
    432 F. 2d 447
    DORR-OLIVER, INCORPORATED v. THE UNITED STATES, DEFENDANT; COMANCO, INCORPORATED AND LOCKHEED AIRCRAFT, INCORPORATED, THIRD-PARTY DEFENDANTS
    [No. 130-68.
    Decided October 16, 1970]
    
      
      William O. Conner, attorney of record, for plaintiff. J. Dennis Malone, of counsel.
    
      Paul F. Arseneau, with, whom was Assistant Attorney General William D. RucJcelsham, for defendant.
    
      
      Albert L. Carter, attorney of record for Lockheed Aircraft Corporation.
    
      Pml Matzko, attorney of record for Comanco, Incorporated.
    Before Cowen, Chief Judge, Lakamore, Dureee, Davis, Collins, Skelton and Nichols, Judges.
   . Per Curiam :

This case was referred to Trial Commissioner J ames F. Davis with directions to make findings of fact and recommendation for conclusions of law under the order of reference and Buie 134(h). The commissioner has done so in an opinion and report, on the issue as to when plaintiff became the “owner” of the patent, within the meaning of § 1498 of 28 U.S.C., filed May 7, 1970. On June 1, 1970 defendant filed a notice of intention to except to the commissioner’s report. However, on August 18, 1970, there were filed defendant’s withdrawal of its notice of intention to except, a joint motion of plaintiff and defendant under Buie 141(b) requesting the court to adopt the commissioner’s opinion, findings of fact, and recommendation for conclusion of law (on the severed issue of ownership of U.S. Patent No. 3,243,062), and a stipulation by plaintiff and defendant pertaining to evidence and testimony to be presented in further proceedings before the commissioner. In view of the above, no exceptions having been filed by any party and the time for so filing under the Buies of the court having expired, the case has been submitted to the court without oral argument. Since the court agrees with the commissioner’s opinion, findings of fact and recommended conclusion of law, it hereby adopts the same, as hereinafter set forth as the basis for its judgment in this case. Therefore, it is concluded that plaintiff is and, at all times since March 29, 1966, has been the owner of U.S. Patent 3,243,062, within the meaning of 28 U.S.C. § 1498, and the case is remanded to the trial commissioner for further appropriate proceedings.

OPINION" OP COMMISSIONER

Davis, Commissioner:

This is a patent suit under 28 U.S.C. § 1498. The patent in issue relates to cargo trailers. It was granted to plaintiff on March 29, 1966, on an application filed in the U.S. Patent Office by Bruno S. Frassetto on March 20, 1964. The petition was filed in this court on April 24, 1968. The only issue now before the court is when plaintiff became the “owner” of the patent, within the meaning of § 1498. Plaintiff says it has owned the patent since its date of issuance (March 29, 1966). Defendant says that plaintiff has owned the patent only since. October 21, 1968, a date with significance later noted, and is not entitled to recover for any Government infringement prior to that date. For reasons below discussed, it is held that plaintiff has owned the patent since it issued and has had standing since then to sue in this court as “owner.” The pertinent facts are stipulated and are summarized below.

Background

Frassetto, an engineer, was employed by American Machine & Foundry Company (AMF) from 1951 to 1963. He worked on development of missile and space vehicle handling equipment, exercising both engineering and managerial duties. In 1951, he signed an agreement with AMF which, in essence, required him to assign to AMF all inventions made by him in AMF’s line of business during his tenure of employment and for one year thereafter. In 1963, Frassetto left AMF and went to work for Dor'tech, Incorporated, a subsidiary of plaintiff. Later that year, he invented an improved trailer for transporting palletized cargo. A patent application describing and claiming the trailer was filed in 1964, and it matured into the patent in suit. Pursuant to an employment contract with Dortech, Frassetto assigned the patent to plaintiff which has been record titleholder since issuance. The parties agree that the invention was conceived and reduced to practice while Frassetto was working for Dortech in September and October 1963, a time within one year after Frassetto left A1IF. Frassetto never worked on cargo trailers at AMF, though AMF made cargo trailers in 1962, about a year before Frassetto left AMF. So far as the record here shows, Frassetto knew nothing about the trailers and had nothing to do with their manufacture.

