In July, the Texas Court of Appeals turned down software programmer Evan Brown’s appeal for a jury trial to decide who owned an idea in his head: Brown, or his former employer. The decision was a victory for business and a blow to the little guy, as well as an affirmation of standard employment-contract law. It’s also a cautionary tale for creative-minded information technology workers.
Seven years ago Brown told his employer, DSC Communications Corp., that he had figured out a system to translate data from old mainframe computer programs into modern computer languages, an innovation that would enable businesses to run their old software on much faster computers. Brown says he had been wrestling with the problem since 1975 and finally, while on vacation in 1996, he figured out the final 20 percent of the puzzle.
His original hope was to make a deal with DSC allowing him to continue working on his idea while still staying employed. But negotiations soon broke down, and within a year, DSC sued Brown, stating that his idea was the property of the company because he had signed an employment agreement giving the company ownership of any “inventions” he conceived or developed during his employment, with the exception of ideas that Brown had explicitly disclosed at the time of original employment. Brown, who ended up working for DSC for 10 years, said he had come up with the idea entirely on his own time and refused to give up the design.
By 1998, Paris-based Alcatel had purchased DSC. Alcatel continued to assert ownership of Brown’s idea, and after it failed to gain control when Brown filed for Chapter 13 bankruptcy, a summary judgment was issued in 2002 from the 219th Judicial District Court in Texas in favor of the company. Not only has Brown lost the rights to his idea, but he is also liable for Alcatel’s $332,000 attorneys’ fees. Brown says he will soldier on and is petitioning for review at the state court level.
The case turned on the issue of employment agreements, in which it is general practice for a company to claim the rights to any invention that an employee comes up with while in its employ. But the case also highlights the more complex issue of the value of ideas in the workplace, and how far intellectual property and ownership rights should extend in an age where the demarcation between thinking for the company and thinking for oneself is increasingly blurred.
“I dug my heels in from day one,” says Brown in a quiet Texas lilt a few days after his appeal was denied. “What they’re doing is wrong. It’s extortion. I had an idea, not an invention, and it was not in the scope of the work agreement. One idea that only exists in your head and that did not yet exist can’t be an invention … All I had was an idea.”
Brown, 54, lives in a barn “out in the sticks” in Hamilton County, Texas, where he “runs 20 cows and does some farming” when he is not researching his case at the Baylor University law library in Waco, Texas. It is a long way from the $104,000 annual salary he earned at DSC, and even further from what Brown estimated could be a “multimillion-dollar per year” business.
1996, with concern beginning to build about updating computers to avoid the much-feared Y2K “millennium bug,” Brown thought his idea, dubbed the “Solution,” could be highly valuable to companies and institutions that were hamstrung by elderly computer programs. Brown said he thought the program was particularly applicable in the areas of oil field pipelines, satellites and government weaponry, many of which were still running on decades-old code. DSC, which manufactured products for the telecommunications industry, was also interested in Brown’s idea and at one point offered him up to $2 million for the rights to develop it.
Letting one’s employer know that you have come up with a million-dollar idea on your own time may sound naive, but to Brown it was a matter of principle. Brown says he also knew that DSC had a history of suing former employees, so he decided to be straightforward, confident that DSC couldn’t claim to own what existed only in his head. He sent his supervisor a letter saying he had solved the design elements of the Solution and asked if the company would be interested in helping him develop it, which he says was 18 months away from implementation once he put it down on paper.
“I expected them to sign a release so I could work on my idea,” Brown says. “I had that feeling going in.”
When the relationship between Brown and Alcatel became acrimonious, the company sued, and the letter became a key issue in the case. “The killer was I used the word ‘solved,’ instead of using ‘solving,’” Brown explains. “I should have said that I’m working on an idea. That was the single most critical word out of whole lawsuit.” Brown, who describes himself as a “computer geek in cowboy boots,” is adamant that he developed his Solution completely on his own time.
“There are workaholics and normal people,” Brown says, describing the years during which he worked on his idea. “For normal people they put work aside, go home, have a family, play soccer, go swimming, and stay focused on that part of their life. I didn’t have any kids, and I didn’t go home and kick up my heels and watch football. I came home, went upstairs, got on the computer, and did my own work. I worked for DSC 40 hours a week, and the rest of the time was mine.”
“Alcatel’s attorneys made a big deal about that [letter], and said that it was evidence that the contract was enforceable, and it appeared to have a lot of weight with the judge,” says James C. Lai, a lawyer pursuing a postgraduate degree in the John Marshall Law School’s Information Technology and Privacy program. “From his perspective he showed good faith by dealing with his employer, and it happened to come back to bite him.”
