Two high profile cases have drawn attention to a frequent problem in trade secret cases involving medical researchers, software developers and engineers: Who owns the trade secrets or inventions at issue, the employee or the employer? As one might expect, a well drafted employment agreement will go a long way to resolving this question.

The first case, Abramson Cancer Center of the Univ. of Penn. v. Craig Thompson, M.D., Case No. 11-cv-09108-LAK (S.D.N.Y.), highlights the problems that the absence of an employment or consulting agreement may create. Late last year, the University of Pennsylvania’s Abramson Cancer Institute sued its former research director, Dr. Craig Thompson, as well as the company that he formed after his departure, Agios Pharmaceuticals. Penn’s Institute claims that Dr. Thompson took an “innovative cancer metabolism research platform” with him that was the property of the Institute. The Institute claims it has been damaged to the tune of a whopping $1 billion. As Dr. Thompson is now the President of Memorial Sloan-Kettering Cancer Institute, this dispute has garnered a number of headlines.

I have attached the amended complaint below. As you can see, there is no claim invoking a specific employment contract (while there is an invocation to an Institute Agreement, there does not appear to be any allegation that Dr. Thompson signed it).  Instead, the amended complaint primarily relies upon statutory and common law claims that Dr. Thompson owed a duty to the Institute to disclose any of his inventions or research and that he failed to disclose his discoveries while he served as research director. One would expect that Dr. Thompson and his company will emphasize the absence of any written agreement on this issue, a fact that may complicate the question of owns what. We’ll obviously wait to see how things shake out.

Now compare the Northern District of Illinois’ recent decision in Motorola, Inc. v. Lemko Corp., Case No. 08 C 5427 (N.D. Ill.), where the existence of a provision establishing the employer’s ownership of the inventions proved critical.  (I have attached a copy of the opinion below). In Lemko, Motorola brought a trade secret action against a number of former employees who had formed a competing company, Lemko, to develop and sell devices that arose from their work on Motorola’s distributed mobile architecture. The employee agreements of two of the former employees, Shaowei Pan and Nicholas Labun, contained  a provision assigning to Motorola “the entire right, title and interest in all my inventions, innovations, or ideas developed or conceived by me solely, or jointly with others, at any time during my employment … related to the actual or anticipated business activities of Motorola.” 

Pan and Labun began doing work for Lemko while they were still employed by Motorola. In 2007, Hanjuan Jin, one of Motorola’s former employees, was stopped at O’Hare International Airport before boarding a one-way flight to China and it was discovered that she had documents containing Motorola’s trade secrets. (Jin was convicted last week of stealing Motorola’s trade secrets). Motorola later brought this action and asserted that various Lemko patents were the property of Motorola because they were related to inventions and innovations that Pan and Labun had developed for Motorola.
Lemko, Pan and Labun moved for summary judgment but that motion was denied because the district court found there were sufficient issues of material fact regarding whether Lemko’s inventions and technology fell within the relevant employment agreements. The case settled shortly after that ruling last month.

While an agreement should considerably strengthen an employer’s hand, it is important to remember that several states have specifically addressed this situation with legislation. California, for example, provides a safe harbor for employees who develop inventions or technology entirely on their own time without using their employer’s resources or equipment, so long as those efforts do not relate to work performed for their employer. That statute, California Labor Code § 2870, expressly trumps any employment agreement that purports to require an employee to assign an invention that would otherwise be his under this statute.

The takeaway? Make certain that every researcher, technician and developer has a written employment or consulting agreement that includes a provision defining who owns what intellectual property that he or she develops while employed. Also, make sure that there is a requirement that they disclose any inventions that they believe that they have independently derived so that the issue of ownership can be flushed out and resolved before they decide to go forward in any new venture. Finally, double-check your state’s law to see whether there are any statutes or authority addressing this situation.

The Leonard and Madlyn Abramson Family Cancer Research Institute at the Abramson Cancer Center of the University of Pennsylvania v Craig Thompson M D .pdf (416.45 kb)

Motorola Inc v Lemko Corp et al .pdf (1.23 mb)