Soon after plaintiff filed its petition in this court, defendant moved to dismiss on grounds that the Frassetto patent is not owned by plaintiff, but rather is the rightful property of AMF. Defendant recognized that plaintiff is and always has been legal titleholder of the patent, but noted the 1951 AMF-Frassetto employment contract and argued that by its terms, AMF rightfully owns the patent, is “the real party in interest,” and that accordingly plaintiff “possesses no ownership interest in the patent sufficient to support a suit against the Government, or grant the Court jurisdiction under 28 U.S.C. § 1498.” Defendant also pointed out that during administrative claim proceedings in 1966-67 between plaintiff and defendant’s Defense Supply Agency, AMF alleged ownership of the patent by reason of the 1951 employment agreement. AMF became involved in the administrative proceedings because it was a potential indemnifier for accused devices it supplied to the Government. On September 26,1968, defendant withdrew its motion to dismiss in favor of a joint motion of the parties (a) to bring in AMF as a party-plaintiff in order to resolve the patent ownership issue, and (b) to sever that issue for separate trial.

At this juncture, plaintiff and AMF negotiated between themselves to resolve the ownership problem. By agreement dated October 21, 1968, AMF assigned to plaintiff “any and all claims of ownership of the Frassetto patent.” The agreement recognized that plaintiff was “record title holder” of the patent; that AMF “alleged a claim of ownership of said patent”; and that AMF was “willing to assign such claim” to plaintiff. Plaintiff, in turn, agreed to pay AMF 10 percent of tbe monies “actually received” in this suit and granted to AMF a “non-exclusive, royalty-free, irrevocable, nontransferable license” under the patent. On November 1,1968, plaintiff’s counsel filed a paper styled “Verified Notice of Eesolution of Issue,” which noted the above agreements and suggested that the ownership issue was moot. On January 10, 1969, AMF, by virtue of its license under the patent, granted to the United States the right to use, royalty-free, any accused devices supplied to the United States by AMF; and on January 13,1969, AMF moved to be dismissed on grounds that it no longer claimed ownership of the patent and, furthermore, was no longer liable to the United States as an indemnifier.

At this point, defendant moved to limit plaintiff’s recovery period to times after October 21, 1968. Defendant contended that the October 21, 1968 agreement between plaintiff and AMF was in fact a patent “assignment”; and that by virtue of the anti-assignment statute (31 U.S.C. §203), plaintiff is precluded from recovering for any past infringement by the Government, citing Brothers v. United States, 52 Ct. Cl. 462, 466 (1917), aff'd, 250 U.S. 88 (1919). By order dated February 6,1969, the trial commissioner denied the Government’s motion, stating that the purported “assignment of claim of patent ownership” executed by plaintiff and AMF on October 21,1968, was “in the nature of a quitclaim,” was not an “assignment of the ownership” of the patent, and was not a “transfer or assignment of a claim upon the United States” within the meaning of 31 U.S.C. § 203. Furthermore, the commissioner severed the issue of ownership for separate trial. On April 14,1969, the court denied defendant’s request for review of the commissioner’s order, “without prejudice to renewal after the issue of patent ownership is determined.” The parties then filed stipulated facts and documents as the basis for resolution by this court of the ownership issue.

The ownership issue

At the outset, it is pertinent to note thsut the owner of record title of a patent is the proper party to bring suit in this court under 28 U.S.C. § 1498. N. V. Montan Export-Metaal Handel-Maatschappij v. United States, 122 Ct. Cl. 42, 102 F. Supp. 1016, 92 USPQ 336 (1952). This would appear to end the matter, for plaintiff has been record owner of the patent from the beginning. However, defendant says that AMF had superior equities in the invention and patent up to October 21, 1968, and thus was the “owner” within the meaning of the statute. In patent litigation between private parties, equitable rights of ownership of strangers to the suit cannot be raised as defenses against the legal titleholder of a patent. Sigma Eng'r Service, Inc v. Halm Instr. Co., 33 F.R.D. 129, 138 USPQ 297 (E.D. N.Y. 1963), and cases cited'therein. Thus, if defendant were a private party, its contention would be dismissed without fanfare; However, the anti-assignment statute raises á problem not present in private litigation. For if, in fact, AMF was “owner” of the patent up to October 21,1968, plaintiff cannot recover for Government infringement prior to that date. Brothers, supra; LeFiell v. United States, 162 Ct. Cl. 865, 138 USPQ 312 (1963). It is therefore necessary to decide whether there is any merit to defendant’s argument that AMF was the “owner” of the patent prior to October 21, 1968.

