Milliken & Company sued Brian Morin after he resigned from the company and started a new venture using Milliken’s proprietary information. The crux of its suit was that Morin breached the confidentiality and invention assignment agreements he signed when he started working for Milliken. A jury found for Milliken, and the court of appeals affirmed. Milliken & Co. v. Morin,
FACTUAL/PROCEDURAL BACKGROUND
Morin began working for Milliken as a research physicist in 1995 in its Spartanburg, South Carolina facility. As a condition of his employment, Morin had to sign an “Associate Agreement” which contained provisions regarding confidentiality and the assignment of certain inventions. The confidentiality agreement reads as follows:
CONFIDENTIAL INFORMATION means all competitively sensitive information of importance to and kept in confidence by Milliken, which becomes known to me through my employment with Milliken and which does not fall within the dеfinition of Trade Secret above.1 Such Confidential Information may be valuable to Milliken because of what it costs to obtain, because of the advantages Milliken enjoys from its exclusive use, or because its dissemination may harm Milliken’s competitive position.
B. EXCEPT as required in my duties to Milliken, I will never, either during my employment by Milliken or thereafter, use or disclose, modify or adapt any ... Confidential Information as defined in paragraph 3hereinabove until three (3) years after the termination of my employment except as authorized in the performance of my duties for Milliken.
Morin’s duty to assign his inventions to Milliken is somewhat longer:
4. INVENTIONS means discoveries, improvements and ideas (whether or not shown or described in writing or reduced to practice), mask works (topography or semiconductor chips) and works of authorship, whether or not patentable, copyrightable or registerable, (1) which relate directly to the business of Milliken, or (2) which relate to Milliken’s actual or demonstrably anticipated research or development, or (3) which result from any work performed by me for Milliken, or (4) for which any equipment, supplies, facility or Trade Secret or Confidential Information of Milliken is used, or (5) which is developed on any Milliken time.
A. With respect to Inventions made, authored and conceived by me, either solely or jointly with others, (1) during my employment, whether or not during normal working hours or whether or not at Milliken’s premises; or (2) within one year after termination of my employment,2 I will:
a. Keep accurate, complete and timely records of such Inventions, which records shall be Milliken property and retained on Milliken’s premises.
b. Promptly and fully disclose and describe such Inventions in writing to Milliken.
c. Assign (and I do hereby assign) to Milliken all of my rights to such Inventions, and to applications for letters patent, copyright registrations and/or mask work registrations in all countries and to letters patent, copyright registrations and/or mask work registrations granted upon such Inventions in all countries.
d. Acknowledge and deliver promptly to Milliken (without charge to Milliken but at the expense of Milliken)such written instruments and to do such other acts as may be necessary in the opinion of Milliken to preserve property rights against forfeiture, abandonment or loss and to obtain, defend and maintain letters patent, copyright registrations and/or mask work registrations and to vest the entire right and title thereto in Milliken.
NOTICE: This is to notify you that paragraph A of this Milliken “Associate Agreement” you are being asked to sign as a condition of your employment does not apply to an Invention for which no equipment, supplies, facility or proprietary information of Milliken was used and which was developed entirely on your own time, and (1) which does not relate (a) directly to the business of Milliken or (b) to Milliken’s actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by you for Millikеn.
Over the next nine years with Milliken, Morin was promoted twice, first to Senior Research Physicist and then to Team Leader for the Advanced Yarns Team. During the time Morin was in charge of the Advanced Yarns Team, one of Milliken’s goals was to investigate the use of additives and equipment modifications to create a new type of fiber. To seek out potential uses for such a product, Milliken sent Morin to a trade show in Anaheim, California, in the Fall of 2003. Shortly thereafter, he began drafting а business plan for his own company, Innegrity, which would manufacture this new fiber. He then resigned from Milliken on May 19, 2004, and filed a patent for the fiber, which he labeled Innegra, the following November.
