19 A. 712, 8 L.R.A. 469. These cases hold that such contracts are not void per se, but that they may be held to be void if they are unreasonably in restraint of trade. Herreshoff v. Boutineau, supra. In determining their reasonableness, an attempt should be made to weigh the competing interests of employer and employee and to give full consideration to the public interest. In terms of these interests, a covenant will be void ab initio if it "extends beyond any apparently necessary protection which the...