Read your contract: Prior invention attributed to employer when integrated into employer’s software | Manatt, Phelps & Phillips, LLP
In Apprio, Inc. v. Zaccari,1 the United States District Court for the District of Columbia ruled a binding agreement that if, during the course of his employment, the employee incorporated an earlier invention into the employer’s product, the employer would obtain the rights to intellectual property on this prior invention. The court held that even if the employee recognized only the provision on the assignment of the invention in the employment contract, it was unreasonable for an employee not to tell his employer anything if he intended to not be bound by the contract.
Apprio Inc., a government contractor, sued former employee Neil Zaccari for breach of contract. Apprio claimed that Zaccari transferred his ownership rights to software he developed while working for the company to Apprio. From 2014 to 2017, Apprio worked for the Defense Contract Management Agency (DCMA), a federal agency established under the Ministry of Defense to simplify and oversee the work of its government contractors. DCMA engaged Apprio to develop the software and automated procedures, and to help DCMA create an integrated workload management system to enable the efficient receipt and evaluation of government contracts by DCMA.
While working for Apprio, Zaccari was awarded a contract entitled “Proprietary Information and Invention Assignment Agreement” (the Agreement). Zaccari agreed he acknowledged receiving the deal, but said he was not told that approval of the document was a condition of employment or that signing the contract would make it binding. Zaccari used Microsoft Excel macros to develop software that automated the manual process of receiving and reviewing DCMA contracts (the CRR software). Zaccari claimed that he produced the CRR software from the base code he created in 2008 and then updated the base code while working for Apprio.
After terminating his employment, Zaccari rejected Apprio’s requests to return the CRR software to him. Zaccari also refused to assign the intellectual property rights in the CRR software to Apprio and applied for its own copyright registration for the CRR software. Zaccari sued Apprio, claiming that Apprio violated the Agreement and infringed its copyright in the CRR software.2 Apprio sued Zaccari a few months later, and the court consolidated the cases.
Apprio has filed for summary judgment regarding the assignment by Zaccari of the intellectual property rights in the CRR software, including the assignment of the Zaccari copyright registration.
The court first explained:
To prevail over a claim for breach of contract under the law of the District of Columbia, a plaintiff must establish: (1) a valid contract between the parties, (2) an obligation or duty arising out of the contract, (3) a breach of this obligation or duty, and (4) the damages caused by such breach. . . . This motion deals with the first two of those elements and presents two questions. First, is the Agreement a binding contract between Apprio and Zaccari? Second, if the Agreement is a binding contract, does it dictate that Zaccari has assigned its rights to the CRR Software?3
The parties questioned whether the agreement was a binding contract and whether Zaccari had agreed to be bound or simply acknowledged having received the agreement from Apprio. Under DC law, “[f]or a binding contract exists, there must be both (1) agreement as to all material conditions; and (2) the intention of the parties to be related.4
The court ruled that Apprio was in the best position because it was clear that by acknowledging the deal, Zaccari was objectively demonstrating his acceptance of its terms. The court noted that “the agreement begins by identifying a crucial element of the formation of the contract – the consideration that Zaccari will receive in return for his acceptance of the terms presented.”5
In addition, Zaccari’s actions relating to the agreement also demonstrated its intention to accept the terms of the contract. The court reasoned:
Here, Zaccari accepted the benefits described in the Accord (“to be retained as[n] . . . employee of Apprio, Inc. ”) and continued to receive compensation. Zaccari never followed up with Apprio’s human resources office to ask about the deal or to object to any of its terms. Moreover, Zaccari was hardly “silent” when he introduced the Accord: he provided the only acknowledgment that Apprio expected. . . . It is unreasonable for an employee to say nothing to his employer if he intends not to be bound by the types of provisions included in the agreement – not just the assignment of rights, but the duties of loyalty, of loyalty. confidentiality and non-disclosure and non-solicitation provisions. Employers rarely consider such provisions to be optional. Despite his claim that he had no intention of being linked, there was no way that Apprio, or anyone else, could have known that this was his. subjective mental state.6
Therefore, since the tribunal found that Zaccari had demonstrated his intention to be governed by the Agreement by his recognition and conduct, it rejected his assertion that he did not intend to accept the Agreement. .
Having concluded that there was a binding contract between Apprio and Zaccari, the court considered the interpretation of the agreement.
Apprio claimed that Zaccari had lost its rights to the CRR software. Zaccari replied that he had not waived any rights even though he was bound by the Agreement.