The inquiry focuses on the 1951 AMF-Frassetto employment contract. The contract obligated Frassetto to use Ms best efforts to “invent, design and improve machines, implements, appliances, methods, products and systems relating to or useful in connection with the following subject matter, .namely: the machinery.and devices and other products of the various kinds made, used and sold by you [AMF] heretofore or hereafter during my employ.” The agreement further required that, Frassetto “promptly communicate and disclose to you [AMF] * * * all inventions and improvements relating to your business and in connection with the subject matter above named, originated by me solely or jointly with others during the term of my employment and dwing'. a period of one year after termination thereof * * the italicized phrase being a so-called “hold-over” clause. AMF, in turn, agreed to pay Frassetto a bonus of $100 for each invention “upon execution by me [Frassetto] of all necessary patent applications, assignments and other documents so transferring any such invention to you [AMF].”

Defendant contends that AMF manufactured cargo trailers in 1962 while Frassetto was an employee; that the improved cargo trailer of the Frassetto patent, though different from the AMF trailer, is nevertheless “subject matter” within the scope of the contract; that the invention was made by Fras-setto within the one-year hold-over period; and that, by operation of the contract, AMF thus “owned” the invention and patent, at least up to October 21, 1968. Plaintiff says, on the other hand, that under no reasonable construction of the contract can AMF be deemed ever to have-owned or had any rights to the invention or the patent. Plaintiff notes, and defendant does not dispute, that Frassetto never worked on cargo trailers at AMF; that Frassetto’s invention was made while he worked for Dortech with Dortech funds and on Dortech time; and that, in any event, the one-year hold-over clause has never been enforced by AMF and, indeed, was dropped from subsequent AMF employment contracts. Plaintiff also points out that AMF’s line of business embraces many and diverse products, and that the meaning of “subject matter” in the contract must be limited to those areas of technical endeavor in which Frassetto actually worked at AMF. The issue, then, is simply whether the hold-over clause of the 1951 contract operated to make AMF “owner” of the invention and patent.

Hold-over clauses in employment contracts are enforceable only if they constitute a reasonable and justifiable restriction on the right of employees to work in their profession for subsequent employers. Guth v. Minnesota Mining & Mfg. Co., 72 F. 2d 385, 22 USPQ 89 (7th Cir. 1934); IV Walker, Patents § 374 (Deller’s 2d ed. 1965). See also Knoth, Assignment of Future Inventions, 27 Chx.-Kent L. Kev. 295 (1949). Their legitimate purpose is to prevent an employee from appropriating to his own use or to the use of a subsequent employer inventions relating to and stemming from work done for a previous employer. Hold-over clauses are simply a recognition of the fact of business life that employees sometimes carry with them to new employers inventions or ideas so related to work done for a former employer that in equity and good conscience the fruits of that work should belong to the former employer. In construing and applying holdover clauses, the courts have held that they must be limited to reasonable times (Guth, supra) and to subject matter which an employee worked on or had knowledge of during his employment. Universal Winding Co. v. Clarke, 108 F. Supp. 329, 94 USPQ 295 (D. Conn. 1952). Unless expressly agreed otherwise, an employer has no right under a hold-over clause to inventions made outside the scope of the employee’s former activities, and made on and with a subsequent employer’s time and funds. Gas Tool Patents Corp. v. Mould, 133 F. 2d 815, 56 USPQ 357 (7th Cir. 1943).