Milliken first caught wind of Morin’s plans after he invited his former colleagues to attend a presentation he was giving at a gathering of venture capitalists in Greenville, South Carolina. After noting the similarities between Innegrity’s business plan and certain projects being conducted at Milliken, Milliken raised concerns thаt Morin had violated the Associate Agreement. This suit soon followed.
Milliken brought several claims against Morin, but only its claims for breach of the confidentiality agreement, breach of invention assignment provisions, breach of the duty of loyalty,
STANDARD OF REVIEW
An action for breach of contract is an action at law. Sterling Dev. Co. v. Collins,
LAW/ANALYSIS
I. APPLICABLE STANDARD
We must first resolve a question left unanswered by the court of appeals, which is under what rubric we are to evaluate the enforceability of these agreements. Morin argues that we should analyze them as non-compete agreements and thus strictly construe them in favor of the employee. We disagree.
“According to the early common law of England, an agreement in restraint of a man’s right to exercise his trade or calling was void as against public policy.” Standard Register Co. v. Kerrigan,
“Modern courts have usually, in passing on these contracts, employed three critеria: (1) Is the restraint, from the standpoint of the employer, reasonable in the sense that it is no greater than is necessary to protect the employer in some legitimate business interest? (2) From the standpoint of the employee, is the restraint reasonable in the sense that it is not unduly harsh and oppressive in curtailing his legitimate efforts to earn a livelihood? (3) Is the restraint reasonable from the standpoint of a sound public policy?”
Id. (quoting Welcome Wagon,
The agreements under review, however, are not in restraint of trade. See Louis Altman & Malla Pollack, Callmann on Unfair Competition, Trademarks and Monopolies § 14:6 (4th ed.2009) (“An employee’s express commitment not to disclose his employer’s confidential information, whether or not it comprises trade secrets, ‘unlike the covenant not to compete cannot be challenged as an unreasonable restraint of trade.’ ” (quoting Lear Siegler, Inc. v. Ark-Ell Springs, Inc.,
Holdover clauses do not fit this mold because they do “not limit the employee’s post-employment activities except with respect to the affected inventions and improvements.” NovelAire Techs., L.L.C. v. Harrison,
Because these agreements are not in restraint of trade, we hold there is no “ancient disfavor” and thus they are not to be strictly construed in favor of the employee. See Carolina Chemical Equip. Co. v. Muckenfuss,
Nevertheless, these agreements are still restrictive covenants and public policy demands their scope be subject to judicial review for reasonableness. When evaluating these provisions, courts should look to the more general standard enunciated in Standard Register, namely whether the restriction is reasonable in that it is no greater than necessary to protect the employer’s legitimate interests, and it is not unduly harsh in that it curtails the employee’s ability to earn a living.
II. ENFORCEABILITY OF AGREEMENTS
With this framework in mind, we turn next to the enforceability of the holdover and confidentiality agreements Morin signed. In our opinion, both of them are facially valid.
A. Holdover Clause
As has been eloquently stated, “A naked assignment or agreement to assign, in gross, a man’s future labors as an author or inventor[ — ]in other words, a mortgage on a man’s brain, to bind all its future products[ — ]does not address itself favorably to our consideration.” Aspinwall Mfg. Co. v. Gill,
The invention assignment agreement Morin signed is embodied in a complex set of paragraphs which by no means are an exercise in clarity. After sorting through the morass, however, the impact of the agreement is much narrower than it may appear initially. The agreement first applies to all inventions, a term which is defined quite broadly. It covers:
discoveries, improvements and ideas (whether or not shown or described in writing or reduced to practice), mask works (topography or semiconductor chips) and works of authorship, whether or not patentable, copyrightable or registerable,
(1) which relate directly to the business of Milliken, or
(2) which relate to Milliken’s actual or demonstrably anticipated research or development, or
(3) which result from any work performed by me for Milliken, or
(4) for which any equipment, supplies, facility or Trade Secret or Confidential Information of Milliken is used, or
(5) which is developed on any Milliken time.
