Abstract
A company's former employee was contractually obligated to keep inventions confidential and disclose any inventions to the company for up to one year following the end of his employment. At trial, the jury reached a seemingly inconsistent verdict. It found that the employee violated confidentiality by filing a patent application with confidential information but did not breach his disclosure duty in failing to inform the plaintiff of that invention. The district court inferred that the jury found no invention to be assigned, logic which the First Circuit accepted on appeal in not requiring the former employee to assign his inventions to the company.
Background
Covidien hired Brady Esch to work on medical devices for treating varicose veins. Esch signed an employment agreement requiring him to (1) disclose all inventions created while working at the company and up to one year after—including any inventions he worked on during that year but completed later; (2) assign those inventions to Covidien; and (3) maintain the confidentiality of Covidien's information. When Covidien eventually terminated Esch, he signed a separation agreement that incorporated the same provisions. One year after his termination, Esch formed a company to market a medical device for treating varicose veins. He filed a provisional patent application describing that device, followed by nonprovisional and international patent applications covering the same technology.
The District Court Trial
Covidien sued Esch for the rights to the three patent applications. Covidien argued Esch had breached his disclosure duty by failing to disclose the inventions and breached confidentiality by filing the applications.
The case went to trial, and the jury was provided a special verdict form. Special verdict forms ask the jury to answer questions about factual issues in the case. From those answers, the judge determines the winning party. Here, Questions 1 and 2 asked whether Esch breached confidentiality under the employment and separation agreements. Question 3 asked whether Esch breached his disclosure duty under the employment agreement. If the jury answered “yes” to Question 3, it was instructed to answer additional questions regarding the timing of Esch's work on the inventions and the assignment of those inventions. The jury found that Esch breached confidentiality (Questions 1 and 2) but did not breach his disclosure duty (Question 3). Since the jury answered “no” to Question 3, it did not answer the questions regarding the timing and assignment of the inventions.
After trial, Covidien asked the district court to order the assignment of the inventions. The court declined, finding that Covidien's request would require interpreting the jury verdict to reach an inconsistent conclusion: that Esch's publication of confidential information both breached confidentiality and satisfied his disclosure duty. It therefore inferred that the jury had decided no inventions were made under the terms of the employment agreement. Covidien appealed.
The Covidien Decision
On appeal, Covidien made two arguments. First, it argued that the jury verdict only resolved Esch's disclosure duty, not whether he was required to assign the inventions. Second, Covidien argued in the alternative that the jury had incorrectly determined Esch did not violate his disclosure duty.
The circuit court rejected both arguments. Rather than reviewing all the evidence submitted to the jury, the circuit court could only review the facts of the case and assess the district court's reasoning for denying the order. In particular, it would consider (1) whether the special verdict form and the jury instructions were adequate and (2) whether the district court's inference was permissible and consistent with the jury verdict.
The circuit court upheld the district court decision on both questions. On the first question, the circuit court found the special verdict form was not only reasonable but nearly identical to the version Covidien initially submitted. The court further determined that the jury had correctly followed the instructions on the form. It did not need to answer the timing and assignment questions because it could have decided whether Esch started work on the inventions when deciding the disclosure issue (Questions 1 and 2).
On the second question, the circuit court said that it was obligated to interpret the jury's answers in a manner that made them consistent, to the extent such an interpretation was possible. It agreed with the district court that the only consistent reading of the verdict required inferring that no inventions were made during the term of the employment agreement. While Covidien argued that other interpretations of the jury verdict were plausible, it failed to raise those interpretations before the district court and so waived them on appeal.
Strategy and Conclusion
Courts give jury verdicts considerable deference. When using special verdict forms, companies should consider whether having specific issues warrant multiple and specific jury answered questions. Companies should also evaluate the possible answer combinations to determine if any combinations may be inconsistent or whether they would be susceptible to an interpretation that makes the answers consistent.
Further Information
The Covidien decision can be found here.
Originally published 30, August 2021
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