Under the facts here, it is clear that AMF was never entitled to rights to the patent in suit. Frassetto never worked on cargo trailers at AMF, nor does the record show that he had knowledge of AMF’s activities relating to cargo trailers. It is therefore not reasonable under the circumstances to include cargo trailers as part, of the “subject matter” which Frassetto agreed to assign back to AMF within one year after termination of his employment. Furthermore, the record shows, and defendant concedes, that the invention was conceived and reduced to practice while Frassetto worked for Dortech, on Dortech’stime and with Dortech’s money. Indeed, AMF has never sought to enforce the hold-over clause against Frassetto and has waived whatever rights it might have thereunder, factors which weigh heavily in construing the scope of the employment contract. Cf. Reece Folding Mach. Co. v. Fenwick, 140 F. 287 (1st Cir. 1905). In sum, AMF has never been legal or equitable owner of the Frassetto patent; and plaintiff, as legal and equitable titleholder, has had standing to sue in this court from the date the patent issued.

Finally, contrary to defendant’s arguments, plaintiff’s agreement of October 21,1968, to pay AMF 10 percent of the monies recovered in this suit does not violate the anti-assignment statute. The consideration for the agreement was simply a waiver by AMF of whatever rights it might have under the AMF-Frassetto employment contract, a transaction characterized earlier in this suit by the trial commissioner as “in the nature of a quitclaim.” The agreement simply creates contract rights between plaintiff and AMF and does not give AMF a lien on any recovery against the United States. See Nutt v. Knutt 200 U.S. 12 (1906); Pittman, v. United States, 127 Ct. Cl. 173, 116 F. Supp. 576 (1953), cert. denied, 348 U.S. 815 (1954).

FINDINGS of Fact

1. This is a patent suit under 28 U.S.C. § 1498. Plaintiff seeks reasonable and entire compensation for alleged unauthorized use and manufacture by or for defendant, the United States, of the invention described and claimed in U.S. Patent 3,243,062, entitled “Pallet Transfer Trailer.” The patent issued on March 29, 1966, to plaintiff as the holder of record title, on an application filed March 20,1964, by Bruno S. Frassetto. Plaintiff’s petition was filed in this court on April 24, 1968. The patent will be referred to as the Frassetto patent.

2. Plaintiff is a Delaware corporation, having its principal office and place of business at Stamford, Connecticut.

3. In response to notices under Buie 23 (now Bule 41), Comanco, Inc., Berwick, Pennsylvania, and Lockheed Aircraft, Inc., Marietta, Georgia, have appeared as third-party defendants and filed answers. They have not participated in the present phase of the case.

4. (a) On August 21, 1968, defendant moved to dismiss the petition, challenging plaintiff’s ownership of the Fras-setto patent and its standing to bring suit under 28 U.S.C. § 1498. Alternatively, defendant moved to join American Machine & Foundry Company (AMF) as a party-plaintiff, and to sever for resolution the issue of whether plaintiff or AMF owns the patent in suit. On September 26, 1968, defendant withdrew its motion to dismiss; and plaintiff and defendant filed a joint motion to join AMF as a party and to sever the issue of ownership for separate trial.

(b) Oil October 21, 1968, plaintiff and AMF entered an agreement captioned “Assignment of Claim of Patent Ownership” by which AlMF assigned to plaintiff “any and all claims of ownership of United States patent 3,243,062” and plaintiff agreed to pay AMF “10 percent of monies actually received” by plaintiff in this suit. Concurrently, the parties entered a licensing agreement by which AMF was granted a royalty-free, non-exclusive license under the patent in suit “to make, use and sell the invention claimed therein excluding sub-licensing rights except the right to sublicense purchasers to use equipment supplied by AMF.”

On January 10, 1969, AMF granted to the United States a “royalty free non-exclusive license * * * with respect to pallet transfer trailers heretofore or hereafter pui-chased by the United States from American Machine & Foundry Company.” By stipulation dated March 11,1969, counsel for the United States in this suit acknowledged the license granted by AMF to the United States.

On January 13, 1969, having earlier received notice under Buie 23 (now Bule 41), AMF moved to dismiss the petition with respect to AMF on grounds that it has no interest in the ownership of the Frassetto patent and, as a licensee thereunder, has granted to the United States the right to use, royalty-free, all pallet transfer trailers sold to the United States by AMF.

