Articles & Updates

Avoiding Unjust Enrichment Claims Using Two Simple Words

Mar 22, 2016 | Articles & Updates

Article by Kenneth Schott, III

Ford Motor Company has proven once again that well-worded employment contracts can prevent unfavorable results in court and protect valuable intellectual property rights. In a recent decision by the United States Court of Appeals for the Federal Circuit, the auto manufacturer’s use of two simple words in an employment contract helped it to avoid being held liable to a former employee and inventor for his role in developing Ford’s famous SYNC technology.

SYNC technology is an integrated in-vehicle communications and entertainment system that allows drivers of Ford automobiles to make hands-free telephone calls, control music, connect their cell phone to 911 Assist in the event of an accident, and perform other functions with voice commands. In 2007, Ford contracted with Joseph Berry through his then company, JBJ Advisors, to build certain aspects of the SYNC system. Subsequently in 2008, Berry became a full-time employee of Ford to continue his work developing SYNC technology. Significantly, both contracts that JBJ Advisors and Berry entered into prospectively assigned to Ford all intellectual property rights to the SYNC technology that were yet to be developed. However, the assignment provisions in each contract contained the language that every invention “made, conceived or developed” and/or “made, conceived or reduced to practice” belonged to Ford.

Berry alleges that Ford was unjustly enriched by work Berry completed pre-contract during the fall of 2006 when he “conceived” the idea for SYNC technology and communicated this idea to Ford over the course of several meetings without compensation. In response, Ford argued that the contracts entered into between Berry and Ford encompassed all work done by Berry related to SYNC technology despite the fact that the assignment provisions were prospective in nature. In support of its argument, Ford relied heavily upon Preston v. Marathon Oil Co.¹ for the proposition that if any invention was not both “made and conceived” prior to employment, then the invention was covered by the contract. Last February, the Federal Circuit agreed with Ford.

Since the express language “made and conceived” was incorporated into both contracts, the court found the fact that Berry conceived the idea for SYNC technology pre-contract to be irrelevant. “Conception alone, without reduction to practice, is insufficient to remove the inventions from the scope of the agreements.” In the absence of any “physical manifestations” (e.g., designs, prototypes, etc.) of the SYNC technology prior to entering into the contracts with Ford, all of Berry’s intellectual property became subject to Ford’s contractual rights and, therefore, became Ford property. Thanks to two simple words, Ford successfully protected its contractual rights and patent rights in one of Ford’s most marketable automobile features, SYNC technology.

The Ford case presents a good example of how employers who engage outside consultants and/or employ full time research and development specialists can protect themselves from lawsuits over intellectual property rights from conduct that occurs before entering into a contractual relationship. Employers whose businesses are highly driven by research and development should take note and incorporate such language into their standard employment contracts. However, the key lesson learned in this case is much broader in context and application. Artful drafting of contracts is a proactive way for employers to gain an upper hand in litigation; but, perhaps more importantly, well-written contracts preserve an organization’s most valuable commodity, its industry.