UUIICC JJoohhnn MMaarrsshhaallll JJoouurrnnaall ooff IInnffoorrmmaattiioonn TTeecchhnnoollooggyy && PPrriivvaaccyy LLaaww Volume 21 Issue 3 Journal of Computer & Information Law Article 1 - Spring 2003 Spring 2003 AAllccaatteell UUSSAA,, IInncc.. vv.. BBrroowwnn:: DDooeess YYoouurr BBoossss OOwwnn YYoouurr BBrraaiinn??,, 2211 JJ.. MMaarrsshhaallll JJ.. CCoommppuutteerr && IInnffoo.. LL.. 229955 ((22000033)) Jim C. Lai Follow this and additional works at: https://repository.law.uic.edu/jitpl Part of the Computer Law Commons, Intellectual Property Law Commons, Internet Law Commons, Privacy Law Commons, and the Science and Technology Law Commons RReeccoommmmeennddeedd CCiittaattiioonn Jim C. Lai, Alcatel USA, Inc. v. Brown: Does Your Boss Own Your Brain?, 21 J. Marshall J. Computer & Info. L. 295 (2003) https://repository.law.uic.edu/jitpl/vol21/iss3/1 This Article is brought to you for free and open access by UIC Law Open Access Repository. It has been accepted for inclusion in UIC John Marshall Journal of Information Technology & Privacy Law by an authorized administrator of UIC Law Open Access Repository. For more information, please contact [email protected]. ARTICLES ALCATEL USA, INC. V. BROWN: DOES YOUR BOSS OWN YOUR BRAIN? JIM C. LAIt I. INTRODUCTION Who owns your thoughts? According to the 219th Judicial District Court of the State of Texas, your employer might.' On July 26, 2002, in Alcatel USA, Inc. v. Brown,2 the court ruled that a company owned rights to a software idea that existed entirely in the thoughts of its for- mer employee, Evan Brown.3 The court held that Alcatel was entitled to summary judgment on its claims alleging that Brown breached an inven- tion disclosure contract4 that contained no exceptions5 and issued a de- claratory judgment holding the contract enforceable. Furthermore, the court granted Alcatel "full legal right, title, and interest" to Brown's "So- lution,"6 a process for "converting machine-executable binary code into high-level source code."7 In granting summary judgment to Alcatel, the court decided that the contract was enforceable, that Brown had breached the agreement, and t James C. Lai is a LL.M. candidate in the John Marshall Law School's Information Technology and Privacy Law program. James attended law school at the University of South Carolina and is an attorney-editor for Lexis-Nexis. E-mail: james.lai@lexisnexis. com. 1. Alcatel USA, Inc. v. Brown, No. 199-00596-97 (Tex. Dist. Ct. 219th Dist. July 26, 2002). 2. Id. 3. Erica Lehrer Goldman, Idea in Former Employee's Head Belongs to Alcatel 1 1 <http://www.law.com> (last updated Aug. 12, 2002). 4. An invention disclosure agreement is a contract that many companies require their employees to sign. By signing such a contract, an employee essentially assigns to the com- pany the ownership rights of any invention that he or she develops while working for the employer. They may also require employees to disclose to the company any inventions they may develop. 5. Goldman, supra n. 3, at 2. 6. Id. at 7. 7. Id. 296 JOURNAL OF COMPUTER & INFORMATION LAW [Vol. XXI that Alcatel owned the Solution. Brown has appealed the case, but the court's decision, if upheld on appeal, will have serious consequences for the technology industry. By signing their employees to ironclad inven- tion disclosure agreements, employers will be able to follow Alcatel's ex- ample and claim rights to "inventions" created by their employees through breach of contract litigation.8 By recognizing Alcatel's claim of ownership to Brown's Solution, the court created a way for employers with clever counsel to circumvent the protections that courts have applied to covenants not to compete,9 which hold unenforceable any agreements that unreasonably burden employ- ees who sign them.10 By recognizing Alcatel's claims of ownership to Brown's Solution, the court has allowed companies to sue former employ- ees who bring their skills to new jobs and claim that whatever intellec- tual property the employees are currently developing at their new jobs should have been disclosed under an invention disclosure agreement prior to the employee's departure from the company by alleging that the employees breached invention disclosure agreements signed while they were still on the job. A company's ability to exploit intellectual property rights, either through exclusive control over an innovation or through profits from li- censing agreements, is critical to the economy of the twenty-first cen- tury. The owners of intellectual property can control the ability of others to make use of their property. Companies develop intellectual property by hiring