Groves v Canasonics Inc, 2015 ABQB 314
Many employment contracts include agreements that any inventions produced by the employee throughout the term of the employment are assigned to the employer. This case is an example of one such employee seeking to avoid, but failing to avoid, such an agreement. For high-tech companies and their employees, this case provides a unique opportunity to witness properly drafted contracts, and several arguments seeking to get around them, in action.
Background
William Groves (“Groves”) started as a founding director and “tool expert” at the oil well stimulation company Canasonics Inc. (“Canasonics”). As a founding director, Groves brought to the company the tool that made its well stimulation work possible: the Clean Well Tool – a well stimulating tool that was invented by his father in the 1990s. [3] At Canasonics, Groves made several improvements to the Clean Well Tool. He made two new versions of the tool, dubbed the Sonic Stimulation Tool (SST) and the Acoustic Pulse Tool (APT), for which no patents seem to have been obtained. [46] Groves also developed several inventions that he patented and duly assigned (in accordance with his employment contract) to Canasonics. [49] After a falling out between Groves and the other directors at Canasonics, [8] Groves sought to ensure that any intellectual property in the unpatented SST and APT remained his own, and also sought to reverse the transfer of the patents that he already assigned to the company.
The Unpatented SST and APT Inventions are Owned by Canasonics
The intellectual property transfer agreement in Groves’ employment contract is as follows:
- Full confidentiality of Company information is required. The Company shall own any and all Copyright and Intellectual Property created in the course of Employment. Further, in the event there is a period when the Employee might be considered an independent contractor, all Copyright created and any Intellectual Property created shall be owned by the Company. [6, emphasis added]
Groves argued, however, that the SST and APT were not in fact new or inventive and thus did not fall under the technology transfer agreement. Groves argued that the SST was simply the Clean Well Tool but rebranded, and that the APT was simply a larger version of the SST. [28]
The Court, on the other hand, was highly critical of Groves’ testimony about the SST and APT being no different from the Clean Well Tool. The judge described Groves as “one of the most unreliable and deceitful witnesses to have ever taken an oath to tell the truth before me”, [13] having repeatedly spoken falsehoods, contradicted his own affidavit, and overall lacked credibility. [14-22]
The Court was more convinced by other evidence such as a Scientific Research and Experimental Development (S.R.E.D.) Tax Credit Application describing the development of the APT tool as having superior pulse propagation and using different tubing than the Clean Well Tool. [35] Groves’ father, the creator of the Clean Well Tool, could not recognize the APT, further suggesting the APT must have been more than just a larger version of the Clean Well Tool. [29] Canasonics’ website describes both the SST and APT as patent pending, [44] further suggesting differences over the Clean Well Tool (although it was not clear if this patent was ever obtained [45]). For all these reasons, the Court found that the SST and APT tools were invented by Groves, whether they are patentable or not, while he was employed at Canasonics. [47] Any intellectual property in the tools is therefore owned by Canasonics. [48]
The Patents Assigned to Canasonics Remain Owned by Canasonics
Regarding the several patents already assigned to Canasonics, Groves argued that these assignments were ineffective because the following provision in each of the agreements was breached: [50]
In consideration of One Dollar and other good and valuable consideration, of which I acknowledge receipt, …[49, emphasis added]
Groves argued that “and other good and valuable consideration” refers to his salary, which he argues he was never fully paid. [50] As a result, he argued, each of the assignments was invalid.
This argument failed for two independent reasons.
First, note that the provision states that the signor acknowledges receipt of the “other good and valuable consideration”. [52] Although the agreement does not define what constitutes “other good and valuable consideration”, the consideration could not have been Groves’ unpaid salary because Groves acknowledged receipt of the consideration. [52-53] Since Groves’ acknowledged receipt of the consideration, the consideration could not have been his unpaid salary. Since the consideration could not have included his unpaid salary, there was no breach on these grounds.
Second, there is a technical legal problem with Groves asking that all the patent assignments be reversed simply because his salary was not paid in full. Groves was essentially asking for the remedy of rescission – unwinding the contract as if it had never been performed – but he could only have asked for rescission if he did not accept any of his salary at all. [55] Since he accepted at least part of his salary, the only remedy he could ask for would be damages. [57] Groves did not ask for damages, so the Court did not need to consider whether he was entitled to any. [58]
In sum, aside from the original Clean Well Tool handed down from the plaintiff’s father, all of the unpatented tools and all of the assigned patents are in the ownership of Canasonics Inc. [59]
Commentary
High-tech companies can use this case as a reference for properly drafted employment agreements and patent assignment agreements, and reflect on how their own agreements would fare in similar circumstances. This case also especially serves as guidance regarding rescission of patent assignment agreements. Here, an argument that a patent assignment from employee to employer was invalid because of unpaid salary failed because the consideration for the patent assignment was acknowledged as having been received.