In Apprio, Inc. v. Zaccari,1 the U.S. District Court for the District of Columbia held an agreement enforceable where if, in the course of employment, the employee incorporated a prior invention into the employer's product, the employer would obtain the intellectual property rights in that prior invention. The court reasoned that even though the employee only acknowledged the invention assignment provision in the employment agreement, it was unreasonable for an employee to say nothing to his employer if he intended not to be bound by the agreement.
Apprio Inc., a government contractor, sued former employee Neil Zaccari for breach of contract. Apprio asserted that Zaccari transferred his ownership rights in a software program 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 Department of Defense to simplify and supervise the work of its government contractors. DCMA employed Apprio to develop the software and automated procedures, and to help DCMA create an integrated workload management system to enable effectual receipt and assessment of government contracts by DCMA.
While working for Apprio, Zaccari was provided with a contract titled "Proprietary Information and Assignment of Inventions Agreement" (the Agreement). Zaccari agreed that he acknowledged receiving the Agreement but says he was not informed that approving 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 DCMA's manual contract receipt and review procedure (the CRR Software). Zaccari contended that he produced the CRR Software out of base code that he created in 2008 and then updated the base code while working for Apprio.
After terminating employment, Zaccari rejected Apprio's demands that he return the CRR Software. Zaccari also declined to assign intellectual property rights in the CRR Software to Apprio and applied for his own copyright registration for the CRR Software. Zaccari sued Apprio, contending Apprio violated the Agreement and infringed his copyright in the CRR Software.2 Apprio sued Zaccari a few months later, and the court consolidated the cases.
Apprio filed for summary judgment concerning Zaccari's assignment of intellectual property rights in the CRR Software, including assignment of Zaccari's copyright registration.
The court initially explained:
The parties disputed whether the Agreement was an enforceable contract, and whether Zaccari agreed to be bound or just acknowledged that he received the Agreement from Apprio. Under D.C. law, "[f]or an enforceable contract to exist, there must be both (1) agreement as to all material terms; and (2) intention of the parties to be bound."4
The court believed Apprio had the better position because it was clear that in acknowledging the Agreement Zaccari objectively demonstrated his acceptance of its terms. The court noted that the "Agreement begins by identifying a crucial element of contract formation-the consideration Zaccari will receive in exchange for agreeing to the terms presented."5
In addition, Zaccari's actions relating to the Agreement also exhibited his intent to accept the terms of the contract. The court reasoned:
Accordingly, since the court held that Zaccari demonstrated his intent to be governed by the Agreement by his acknowledgment and conduct, it rejected his assertion that he did not intend to accept the Agreement.
Having held there was a binding contract between Apprio and Zaccari, the court addressed the interpretation of the Agreement.
Apprio asserted that Zaccari forfeited his rights in the CRR Software. Zaccari responded that he did not give up any rights even if he was bound by the Agreement.
Paragraph 2.3 of the Agreement stated:
In addition, Paragraph 2.4, "Unassigned Inventions," states that an employee retains inventions "developed entirely on [the employee's] own time without using [Apprio's] equipment, supplies, facilities, or trade secrets and neither related to [Apprio's] actual or anticipated business, research or development, nor resulted from work performed by [the employee] for [Apprio]."8
"Prior Inventions" are those that "[an employee] made prior to the commencement of" employment with Apprio.9 Even if the employee doesn't disclose a prior invention, "[i]f, in the course of . . . Service, [the employee] incorporate[s] a Prior Invention into a Company product, process or machine," then Apprio receives "a nonexclusive royalty-free, irrevocable, perpetual, worldwide license . . . to make, have made, modify, use and sell such Prior Invention."10
Zaccari asserted that even if he was governed by the Agreement, he did not assign any intellectual property rights in the CRR Software to Apprio because the CRR Software comprised two components: a base code and an update to the base code. In addition, Zaccari argued that he developed the base code in 2008, and it should be governed by Paragraph 2.2 as an invention developed prior to employment.
The court rejected both arguments in view of the clear language in the Agreement. The court explained that the Agreement stated that "[i]f, in the course of [his employment], [he] incorporate[s] a Prior Invention into a Company product, process or machine," then Apprio receives intellectual property rights in that Prior Invention.11
The court therefore held that Zaccari assigned his invention rights in the CRR Software to Apprio. According to the court:
The court further determined:
The court therefore held that Apprio and Zaccari were subject to a valid agreement, and that Zaccari transferred his invention rights in the CRR Software to Apprio according to the Agreement.
Invention assignment provisions in an employment agreement should be carefully tailored to an employer's needs. Here, the employer required that the employee assign any inventions-whether or not created for the employer-if the employee incorporated the invention into the employer's product. The employee should have been more careful before improving his prior software and incorporating it into his employer's software.
The employment agreement at issue in this case strongly favors the employer and might be an impediment for some potential employees because the employee forfeits a prior invention. Employers should also consider less extreme measures, such as requiring a nonexclusive license as an alternative. Employees should be cautious and notify employers prior to incorporating their prior inventions, or inventions of others for that matter.
1 Apprio, Inc. v. Zaccari, No. 18-cv-2180, 2021 WL 2209404, 2021 BL 202190 (D.D.C. June 1, 2021).
2 Zaccari v. Apprio, Inc., No. 18-cv-1560 (D.D.C. June 29, 2018).
3 Apprio, slip op. at 8.
4 Id., slip op. at 8 (citing United House of Prayer for All People v. Therrien Waddell, Inc., 112 A.3d 330, 337-38 (D.C. 2015)) (quoting Georgetown Ent. Corp. v. Dist. of Columbia, 496 A.2d 587, 590 (D.C. 1985)).
5 Id., slip op. at 11.
6 Id., slip op. at 14-15.
7 Id., slip op. at 17 (quoting Agreement ¶ 2.3).
8 Id., slip op. at 17 (quoting Agreement ¶ 2.4).
9 Id., slip op. at 17 (quoting Agreement ¶ 2.2).
10 Id., slip op. at 18 (quoting Agreement ¶ 2.2).
11 Id., slip op. at 19 (quoting Agreement ¶ 2.2).
12 Id., slip op. at 20-21.
13 Id., slip op. at 24.
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