United States: Court Refuses To Enforce Invention Assignment Agreement As Unlawful Noncompete

Last Updated: June 30 2009
Article by Victor Schachter and Allen M. Kato

In Applied Materials v. Advanced Micro-Fabrication Equipment Company, the federal district court for the Northern District of California refused to enforce an invention assignment clause that required former employees to assign inventions disclosed within one year of termination of employment if the invention related to work performed by the employee for the employer. In this unfair competition matter brought by Applied Materials ("Applied") against Advanced Micro-Fabrication ("Advanced"), a company based in Shanghai, China, Advanced had hired several Applied employees. Applied alleged that its former employees misappropriated trade secrets by disclosing inventions conceived by them within one year of termination of their employment with Applied. At the commencement of employment with Applied, each had signed an invention-assignment agreement stating that any invention disclosed by the employee within one year after terminating employment with Applied was presumed to be conceived during employment for Applied and "will be assigned to Applied ... provided it relates to my work with Applied." Applied sought to enforce the invention assignment provision against the former employees and thereby obtain rights to the patents at issue. Granting Advanced's motion for summary judgment against Applied's attempt to enforce the agreement, the court held that the clause impermissibly required assignment of post-employment inventions (regardless of when conceived or whether based on Applied's confidential information) in violation of California's prohibition on noncompete agreements. If appealed, this decision is likely to be upheld given California's strong public policy against non-compete agreements.

News Bites

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In A.T.&T. Corp. v. Hulteen, the U.S. Supreme Court held that the employer lawfully calculated pension benefits for employees who took pregnancy disability leave during the 1960s and 1970s. Before the passage of the federal Pregnancy Disability Act in 1979, for the purpose of calculating pension benefits, the employer gave lesser service credit for employees who took pregnancy disability leave than for other types of leave of absence. The court held that the employer's pre-1979 limitation of pension credit for pregnancy leave was lawful at the time, and that the recent Lilly Ledbetter Fair Pay Act did not apply as there was no unlawful act that affected the present pension benefits.

Starbucks Wins Appeal of $86 Million Ruling Over Tips

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Field Service Representatives Not Entitled To On-Call Waiting Time Pay

In Gomez v. Lincare, Inc., field service representatives for a medical equipment company sued their employer for unpaid wages including overtime. Although the California court of appeal ruled that a jury trial was required to determine whether the employees were exempt from overtime as "drivers" under the motor carrier exemption, the court dismissed the employees' claim for unpaid wages during on-call waiting time. The court noted that while the employees were (1) provided pagers, (2) required to respond to a page within 30 minutes by telephone, and (3) expected to arrive at the customer site within two hours of a page, they were allowed to engage in personal activities while on call, and they could trade on-call responsibilities with a co-worker. Although plaintiffs urged that they felt constrained from engaging in personal activities, the court held that the employee's unilateral decision to avoid personal activities while on call did not change the conclusion that the waiting time was non-compensable personal time.

"Me Too" Evidence Of Pregnancy Discrimination Allowed

In Johnson v. United Cerebral Palsy, a California court of appeal directed a jury to decide whether the employer discharged plaintiff on account of her pregnancy. According to plaintiff, the day after she returned from a short sick leave related to her pregnancy, her supervisor terminated plaintiff from her job as a home-care counselor without giving her a specific reason. Although the employer asserted that plaintiff had falsified her time sheets, as part of its investigation the agency did not ask plaintiff to explain her hours. Further, the employer had never told plaintiff that her job performance was unsatisfactory. Notable, and troubling, was the court's acceptance of plaintiff's "me too" declarations by other co-workers that they too were fired after they became pregnant, and evidence of other occasions where employees were cited for dishonesty but were not fired.

Employee Required To Arbitrate Vacation Pay Claim

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Inadequate Investigation Requires Trial Of Alleged Harasser's Wrongful Discharge Claim

In Sassaman v. Gamache, the federal Second Circuit Court of Appeals (covering eastern states including New York) sent to trial an employee's claim that he was constructively discharged on account of his sex. The employee in this case accused his female supervisor of sexual harassment. During an investigation, it was claimed that an employer representative allegedly told plaintiff that he would be terminated unless he resigned because "you probably did what she said you did because you're male." The plaintiff resigned and filed the lawsuit for sex discrimination. The court held that the alleged statement "you're male" was direct evidence of an "invidious sex stereotype," and the failure to conduct a thorough investigation was circumstantial evidence of discriminatory intent sufficient to require a jury trial. It was noted that the matter was never referred to the employer's EEO officer who normally investigated such claims.

Sexual Comments Within Closely Grouped Cubicles Support Sex Harassment Claim

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