people to develop it for them.11 Companies rely on invention disclosure agreements like the one Brown signed to acquire valuable in- tellectual property rights that would otherwise belong to the individuals who invented them.12 These agreements are important to any technol- ogy-oriented company because they provide the means for companies to benefit from the work they pay their employees to do.13 However, in this case, the company, and the court, went too far. By recognizing an em- ployer's ownership of intellectual property that does not exist as defined by the law of copyright, patent, trademark, and trade secret,14 the 8. Alcatel USA, Inc. v. Brown, No. 199-00596-97 (Tex. Dist. Ct. 219th Dist. July 26, 2002). 9. Restatement (Second) of Contracts § 188 (1981). Courts restrictively interpret cove- nants not to compete that are overly burdensome to the employee signing them by allowing only "reasonable" restrictions on the former employee's right to compete. 10. Id. 11. Goldman, supra n. 3, at § Seeking Bright Lines. 12. Id. 13. Id. at 12. 14. Intellectual property is divided up into patent, copyright, trademark, and trade secret protection. In order to qualify for one of the four forms of intellectual property pro- tection, the property in question must meet certain requirements. The Copyright Act re- quires the fixation of an original work of authorship in a tangible medium. General 20031 DOES YOUR BOSS OWN YOUR BRAIN? court's decision provides companies with a way to restrain the intellec- tual property market with all-encompassing invention disclosure agree- ments. This Casenote looks at the ramifications of the court's decision in the context of the technology Alcatel has wrested from Evan Brown's pos- session, an idea for a computer program that, if it works, can easily con- vert software written for obsolete systems to forms usable by modern computers. This Casenote consists of five sections. Part I provides factual back- ground consisting of: (1) an overview of Evan Brown's employment his- tory, the work he did during his employment with DSC, and the problems that led him to begin developing his Solution in the first place, (2) a brief discussion of Brown's technology, and (3) the history of the litigation surrounding Brown and the technology he developed. Begin- ning with Brown's first attempt to negotiate a release with DSC in order to avoid a lawsuit, DSC's termination of negotiations and filing of a law- suit, the injunctions granted in favor of DSC against Brown, and the fi- nal disposition of the case on DSC's motion for summary judgment. Part II discusses the core issues decided in the case: whether inven- tion disclosure agreements are enforceable, whether they cover ideas that, like Brown's Solution, have not been reduced to any tangible form, and whether an employer can claim ownership in such an idea. It looks at each issue in the context of intellectual property in today's high-tech economy and how the resolution of each issue will impact the future. Part III traces the history of the litigation. By reference to the argu- ments made and the orders issued, this section details the court's deci- sion on each issue and its reasoning behind each of its decisions. Part V evaluates the court's holdings and explores the inadequacy of the court's decision. It explores in greater detail the ramifications of the court's de- cision and its potential impact on the high-tech industry well beyond the boundaries of a single state. It also discusses the policy implications be- hind the enforcement of invention disclosure agreements as the trial Information About Copyrights, How Do I Copyright My Software % 2 <http:// www.patents.com/copyrigh.htm> (last updated Sep. 20, 1998). The Lanham Act provides trademark protection to names and phrases that identify the owner's product. General Information about Trademarks <http://www.patents.comltrademar.htm> (last updated June 30, 1995). Patent protection is extended to inventions that have been disclosed to the U.S. Patent & Trademark Office and which meet the requirements of nonobviousness, nov- elty, and usefulness. General Information About Patents <httpJ/www.patents.compat- ents.htm> (accessed April 3, 2003). Trade secret protection is extended to information that provides economic advantage to its owner because it is not known to the public. Uniform Trade Secrets Act § 1(4) (1985). The one element common to all forms of intellectual prop- erty protection is that they all require something tangible. Copyright law does not protect ideas. Patent law requires enabling descriptions of the invention or description. Trade- mark law requires use in commerce or intent to do so soon. Trade secret law requires the existence of a secret. 