Accordingly, any discovery, etc., which meets any of the five criteria contained in the agreement is an invention and is to be assigned.
However, the agreement also contains a rather broad exception to this inclusive definition. It excepts an invention, as defined above,
for which no equipment, supplies, facility or proprietary information of Milliken was used andwhich was developed entirely on your own time, and
(1) which does not relate
(a) directly to the business of Milliken or
(b) to Milliken’s actual or demonstrably anticipated research or development, or
(2) which does not result from any work performed by you for Milliken.
(emphasis added).
Morin’s contention is that the invention assignment clause is overbroad because it grants Milliken rights to one of Morin’s inventions “irrespеctive of whether his invention is legitimately an extension of research he did for Milliken.”
Accordingly, the agreement is not broader than necessary to protect Milliken’s legitimate business interests. Moreover, the one-year holdover provision is eminently reasonable. See
B. Confidentiality Clause
It is widely recognized that an employer may “restrain a former employee from disclosing and using confidential information which was developed as a result of the employer’s initiative and investment and which the employee learned as a result of the employment relationship.” GTI Corp. v. Calhoon,
The heart of Morin’s claim is that the confidentiality provision is so broad that it prevents him from using his own general skills, knowledge, and inventive ability as opposed to just restricting the dissemination of Milliken’s propriety information.
(1) competitively sensitive information
(2) of importance to and
(3) kept in confidence by Milliken,
(4) which becomes known to the employee through his employment with Milliken, and
(5) which is not a trade secret.
It does not take much elaboration to see that rather than covering general skills and knowledge, it encompasses only important information not generally known to the public which becomes known to the employee through his еmployment with Milliken. Thus, the court of appeals did not err in holding that “[t]he three-year provision did not prohibit Morin from disclosing or using any and all information he learned working at Milliken, or using the general knowledge and skills he learned while working there.” Milliken,
Milliken accordingly has a legitimate business interest it can protect through the use of the confidentiality agreement, and the agreement does not sweep any broader than this on its face. Although not necessarily required, the agreement is also reasonably limited to only three years. See Rental Uniform Serv.,
CONCLUSION
We therefore hold confidentiality and invention assignment clauses are not in restraint of trade and should not be strictly construed in favor of the employee. Under a more general reasonableness standard of enforceability, Milliken’s agreements here are reasonably tailored and therеfore enforceable as a matter of law. We accordingly affirm the court of appeals, modifying its opinion only to the extent that we adopt the standard enunciated above.
Notes
. In his brief, Morin also challenges the breadth of the trade secret definition. However, he did not contend it was overbroad before the court of appeals, much less even cite that provision to it. Therefore, he cannot now maintain his overbreadth challenge enсompasses the definition of trade secret. See Camp v. Springs Mortg. Corp.,
. Invention assignment agreements which extend beyond the term of employment are called "trailer” and "holdover” clauses.
. Pursuant to the invention assignment clause, Milliken requested that the circuit court assign the Innegra patent to it from Innegrity. Because Innegrity was no longer a party to the proceedings when the case was tried, the court denied Milliken’s requеst. The court of appeals affirmed, Milliken,
. If upon review they are so broad as to effectively become non-compete agreements, then they are subject to the higher burden. See Almers v. S.C. Nat’l Bank of Charleston,
. Geographic scope has no relevance for invention assignment or confidentiality provisions. Revere Transducers,
. Morin directs his arguments towards the interplay between subparts (1) and (2) of the exception, not the rest of it. Because we do not believe requiring the assignment of inventions that were developed using the employer’s equipment, supplies, and proprietary information, or which were developed on the employer’s time, renders the agreement overbroad as a matter of law, we similarly confine our discussion.
. We reject Morin's argument that Milliken really meant to use the word "and” instead of "or" in the exception.
. Although Morin’s brief lodges a multi-faceted attack against the confidentiality clause, the sole issue on which we granted certiorari is whether it is facially enforceable as a matter of law.
