Caseflicks

Court of Appeals for the Fifth Circuit • 1983

Malcolm R. Wommack v. Durham Pecan Company, Inc.

715 F.2d 962 | 1983 U.S. App. LEXIS 16542

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Takeaway

In short, this case holds that an employee who permits an employer to invest in and commercially use the employee’s invention may be estopped from later charging that employer royalties, even if the employee first developed a workable version independently.

Background

Malcolm Wommack worked as a general laborer for Durham Pecan Company, a pecan processor. While employed, he developed a method for making pecan-weevil larvae easier to identify under ultraviolet light: soaking shelled pecan pieces in a weak yellow-food-coloring solution dulled the pecans’ fluorescence while leaving the worms fluorescent. Wommack performed his initial experiments at home with his own simple equipment and materials.

After demonstrating the process to Durham’s owner, Wommack explained the use of yellow coloring. When Durham installed a UV sorting machine, its owner asked whether the company could use Wommack’s process, and Wommack said yes. Wommack, other Durham employees, and Durham equipment then helped adapt the process to commercial use in the plant. Durham also loaned sorting equipment for Wommack’s home experiments. Wommack used the plant experience and diagrams of Durham’s operation in preparing his patent application, which he filed at his own expense. The patent issued in 1977.

After Durham fired Wommack in January 1976, Wommack asserted that the parties’ verbal agreement allowing Durham to use the process was no longer valid and sought a signed agreement. Durham continued using the process until 1979. Wommack then sued for patent infringement and sought reasonable royalties. The jury found the process patentable and Durham’s use infringing, but it also found that Wommack acquiesced in Durham’s use and that Durham bore costs and supplied property and employees to put the invention into practical form. The district court held that those findings established a shop right—an implied, royalty-free license—and dismissed the infringement claim.

Issues

Issue #1

Whether an employer can obtain a shop right when the employee initially conceived and reduced the invention to practice without the employer’s assistance.

Holding

Yes. Employer assistance need not occur before, or at the precise stage of, patent-law reduction to practice for a shop right to arise.

Reasoning

An employee does not automatically give an employer rights in an invention merely because the invention was conceived during employment. Nor did Durham claim ownership on a “hired to invent” theory: Wommack was hired as a low-wage general laborer, not to exercise inventive faculties for the company. The relevant question was instead whether Durham acquired a shop right, which is a nonexclusive, royalty-free right to use the patented process for its own purposes while the inventor retains the patent against others.

The court rejected Wommack’s view that a shop right requires employer help in achieving patent-law “reduction to practice.” In patentability doctrine, reduction to practice marks the point at which an idea has been sufficiently tested to show utility. But that technical milestone does not control the equitable shop-right inquiry. An inventor may first reduce an idea to practice independently and later create a shop right through cooperative development and commercial implementation with the employer.

The central basis of the doctrine is estoppel, not a mechanical accounting of when or how much employer assistance occurred. Employer time, equipment, labor, and expense matter because they are evidence that the employee consented to and encouraged the employer’s use. It would be inequitable for an employee to invite or permit the employer to invest in using the invention and later demand royalties after the employer relied on that permission.

Issue #2

Whether the jury’s special-verdict answers could be reconciled and supported the finding that Durham had a shop right or implied license.

Holding

Yes. Read in light of the undisputed evidence, the verdicts were reconcilable and established Wommack’s consent and Durham’s reliance sufficient to create a shop right.

Reasoning

The court had a duty to reconcile apparently inconsistent special verdicts if a reasonable reading would do so. The jury found that Wommack had reduced the process to practical application without Durham’s assistance, but also found that Durham paid the costs and supplied property and employees to develop or put the invention into practical form. Those findings could coexist: Wommack could have developed a workable process at home, while Durham later helped transform it into a commercially usable plant operation.

The evidence strongly demonstrated Wommack’s objective consent. He invited Durham’s owner to observe the process, agreed that Durham could use it, participated in adapting it for the plant, accepted company equipment for further experiments, and relied on the company’s production experience in preparing his patent application. He then allowed Durham to use the method for roughly a year before seeking compensation after his discharge.

The jury’s findings that Wommack had not expressly granted a royalty-free license “as long as [Durham] wanted” and had not agreed that Durham could “freely” use the process did not negate its finding of acquiescence. The court read those answers as reflecting Wommack’s later demand for payment, rather than a refusal of consent at the time Durham invested in and began using the process. Once the equitable estoppel underlying a shop right arose, a later unilateral request for compensation could not undo it.

Wommack’s private expectation that Durham eventually would pay him did not alter the result. He presented no evidence that he requested payment or that Durham promised compensation when he gave permission. In return for allowing Durham’s use, Wommack received commercially valuable testing, plant experience, and access to company equipment; Durham assumed the risk and expense of adapting the process with the reasonable expectation that it could continue using it.