Vigitron, Inc. v. Ferguson

• Decision Date: 17 September 1980
• Docket Number: No. 80-004,80-004
• Citation: 120 N.H. 626,419 A.2d 1115
• Parties: , 215 U.S.P.Q. 354 VIGITRON, INC. v. James R. FERGUSON, d/b/a Ultra Design Systems and James W. Weeden.
• Court: New Hampshire Supreme Court

Page 1115

419 A.2d 1115

120 N.H. 626, 215 U.S.P.Q. 354

VIGITRON, INC. v. James R. FERGUSON, d/b/a Ultra Design Systems and James W. Weeden.

No. 80-004.

Supreme Court of New Hampshire.

Sept. 17, 1980.

Orr & Reno, P. A., Concord (Howard M. Moffett, Concord, orally), for plaintiff.

Burns, Bryant, Hinchey, Cox & Shea, Dover (Robert P. Shea, Dover, orally), for defendants.

BOIS, Justice.

This is a bill in equity seeking an injunction, monetary damages, and an accounting arising out of an employment relationship between the plaintiff and the defendants. The plaintiff alleged that the defendants appropriated and disclosed trade secrets and breached their confidential employment relationship by designing and attempting to market a flame safeguard control device for industrial boiler systems which competed with the plaintiff's devices. The defendants filed an answer and counterclaim also seeking injunctive relief and monetary damages. Trial before a Master (Charles T. Gallagher, Esq.) resulted in a recommendation that an injunction issue against the defendants, and that judgment be entered for the plaintiff. The Trial Court (Bean, J.) approved the recommendation and reserved and transferred the defendants' exceptions. We affirm.

The plaintiff, Vigitron, Inc., manufactures and sells a series of sophisticated electronic flame safety controls for industrial boiler systems, involving certain trade secrets and confidential proprietary information. Their products include the "9001," described by the master as "the basic control box"; the "9002," described as "a cheaper and less sophisticated control box"; and the "9003," a development project which the plaintiff claims was an attempt to design and produce a major new control to succeed the "9001," and which the defendants claim was a limited effort to redesign the "9002."

The defendant Ferguson is an engineer who came to work for the plaintiff in January 1978. He was assigned the task of supervising all of the "home-base" activities of Vigitron, including research and development. The defendant Weeden is an electronics engineer hired by Vigitron in March 1978 to develop new products and improve upon flame safeguard controls. He was promoted to chief engineer in June 1978.

Vigitron's "9003" project was aimed at developing a flame safeguard control box of an improved design. It was instituted by a confidential memorandum from Vigitron's president, Mr. Leake, to Ferguson dated April 20, 1978. Leake told Ferguson not to tell Mr. Jackman, the chief engineer at the time, about the project. In response to the memorandum and instructions from Ferguson, Weeden worked on such a project at his home.

In May 1978, Ferguson and Weeden, without Leake's knowledge, formed a partnership, Ultra Design Systems, to design and market electronic systems. Ferguson thereafter resigned his position with Vigitron. By June 8, 1978, Weeden had drawn a preliminary schematic of what he called the "Ultra 100" control, a new flame safeguard control device. By the end of July, Weeden had a final schematic and working prototype of the Ultra 100. In the interim, he had been promoted to chief engineer at Vigitron.

On August 12, 1978, Weeden and Ferguson went to Toronto, Canada and demonstrated and attempted to sell the Ultra 100 to the Canadian distributor of Vigitron products. The distributor called Leake the following day and told him about the demonstration. Up to this time, Vigitron's president was unaware of the existence of, or Weeden's involvement in, the development of the so called Ultra 100. On August 14, 1978, Leake called a meeting with Weeden and other employees to discuss the matter. This litigation ensued.

The first issue is whether the trial court erred in ruling that the Ultra 100 was the sole property of Vigitron. We find no error.

The defendants admit that Weeden was hired as a project engineer "to aid in the development of products," and that Weeden was asked to work on "improving the plaintiff's 9003 flame safeguard control (a rework or redesign of the 9002)." They argue, however, that the Ultra 100 is a completely new device, and not a rework of or improvement upon the 9002. This argument is premised on claims that the plaintiff had not requested that Weeden design a completely new control; that the Ultra 100 did not involve any trade secrets of Vigitron nor the testing methods or expertise used in Vigitron products; that the work performed in the development of the Ultra 100 was at Weeden's home, on his own time, and with use of minimal contacts with Vigitron; and that the Ultra 100 embodied new concepts and devices rather than mechanical details of principles originating from Vigitron products.

The respective rights and obligations concerning an invention conceived by the employee spring from the contract of employment. United States v. Dubilier Condenser Corp., 289 U.S. 178, 187, 53 S.Ct. 554, 557, 77 L.Ed. 1114 (1933). The product of one who is hired to invent, accomplish a prescribed result, or aid in the development of products belongs to the employer in the absence of a written contract to assign. See id.; National Development Co. v. Gray, 316 Mass. 240, 248-50, 55 N.E.2d 783, 787-88 (1944); Steranko v. Inforex, Inc., 5 Mass.App. 253, 269, 362 N.E.2d 222, 233 (1977). Weeden designed and built the Ultra 100 while he was Vigitron's chief engineer during a period in which he had been asked to design the 9003. There is ample evidence in the record to support a finding that the design criteria for the Ultra 100 and the 9003 project were substantially the same, and that the Ultra 100 would have been directly competitive with Vigitron's most successful product, the 9001. The master's ruling that the Ultra 100 was the rightful property of Vigitron is supported by the record and must stand. See Hynes v. Whitehouse, 120 N.H. ---, 415 A.2d 876 (1980); Ballou v. Ballou, 118 N.H. 463, 465-66, 387 A.2d 1169, 1170 (1978).

The defendants assign error to the master's reliance, in his ruling that the Ultra 100 was the property of Vigitron, upon the fact that "if the defendants had not worked for the plaintiff and gained familiarity with flame safeguard controls, they would not have created the Ultra 100 device." That an employee's rendition of services in the course of his employment may have so enhanced his mechanical skill, scientific knowledge and inventive faculties as to enable him to develop and perfect an idea into a patentable article, does not in itself give the employer any exclusive rights to inventions of the employee made during the employment. National Development Co. v. Gray, 316 Mass. 240, 247, 55 N.E.2d 783, 786 (1944); see United States v. Dubilier Condenser Corp., 289 U.S. 178, 187, 53 S.Ct. 554, 557, 77 L.Ed. 1114 (1933). "But a manufacturing corporation, which has employed a skilled workman, for a stated compensation to take charge of its works, and to devote his time and services to devising and making improvements in articles there manufactured, is not entitled to a conveyance of patents obtained for inventions made by him while so employed ...." U.S. v. Dubilier Condenser Corp., supra at 187-88, 53 S.Ct. at 557. With regard to the master's ruling that the Ultra 100 was the property of Vigitron, his reliance upon the knowledge gained and skills developed by the defendants while employed at Vigitron was therefore error. We do not find such error to be reversible, however, in view of the sufficiency of other evidence in the record upon which the ruling can be upheld. See Thayer v. Thayer, 119 N.H. ---, ---, 409 A.2d 1326, 1328 (1979); Moultonboro v. Bissonnette, 105 N.H. 210, 213-14, 196 A.2d 703, 705-06 (1963).

The defendants assign as error the fact that the master did not consider the "shop right" rule in reaching his decision for the reason that "his decision was based upon other legal principles." They argue that even if this court should find that Vigitron has an interest in the Ultra...