(c) On January 10, 1969, defendant filed a motion to define the recovery period, requesting an order that plaintiff’s recovery period extend forwardly from October 21, 1968, on the theory that plaintiff became the owner of the Frassetto patent, within the meaning of 28 U.S.C. § 1498, by virtue of the agreement between AMF and plaintiff, executed on that date. (Finding 4(b).) On February 6, 1969, the trial commissioner denied the motion. Defendant requested review by the court which was denied on April 14,1969, without prejudice to renewal after determination of the issue of ownership which had been severed for separate trial by the trial commissioner’s order dated February 6, 1969.

(d) On February 6, 1969, AMF was dismissed as a party to this suit by a commissioner’s order, affirmed by the court on February 24,1969.

5. On October 14, 1969, the parties filed a “Stipulation Re Severed Issue of Ownership of United States Patent 3,243,082”, with accompanying exhibits. Am order closing proofs on the ownership issue was filed October 22, 1969. Plaintiff and defendant filed proposed findings and briefs directed to the ownership issue.

6. (a) Bruno S. Frassetto commenced employment with AMF, a New Jersey corporation, on or about March 28,1951. Frassetto was hired by AMF as a machine designer, with a view to utilizing his skills in technical endeavors.

(b) On March 28, 1951, Frassetto executed an 'agreement (AMF Form 290C) which set forth the character of the services he was expected to render AMF as his employer and which provided for the disposition of rights in inventions or improvements he might make while employed by AMF and for a period of one year thereafter. The 1951 AMF-Frassetto agreement reads in part as follows (emphasis supplied) :

SECOND: I [Frassetto) further agree that while in your employ I will follow your direction and my appointed duties, and will exert my best efforts to effect improvements on your behalf and otherwise to promote your best interests, and particularly to invent, design and improve machines, implements, appliances, methods, products and systems relating to or useful in connection with the following sub) ect matter, namely: the machinery and devices and other products of the various kinds made, used or sold by you heretofore or hereafter during my employ.
THIRD: I [Frassetto] further agree on behalf of my self, my heirs and representatives, that I will promptly communicate and disclose to you [AMF] or to your nominees, and upon request will transfer to you free of incumbrance and restriction; (a) all inventions and other improvements originated by me solely or jointly with others, originated or developed during my working hours for you, or at your expense, or on your premises; (b) all inventions and improvements relating to your business or in connection with the subject matter above named, originated by me solely or jointly with others during the term of my employment and during a period of one year after the termination thereof; * * *

(c) Frassetto’s employment by AMF ended on June 30, 1963, after one month’s accrued vacation, his last working day being May 30,1963.

(d) Subsequent to the time Frassetto joined AMF in 1951, engineering and scientific personnel who accepted professional employment with AMF executed employment agreements which did not contain the provision regarding assignment of inventions for one year after termination of employment. An unexecuted copy of the new agreement form (Form 290H) is of record. Form 290H was adopted and available for use at AMF at least as early as January 1961.

(e) The parties stipulated that the employment agreement executed by Frassetto on March 28, 1951, is the only such agreement between Frassetto and AMF known to counsel for either party.

7. Frassetto worked from 1958 to 1963 in the General Engineering Division, a component of AMF’s Advanced Products Group. The General Engineering Division was located in four buildings (Nos. 15, 20, 22 and 35), encompassing about 250,000 square feet and housing about 800 employees, at 737 Canal Street, Stamford, Connecticut. Fras-setto worked in a specific department of the General Engineering Division, called the Hydraulic and Mechanical Engineering Department. His duties related to missile and space vehicle handling equipment for which the Advanced Products Group was responsible. He did not work on cargo trailers. Frassetto’s department offices were located in building No. 22. While in the Hydraulic and Mechanical Engineering Department, Frassetto developed a locking hydraulic actuator marketed under the AMF trademark “BEARLOC”. He also developed the hydraulic system for a giant crawler used to handle and transport assembled space vehicles to launch pads, and he performed some managerial work on the Minuteman project. The parties have agreed that the “BEARLOC” device falls within the definition of “subject matter” as defined in the second clause of the AMF-Fras-setto agreement of March 28,1951. (Finding 6(b).)

