Where a person expressly or impliedly contracts to devote his mental faculties and exercise his inventive ability for the benefit of his employer, the inventions conceived by him in the course of his employment and as a consequence of its pursuit belong in equity to the employer.
The following adjudications are informative of the doctrine and representative of its pragmatical application. Connelly Mfg. Co. v. Wattles , 49 N.J. Eq. 92, 23 A. 123; Pomeroy Ink Co. v. Pomeroy , 77 N.J. Eq. 293, 78 A. 698; Marcalus Mfg. Co. v. Sullivan , 142 N.J. Eq. 434, 60 A.2d 330; Hoyt v. Corporon , 168 N.E. 94; National Development Co. v. Gray , 55 N.E. 2d 783; Solomons v. United States , 137 U.S. 342, 11 S. Ct. 88, 34 L. Ed. 667; Standard Parts Co. v. Peck , 264 U.S. 52, 44 S. Ct. 239, 68 L. Ed. 560; United States v. Dubilier Condenser Corp. , 289 U.S. 178, 53 S. Ct. 554, 77 L. Ed. 1114, 85 A.L.R. 1488.
The doctrine also envelops a case where the employee during such an engagement to invent, improves, remodels, or rectifies an apparatus or process of his employer as a result of his inventive ideas. In such circumstances the employer is entitled in equity to the beneficial conceptions and productions of the employee. Connelly Mfg. Co. v. Wattles, supra.
It must be conceded that the mere circumstance that an employee developed an invention while in the service of his employer and with the use of the employer's facilities does not, in the absence of an express or implied agreement to that effect, confer any ownership of the invention upon the employer. Hapgood v. Hewitt , 119 U.S. 226, 30 L. Ed. 369, 7 S. Ct. 193; Solomons v. United States, supra; Dalzell v. Duebner Watch Case Co. , 149 U.S. 315, 37 L. Ed. 749, 13 S. Ct. 886; Eustis Mfg. Co. v. Eustis , 51 N.J. Eq. 565, 27 A. 439.
From such circumstances the employer may acquire the
so-called "shop right," viz. , the right to use the invention without paying tribute to the employee or his assigns. Eustis Mfg. Co. v. Eustis, supra; Solomons v. United States, supra; National Development Co. v. Gray, supra; United States v. Dubilier Condenser Corp., supra.
It is indubitable that the law does not prohibit an employee after leaving the service of his employer from freely exercising his talents and giving expression to his revised and reorganized inventive thoughts and ideas in his own independent right. The law regards an invention as the property of the one who conceived, developed and perfected it, and establishes, protects and enforces the inventor's rights in his invention unless he has contracted away those rights. New Jersey Zinc Co. v. Singmaster , 71 F.2d 277, 279.
It is with a recognition of those general principles of law that the consideration of this case is to be pursued.
The relief here sought by the plaintiff is a judgment that the invention embodied in United States patent No. 2,219,011 acquired by the defendant Materials Reduction Company, Inc., is the property in equity of the plaintiff; that Materials Reduction Company, Inc., be compelled to transfer and assign all its right, title, and interest in and to the patent to the plaintiff; that the defendant be enjoined from issuing licenses under the patent, and that the defendants account to the plaintiff for all earnings and profits heretofore derived from licenses and other transactions relating to the patent.
The basic allegation of the plaintiff is that the invention was mentally fabricated by the defendant Nicholas Stephanoff during the period of his employment by the plaintiff and after the termination of his association it was appropriated and exploited by the defendants, who acted with notice of the plaintiff's property rights.
The evidence is voluminous. The exhibits are numerous. The story is a lengthy one, defying brevity in its disclosure. I shall endeavor to summarize only my impressions of its characteristics of primary significance.
On January 25, 1929, American Pulverizing Corporation was organized to promote a patented direct-impact pulverizer
which is referred to as the Willoughby Mill. On November 23, 1932, the American created the plaintiff, International Pulverizing Corporation, as its wholly owned subsidiary to serve as its operating unit. In April or May, 1933, one Norwood H. Andrews, an officer of the companies, with the aid perhaps of one Walter Willoughby, is said to have invented a new type of mill which through the trial of the case is designated the Micronizer. A patent covering this mill and process claims was issued on March 3, 1936, and is owned by the plaintiff as assignee.
The Micronizer may be generally described as a squat or horizontal cylindrical chamber which has on the outer circular wall a feed injector and nozzles located peripherally for the inward delivery of air or other gaseous fluid under high pressure. The nozzles are so directed as to supply a forward component of motion to the fluid circulating in the mill. In the center there is a circular outlet for the escaping air and ground material.
It will be informational to explain that the material entering the Micronizer through the injector is entrained by the circulating air which causes the particles of the material to rub against each other and also collide with the circular walls and upper and lower plates of the mill. The centrifugal forces produced by the rapidly circulating stream of air are of such magnitude as to propel the heavy particles of material to the peripheral wall and to retain them there until extremely reduced. As their weight lessens, the centrifugal force ceases to dominate and the ground particles are scoured into suspension and transported inwardly by the vortical stream of air in diminishing circuits to the outlet and discharged as the finished product in particle sizes of a few microns.
On April 1, 1934, the defendant Nicholas K. Stephanoff, a mechanical engineer, came into the employ of the plaintiff. There is persuasive evidence that he was engaged to study the Micronizer, subject it to exploration and experimentation, and to suggest for future patent protection any reformations that would improve its commercial efficiency. He is said to have envisioned an advantageous elaboration of the Micronizer
and on June 6, 1935, to have recorded his conception of it in a typewritten memorandum which, it is claimed, was placed in the files of the plaintiff company. This proposed improved structure is identified in these proceedings as the "Stephanoff Memorandum Mill."
That memorandum recommended a mill having "a circle at the periphery, this circle extending rotationally inward into the upper and lower plates, the distance between which will be less than the diameter of the circle. * * * The nozzles should be drilled out along the periphery of this annular circle in such positions as to give the outcoming gases from the nozzles a rotary direction along (around?) the axis of this annular shaped cylindrical ring. At the same time, the resulting motion will be in a forward direction so as to cause a vortex with bottom or top discharge at the center of the mill. * * *"
Stephanoff opined that his conception, if substantialized, would enhance the utility of the mill in that it would increase the time element for grinding and afford a better intermixture of the particles of the material to be reduced.
I must introduce at this point another defendant. On May 18, 1934, the defendant Cleo H. Kidwell, a chemical engineer, was employed by the plaintiff. In November, 1934, he became a director of American Pulverizing Corporation and Director of Research of the plaintiff. He, too, concerned himself on behalf of the plaintiff with the development and improvement of the Micronizer. At that time his relations with the president of the companies were extremely intimate and doubtless ...