IP Law Daily Medical device manufacturer denied assignment of inventions employee made after he was fired
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Friday, April 9, 2021

Medical device manufacturer denied assignment of inventions employee made after he was fired

By Ronald Miller, J.D.

The district court’s factual inference that no "inventions" were made under the terms of the employee’s employment agreement was permissible and internally consistent with the jury’s verdict.

Based on its "slightly more rigorous than abuse of discretion" standard of review, the First Circuit declined to reverse a district court’s denial of an employer’s motion for declaratory judgment following a jury trial to require that an employee assign to the employer any "inventions" described in a patent application. The jury’s ruling that no inventions were made that were encompassed under the employee’s employment agreement was "decisive" to this ruling, so that the appeals court held that the lower court did not abuse its discretion in denying the employer’s post-trial declaratory judgment request (Covidien LP v. Esch, April 8, 2021, Gelpí, G.).

Inventions. In 2009, the employee began working for Covidien, a global healthcare company that manufactured medical devices and supplies, after it acquired his previous employer, VNUS Technologies. In December 2009, he entered into a noncompetition, nonsolicitation, and confidentiality agreement with Covidien that required him to disclose all inventions created during his employment or within one year thereafter, and to assign all interests in the inventions to the company. The agreement also prohibited the employee from disclosing any of the company’s confidential information.

During his tenure with Covidien, the employee spent much of his time working with an eight-person team on a confidential global project aimed at developing features for a new medical device to treat varicose veins.

Confidentiality agreement. In 2013, the employee was terminated from his position as director of global marketing. As part of the termination, he signed a separation agreement and general release, which clarified that the provisions pertaining to disclosure and ownership of "inventions, methods, processes or improvements" would remain in full force and effect and not be superseded by any provision of the separation agreement. It further provided that the employee would adhere to all previous agreements relating to nondisclosure of confidential information.

Patent applications. Shortly after he left Covidien, the employee incorporated his own company to manufacture and sell a medical device to treat varicose veins. In March 2014, he filed a provisional patent application for a device. Then, in 2015, he and other inventors filed additional patent applications.

In November 2016, Covidien filed a complaint against the employee seeking declaratory judgment to require the employee to assign his rights, title, and interest in the patent applications to Covidien. It also alleged that the employee breached his obligations under the Employment and/or Separation Agreements by failing to disclose "Inventions," and by disclosing "Confidential Information," among other claims. The district court issued a preliminary injunction in favor of Covidien, enjoining the employee from making or selling products that disclosed or used any confidential information belonging to Covidien.

Special verdict form. Before trial, both parties submitted their proposed special verdict forms, and the court heard arguments regarding the special verdict form. Before the jury charge, Covidien filed a written objection to the special verdict form and requested several modifications. However, the district court declined to make the proposed changes.

Jury verdict. Following a jury trial, the jury found that the employee breached his confidentiality obligations and awarded Covidien $794,892.24 in damages. Upon conclusion of the jury trial, Covidien moved for declaratory judgment requesting that the employee be required to assign any "Inventions" described in the patent applications to Covidien. The district court denied Covidien’s request, finding that the jury found that no inventions were made that were encompassed under the employment agreement.

Assignment of inventions. On appeal, Covidien urged that the district court's denial of the motion for declaratory judgment was error and warranted reversal because the evidence at trial established that the employee took affirmative steps to reduce an "Invention" to practice. It argued that the jury's verdict concerning the employee’s obligation to disclose "Inventions" was not dispositive to the assignment.

Standard of review. The appeals court noted that the declaratory judgment sought by Covidien was equitable in nature. Moreover, "simply because an equitable remedy may be available does not necessarily mean that it must automatically issue." Second, and most important, the precise form of declaratory relief sought followed three years of litigation concluded by a nine-day jury trial. As such, the appeals court declined to evaluate and weigh all evidence submitted before the jury on the matter because that was beyond the scope of the court’s "slightly more rigorous than abuse of discretion" review and would amount to a de novo review of the jury verdict itself.

Special verdict. The district court’s special verdict form and the jury instructions were adequate, said the court, and the trial court's decision not to modify them did not constitute a reversible error. The structure of the special verdict form gave the jury "a simple, easily understood outlet through which to express its conclusions" by answering "Yes" or "No" to each proposed question. It also logically identified each of the employee’s obligations regarding the Employment or Separation Agreements. Considered "as a whole," the challenged questions were consistent with the applicable law.

During its charge to the jury, the district court sufficiently addressed the Employment and Separation Agreements under applicable Massachusetts law. The definition of "inventions" and the assignment provisions were particularly explained, and the explanation mirrored the terms of the employment agreement. Consequently, the special verdict form and the district court’s rejection of Covidien’s proposed instruction did not amount to a reversible error.

Inconsistent verdict. Further, the district court’s factual inference that no "inventions" were made under the terms of the employee’s employment agreement was permissible and internally consistent with the jury’s verdict. Covidien argued that the district court was not bound by the verdict and had discretion to makes its own factual finding since the jury's decision did not necessarily reflect a determination that the employee did not make an "invention." The appeals court disagreed. It concluded that the jury's verdict did necessitate a finding that there were no "inventions" and was not simply a plausible inference among others the district court could have drawn. Instead, the district court’s inference was necessary and consistent with the jury’s findings as to the confidentiality and disclosure obligations contained in the Employment and Separation Agreements. Accordingly, the district court did not abuse its discretion in denying Covidien’s post-trial declaratory judgment request.

The case is No. 20-1515.

Attorneys: Mark C. Fleming (WilmerHale LLP) for Covidien LP and Covidien Holdings, Inc. Lita M. Verrier (Ropers Majeski) for Brady Esch.

Companies: Covidien LP; Covidien Holdings, Inc.

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