298 JOURNAL OF COMPUTER & INFORMATION LAW [Vol. =X court did and the need to apply principles similar to those governing cov- enants not to compete15 to the enforcement of such agreements. The Conclusion summarizes the impact of the trial court's decision and the negative effects it can have on the high-tech economy. Finally, it states succinctly why the case was wrongly decided and what the court should have done differently. II. BACKGROUND A. EvAN BROwN's EMPLOYMENT HISTORY Brown first began translating computer programs from one hard- ware platform to another when he was an undergraduate student at Texas A&M, between 1970 and 1978.16 His work required him to trans- late programs written in one computer language into another computer language so that they could run on different computer systems. Brown wrote conversion utilities to help him handle common problems, but fin- ished the jobs by hand.17 In 1976, Brown conceived the idea for a computer program that would automatically convert programs written in obsolete computer lan- guages into modern computer languages that newer computers could read and execute.'8 From then until DSC hired him in 1987, Brown worked for several employers and wrote a number of computer programs designed to convert programs written for one type of computer into a form that other computers could run.19 DSC hired Brown in 1987.20 While working for DSC,21 Brown per- fected his idea for a program that would convert "executable binary code into high-level source code."22 This process, if successful, would allow computers to automatically reverse-engineer existing programs and pro- 15. Id. 16. Id. 17. AfT. Evan Brown 3 (Dec. 1, 1998). 18. Id. at 4. 19. Id at T 4-9. 20. Id. at 1 9. 21. By affidavit, Brown stated that DSC hired him 'as an assembly-language program- mer to develop and maintain software" for the company's computer systems. AfT Brown 9 (Dec. 1, 1998). At oral argument over the company's motion for summary judgment, counsel for the company presented evidence that during Brown's employment, DSC had investigated conversion technology on two occasions. S.J. Hrg. Tr. 27:7-20 (Dec. 21, 2001). On the other hand, Brown stated in his affidavit that "[alt no time during [his] employment with DSC was [he] assigned the job or task of developing a computer program to convert machine executable code to high-level source [code]." Aff. Brown 91 10 (Dec. 1, 1998). Brown also stated that prior to his employment with DSC, he had spent years doing plat- form translations before working for DSC and that he wrote utilities to partially automate the process. Id. 22. Goldman, supra n. 3, at 7. 20031 DOES YOUR BOSS OWN YOUR BRAIN? duce source code that can easily be adapted for use on new computer systems.23 Shortly after it hired him, DSC required Brown to sign an invention disclosure agreement24 in which he promised to communicate to the company any inventions that he developed during the course of his employment with DSC.25 B. THE SOLUTION The innovation at issue was Brown's idea for a program that would automatically reverse engineer computer software and translate it into source code. The term "reverse engineering" describes a process by which a subject is analyzed in order to: (1) identify its components and the relationships among them, and (2) create a representation of the sub- ject at a higher level of abstraction.26 Computer programs are most often written in a "high-level" programming language, which human pro- grammers can easily understand and work with. In order to make them work, the resulting "source code"27 is converted into "machine code,"28 which provides instructions that computers can execute, but which few humans can understand or work with effectively. The programs that conduct such conversions are called compilers.29 Brown's Solution was a method for creating a decompiler. A decom- piler is, in theory, a computer program that would read machine-code 23. Id. 24. Employee Pat. Agreement of Evan Brown (Apr. 27, 1987). 25. The agreement Brown signed states that: In consideration of.. .continued employment... with DSC Communications Corpo- ration, and of the salary or wages paid for... such employment, [Brown would]: (A) communicate to an officer of the company promptly and fully all inventions (in- cluding but not limited to all matters subject to patent) [that he] made or con- ceived.., from the time of entering the Company's employ until [his departure] (1) which are along the lines of the business, work or investigations of the Com- pany.. .or (2) which result from or are suggested by any work which [Brown might do] for or on behalf of the Company. Id. Brown stated that the scope of his employment did not include the development of reverse-engineering utilities because (1) DSC was not in the business of producing such products, and (2) Brown did not develop such programs as part of his job. DSC, however, claimed that it had conducted several experiments in decompilation. S.J. Hrg. Tr. 26:21- 27:20. 