New Case: Milliken & Company v. Morin

On August 2oth, 2009, the South Carolina Court of Appeals issued an opinion in Milliken & Co. v. Morin.  The case deals with two issues:  (1) Whether Milliken was entitled to injunctive/equitable relief in addition to the award of damages by the jury.  (Not sure why they weren’t allowed to elect an equitable remedy.) And, there is a Muckenfuss type issue:  (2) Whether the provisions related to confidentiality, inventions and non-disclosure are tantamount to a non-compete, which must be limited in geographic scope and time.  Nothing earth shattering in this case, but the next to last sentence in last paragraph of the opinion hints in the wrong direction.  Will consider further and discuss next time.

UPDATE:  The South Carolina Supreme Court affirmed but slightly modified the Court of Appeals decision in this case in Milliken & Co. v. Morin, 399 S.C. 23, 731 S.E.2d 288(S.C. 2012).  Like the Court of Appeals, the Supreme Court deemed enforceable an assignment agreement by a research physicist with Milliken covering all inventions during and one year after employment (this post-employment agreement is known as a “holdover” agreement), and a confidentiality agreement binding for three years after employment covering competitively sensitive information, even if it not a trade secret.

 The only additional nuance added by the Supreme Court to the Court of Appeals decision was to clarify  that the “ancient disfavor” of non-compete agreements does not apply to holdover and confidentiality agreements. Therefore, the court said, strict construance of holdover and confidentially agreements is not appropriate.

 Milliken had alleged the employee had breached both the holdover and confidentiality agreement.  The former employee, a research physicist, had argued that the agreements were overbroad.  A jury found for Milliken on these claims and awarded $25,324 (the jury found for Morin on breach of loyalty and South Carolina Trade Secrets Act claims).

 As with any case, it is interesting to look at similar cases in other jurisdictions resulting in different outcomes.  In Ingersoll-Rand Co. v. Ciavatta, 110 N.J. 609, 542 A.2d 879 (N.J. 1988), a widely cited case (cited Morin itself), the New Jersey Supreme Court reached a contrary result. The New Jersey court a holdover provision similar to the one in Morin could not be enforced even assuming the invention in that case fit within the provisions of the holdover agreement.

 The agreements at issue in New Jersey’s Ciavatta and South Carolina ‘s Morin cases were similar. The Morin holdover agreement applied to inventions that both resulted from the employee’s work at Milliken and that related to Milliken’s business or research.  In Ciavatta, the holdover covered both inventions that were “conceived as a result of and [were] attributable to work done during such employment and relate[d] to a method, substance, machine, article of manufacture or improvements therein within the scope of the business of the company or any of its affiliates.” (Emphasis added).

 In each case, the company rebuffed inventions of very employees whom they later sued. The South Carolina Court of Appeals noted that “Milliken refused to support research in multifilament fiber manufacturing when [Morin] presented it with the idea.”  In Ciavatta, the employee submitted thirteen patent disclosures, including one for modification of a split-set stabilizer (used in preventing mine cave-ins), which had the same purpose as that was later the subject of the litigation.

 Most importantly, each case involved arguments that the inventions at issue did not result from the work that was delegated to the employee. In Ciavatta, the court noted that the employee was “not hired to invent or to work on design improvements or other variations of the split set friction stabilizer” and that “While Ciavatta employed certain skills and knowledge he undoubtedly gained during his employment by Ingersoll-Rand, his invention was not the result of any research currently being done by the company or any company research in which he personally was involved.”  

Morin, meanwhile complained that the holdover agreement was overbroad because it gave Milliken the rights to his inventions “irrespective of whether his invention is legitimately an extension of research he did for Milliken.”  The court rejected this argument in a footnote, saying ” … [W]e do not believe requiring the assignment of inventions that were developed using the employer’s equipment, supplies, and proprietary information, or which were developed on the employer’s time, renders the agreement overbroad as a matter of law…..”  Although Milliken rebuffed Morin’s multifilament fiber, it apparently cited the fact that Morin drafted a business plan for his new company that would produce the new fiber shortly after a trade show to which Milliken sent him less than a year before his resignation.

As an aside, it is interesting to note proof issues that may attend holdover agreements litigation. How many times have we heard that something was invented by accident?  In Ciavatta, the court noted that the employee’s “eureka” moment for the mineshaft stabilization product came (strangely) when he was changing a household light fixture.  Apparently anticipating such vagaries, the holdover agreement in Morin required the employee to keep ” accurate, complete and timely records of such Inventions.” This serves as a reminder of the fact-bound, detail-ridden nuances with which lawyers must grapple as they draft agreements, counsel clients, and conduct litigation.

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