8. (a) In early 1962, AMF was awarded Air Force Contract No. AF 33(657)7862 for 50 A/M 32H-5 palletized-cargo trailers. The contract required AMF to supply trailers in accordance with detailed Air Force specifications designated MIL-T-27537 (USAS'), dated July 3, 1961, with revisions. AMF was not required by the contract “Statement of Work” clause to perform any experimental, developmental or research work.

(b) The palletized-cargo trailers to be made by AMF under the afore-identified contract are shown in drawings included as part of the contract. In essence, the trailer comprises a flat bed supported by four wheels on swivel casters. Fastened under the bed are two pairs of tubular receptacles for engagement by the tines of a forklift truck. One pair of receptacles run laterally under the bed, the other pair longitudinally. The bed surface supports roller conveyor sections which can be positioned to permit movement of loaded pallets laterally of 'the bed or, alternately, can be manually repositioned, when the trailer is empty, to permit movement of loaded pallets longitudinally of the bed. The parties have agreed that the palletized-cargo trailers made by AMF under the contract fall within the definition of “subject matter” defined in the second clause of the AMF-Frassetto agreement of March 28,1951. (Finding 6(b).)

The trailers built under the Air Force contract were made by AMF in a department known as the Air Terminal Systems Department, a component of the General Engineering Division, Advanced Products Group. Construction and testing of the trailers were carried out in building No. 35. The record is not clear when the trailers were constructed; however, the contract called for delivery in the early months of 1962. Frassetto never worked in the Air Terminal Systems Department, and there is no evidence that he had actual knowledge (before leaving AMF) of the Air Force contract or the trailers built thereunder.

9. (a) Frassetto commenced working for Dortech, Incorporated, a subsidiary of plaintiff, on or about August 26, 1963. Frassetto was hired as a graduate engineer to utilize his managerial and professional skills in technical and scientific endeavors.

(b) On September 15, 1963, Frassetto conceived an improved palletized-cargo trailer. The device was reduced to practice on October 22,1963, and a patent application Serial No. 353,346 covering the device was filed on March 20,1964. This application matured into U.S. Patent 3,243,062, granted on March 29, 1966, now the Frassetto patent in suit. Pursuant to the requirements of an employment contract between Frassetto and Dortech, Frassetto assigned all right, title and interest in the patent to plaintiff by a document dated January 10, 1966, which was in due course recorded in the U.S. Patent Office.

The trailer disclosed in the Frassetto patent is similar in many respects to the trailer made by AMF and described in finding 8 (b). A principal difference is that the roller sections of the AMF device are eliminated in favor of inverted swivel casters which permit cargo pallets supported thereby to be moved horizontally in any direction.

(c) The parties stipulated that the dates of conception and reduction to practice of the Frassetto invention were within the one-year period noted in the third clause, section (b), of the AMF-Frassetto agreement of March 28, 1951. (Finding 6(b).)

(d) In' the fall of 1963, Dortech supplied to the United States under Air Force contract AF 33(657)12908 a number of pallet-transfer devices which plaintiff contends were made in accordance with the teachings of the Frassetto patent. Plaintiff further contends that the device was developed under Dortech’s funds to meet requirements set down by the U.S. Aeronautical Systems Division, Wright-Patterson AFB, Dayton, Ohio.

Conclusion or Law

Upon the foregoing findings of fact and opinion which are made a part of the judgment herein, the court concludes as a matter of law that plaintiff is and, at all times since March 29,1966, has been the owner of U.S. Patent 3,243,062, within the meaning of 28 U.S.C. § 1498. The case is remanded to the trial commissioner for further appropriate proceedings. 
      
       28 U.S.C. § 1498 says in pertinent part:
      (a) Whenever an Invention described in and covered by a patent of the United States is used or manufactured by or for the united States without license of the owner thereof * * *, the owner’s remedy shall be by action against the United States in the Court of Claims for recovery of his reasonable and entire compensation for such use and manufacture. (Emphasis added.)
     
      
       The Brothers case held, among other things, that the anti-assignment statute, section 3477, Revised Statutes (now 31 TJ.S.C. § 203) prohibits the assignment of any claim for patent infringement against the united States which arose prior to the time a plaintiff acquired title to the patent.
     