Paragraph 2.3 of the Agreement stated:
2.3 Assignment of inventions. Subject to Article 2.4 and 2.6, I hereby yield and agree to yield in the future. . . to the Company all my rights, title and interest in and in all inventions (and all proprietary rights relating thereto) whether or not they are patentable or registrable under copyright or similar laws, made or designed or reduced to practice or learned by me, either alone or in conjunction with others, during the term of My Service.7
In addition, paragraph 2.4, “Unassigned Inventions”, states that an employee retains inventions “developed entirely on [the employee’s] free time without using [Apprio’s] equipment, supplies, facilities or trade secrets and none are related to [Apprio’s] actual or anticipated business, research or development, or resulting from the work performed by [the employee] for [Apprio]. “8
“Earlier inventions” are those which “[an employee] carried out before the start of employment with Apprio.9 Even if the employee does not disclose an earlier invention, “[i]f, during. . . Service, [the employee] to integrate[s] prior invention in a company product, process or machine ”, then Apprio receives“ a non-exclusive, irrevocable, perpetual, royalty-free worldwide license. . . to make, have made, modify, use and sell such a prior invention.ten
Zaccari claimed that although it was governed by the Agreement, it had not assigned any intellectual property rights in the CRR Software to Apprio because the CRR Software consisted of two components: a base code and a code update. basic. Additionally, Zaccari argued that he developed the base code in 2008, and that it should be governed by section 2.2 as a pre-use developed invention.
The court rejected both arguments because of the clear language of the agreement. The court explained that the agreement stipulated that “[i]f, during [his employment], [he] to integrate[s] an earlier invention in a company product, process or machine ”, Apprio then receives the intellectual property rights to that earlier invention.11
The court therefore ruled that Zaccari had assigned its invention rights to the CRR software to Apprio. According to the court:
There is no real dispute that CRR software is not considered an “unassigned invention” under paragraph 2.4. Unassigned inventions must be (1) “developed entirely on [an employee’s] his own time without using the Company’s equipment, supplies, facilities or trade secrets ”; (2) not “related to the actual or anticipated activities, research or development of the Company”; and (3) not “result[ ] of the work done by [the employee] for the company. “Agreement ¶ 2.4…. [T]The CRR software was, in fact, “related to [Apprio’s] actual or planned business ”, and so  it was not an unattributed invention that Zaccari developed separately from his work for Apprio.12
The court further determined:
Even accepting all the evidence and drawing all the inferences in Zaccari’s favor. . . the unambiguous language of the agreement still dictates that Zaccari has ceded its ownership rights in the CRR software to Apprio. Zaccari did not identify any material fact in dispute that would call this conclusion into question. Therefore, Apprio is entitled to a summary judgment on the issue of the contractual assignment of rights.13
The court therefore concluded that Apprio and Zaccari were subject to a valid agreement and that Zaccari had transferred its invention rights over the CRR software to Apprio in accordance with the agreement.
Take away food
The provisions relating to the assignment of an invention in an employment contract must be carefully adapted to the needs of the employer. Here, the employer required the employee to assign any invention, whether or not it was created for the employer, if the employee incorporated the invention into the employer’s product. The employee should have been more careful before upgrading his previous software and integrating it into his employer’s software.
The employment contract at issue in this case strongly favors the employer and could be an obstacle for some potential employees, as the employee loses an earlier invention. Employers should also consider less extreme measures, such as requiring a non-exclusive license as an alternative. Employees should be cautious and advise employers before incorporating their earlier inventions, or the inventions of others for that matter.
1 Apprio, Inc. v. Zaccari, n ° 18-cv-2180, 2021 WL 2209404, 2021 BL 202190 (DDC June 1, 2021).
2 Zaccari v. Apprio, Inc., no.18-cv-1560 (DDC June 29, 2018).
3 Apprio, brief op. at 8.
4 Id., Op. at 8 (citing United House of Prayer for All People v. Therrien Waddell, Inc., 112 A.3d 330, 337–38 (DC 2015)) (citing Georgetown Ent. Corp. v. Dist. of Columbia, 496 A. 2d 587, 590 (DC 1985)).
5 Id., Op. At 11 o’clock.
6 Id., Op. at 14-15.
7 Id., Op. at 17 (citing Accord ¶ 2.3).
8 Id., Op. at 17 (citing Accord ¶ 2.4).
9 Id., Op. at 17 (citing Accord ¶ 2.2).
10 Id., Op. at age 18 (citing Agreement ¶ 2.2).
11 Id., Op. at 19 (citing Accord ¶ 2.2).
12 Id., Op. at 20-21.
13 Id., Op. at 24 years old.