Confidentiality and Invention Assignment Agreements Enforceable Against Former Employee


Generally speaking, noncompete agreements are often rigidly construed by courts and reviewed in terms of whether they are reasonably limited with respect to time and place. On the other hand, confidentiality agreements and invention assignment provisions, which are commonplace in industries with high levels of technological innovation, enjoy more favorable treatment in the law. This dichotomy was on display in a recent state court dispute involving the enforceability of certain confidentiality and invention assignment provisions against an ex-employee of a high-tech manufacturer.

In Milliken & Co. v. Morin, 731 SE 2d 288 (S.C. 2012), a company sued its former employee after he resigned and started a new venture allegedly using the company's proprietary information. A jury found in favor of the company based upon the employee's breach of corporate confidentiality and invention assignment agreements. The South Carolina Supreme Court, granting review on the narrow issue of whether the agreements were overbroad as a matter of law, held that they were not and rejected the employee's argument that courts should analyze confidentiality and invention assignment agreements as strictly as non-compete agreements.

The court stressed that confidentiality and invention assignment agreements do not operate in restraint of the employee's trade but merely bar a former employee from using confidential information developed as a result of the employer's initiative and investment, and otherwise protect the company's interest in inventions that were developed by employees while working for the company. Reviewing the provisions under ordinary principles of contract law, and with an awareness of the practical realities of the business and employment world, the court found that their terms were reasonable and enforceable against the ex-employee.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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