The gist of Alcatel’s case is this: When Brown signed an employment agreement and continued to work for the company, he became bound by its provisions, including those that said that all inventions he came up with belonged to the company. Brown’s letter stating that he had “solved” the idea was proof that his idea was an invention and that he had come up with it while employed by Alcatel/DSC.
Brown challenged the enforceability of his employment agreement, saying that because his idea wasn’t complete and needed more work and that he had been developing the idea for many years before working for Alcatel, it was not an invention that could be patented and it could not be claimed by Alcatel. He also argued for a jury trial, instead of a summary judgment by one judge.
“What I found most remarkable about Evan Brown’s case was that this was the first time an intellectual-property agreement was enforced on something that didn’t yet exist,” says Lai, who criticized the decision in the Spring 2003 issue of the John Marshall Journal of Computer & Information Law. “I do think it is a big deal because this sets a precedent. It’s going to be binding precedent in Texas, and it certainly is something state courts might look at, especially if they have never faced this kind of case.”
Brown has been unemployed for the entire seven years of the lawsuit. Apart from holding on to their golden ideas, there is significant risk for employees like Brown who decide to fight with former employers over intellectual-property rights because “no one wants to buy a lawsuit, no matter how good the person is,” Lai says.
“I certainly think it could be a possibility, especially as the I.T. industry matures, that one of the scenarios is that an employer might rely on this decision as authority to stop people from changing jobs,” Lai says.In a case littered with complexities, Brown may have erred by not taking the money and running, says Carl Khalil, a lawyer who runs a Web site offering advice to employees about breaking “non-compete” employment contracts.“I hate to say this, and I’ve been a lawyer for 15 years,” Khalil says. “There’s an old saying in the stock market: ‘A bull can make money in the market and a bear can make money in the market, but a pig never can.’ Here’s a guy that should have taken the offer. With litigation you can hit a home run or strike out, so you’re better off at second base with the offer.”Khalil says that an additional problem for Brown was that, in addition to turning down the settlement, he sent a memo on company time, using company equipment, saying “I have developed…” Khalil thinks the decision by the Texas court, normally friendly on employee issues of this nature, means that more employers will attempt similar legal action.
Marc Greenberg, the director of the Intellectual Property Law Program at Golden Gate University School of Law, says that Brown shot himself in the foot long before he sent the fateful memo in 1996.
“Brown’s claim that he had 80 percent of this idea completed in his mind before beginning employment at DSC is also a two-edged sword for him,” Greenberg wrote in an e-mail. “He views this as proof that DSC can’t claim ownership of it. However, he had an opportunity to disclose and separate this concept out from his employment agreement, and failed to do so. This hurts his argument, as it implies a waiver on his part.”
The “trafficking of ideas” is an important statute in the entertainment and telecommunications industries, and it is the reason that companies have developed employment contracts that cover intellectual-property issues. Greenberg points out that this is a common issue with academic research scientists: Any idea they have, unless explicitly written into a contract, is the property of the institution. Brown didn’t, which was his mistake.
“Brown’s case has a populist feel, a ‘they’re-stealing-my-mind feel to it,’ but as a matter of law, he doesn’t have a very strong case,” Greenberg says.
What Brown should have done instead, according to Greenberg, was either be more cagey about his inquiry about DSC partnering with him to finish off the Solution, or just plain quit. “Suppose Evan Brown had quit DSC and spent the next 18 months working on the Solution,” Greenberg posited. “What would they do? How could they prove that he had developed it on company time? His problem is, this way he looks like he wants the cake and to eat it too. The court looks at this and thinks he wants to work and collect benefits, and when he finally develops something he wants to quit and walk away.”
What every employee concerned about protecting their own ideas should do, the three lawyers wholeheartedly agree, is be very clear about what they are signing in an employment contract. If they do have a long-running idea, they should make clear in the contract that their idea was developed outside the company.
“Really what it boils down to is, read everything,” Lai says. “Don’t run into ambiguity as to when it’s in effect or not.” As for what this decision means for the future, Greenberg doesn’t think Brown’s case is unusual enough to prompt any significant changes in employment contract law.
As for Brown, he is understandably pessimistic. “Everyone would like to create a better mousetrap, start a business, and be successful,” Brown says, painting a picture of his own dream. “This says, Don’t worry about it, because whoever you’re working for, they own it. It’s not very good at all. It’s pretty depressing for creative people.”Lai points out that both Texas courts declined to issue written opinions about Brown’s argument that he developed his idea on his own time, opening up a potential gray area in future cases. “Anytime you have situation where a company relies on the creative output of employees for revenue, you’re going to run into this type of situation,” Lai says. “I think this is by no means the last time we’re going to see a situation like this.”