26. Arie Van Deursen, Reverse Engineering 911 <http://www.program-transformation. org/twikilbinlview/Transform/ReverseEngineering> (accessed Apr. 03, 2003). 27. Eelco Visser, Program Compilation 911 <http:/Iwww.program-transformation.org/ twikilbinlview/Transform/ProgramCompilation> (last updated Dec. 02, 2001). 28. Id. 29. Id. The compilation process is usually composed of several steps during which the source code is first translated into an intermediate "language" that is more difficult for humans to understand than source code but easier for computers to interpret. Id. A code program called a code generator translates this intermediate code into machine-readable object code. Eelco Visser, Code Generation 1 1 <http://www.program-transformation.org/ twiki/binlview/Transform/CodeGeneration> (last updated Sep. 29, 2002). 300 JOURNAL OF COMPUTER & INFORMATION LAW [Vol. MX and convert it into source code.30 Decompilation techniques have been in use since the 1960s allowing programs written for one computer system to be recompiled into machine code written for other systems.31 Com- mon wisdom in the industry dictates that fully automated decompilation is impossible. Most successful decompilers rely on external information, such as the type of compiler originally used to generate the machine code, or require human input at various stages of the process.32 C. THE CASE The Solution, if workable, could revolutionize the process of program transformation and allow users to upgrade their computer systems with- out having to worry about software compatibility.33 Brown and DSC both realized the value of such a program.34 In 1996, Brown asked DSC to release him from his invention disclosure agreement in order to pur- sue development of his idea free from any threat of interference from the company.35 Although the parties negotiated for a year, DSC ultimately fired Brown and brought a breach of contract action against him. The company claimed that Brown violated the agreement when he failed to disclose the idea and sought a declaratory judgment giving it ownership rights in the idea.36 During the course of litigation, DSC sought and ob- tained an injunction that prevented Brown from: (1) disclosing or selling the Solution to anyone other than DSC, (2) further developing the Solu- tion except according to the terms of a mandatory injunction, and (3) de- stroying any material or records relating to the Solution.37 The court also issued a mandatory injunction that required Brown to preserve the Solution and to disclose it to DSC in a manner outlined in its order.38 Despite the fact that the "invention" in which DSC claimed ownership rights existed solely within Brown's thoughts, the court ultimately forced Brown to disclose the Solution to DSC and awarded the company's suc- 30. Arie Van Deursen, Decompilation <http://www.program-transformation.org/twiki/ bin/view/Transform/DeCompilation> (last updated Feb. 27, 2002). 31. Id. 32. Mike Van Emmerik, Is DecompilationP ossible?< http://www.program-transforma- tion.org/twiki/bin/view/Transform/DeCompilationPossible> (last updated Apr. 29, 2002). Fully automated decompilation is commonly considered impossible because of the nature of the compilation process. Id. No two compilers act exactly the same way, so designing a single tool that can successfully reverse engineer the object code generated by any compiler is, in theory, impossible. Id. 33. Goldman, supra n. 3. 34. Id. 35. Id. at 1 10. 36. Id. at 8. 37. Alcatel USA, Inc. u. Brown, No. 199-000596-97, (Tex. Dist. Ct. 219th Dist. Temp. Inj. Order June 30, 1997). 38. Id. 2003] DOES YOUR BOSS OWN YOUR BRAIN? cessor, Alcatel USA, full ownership.39 Finally, on July 26, 2002, the court granted Alcatel's motion for summary judgment in a short opinion that stated, without analysis or discussion, that Alcatel was entitled to the relief it sought.40 III. ISSUES PRESENTED The issues presented to the court for discussion were: (1) whether the invention disclosure agreement was valid and enforceable, (2) whether Brown had breached the agreement, (3) whether Brown or Al- catel owned the rights to the Solution, and (4) whether Alcatel was enti- tled to injunctive relief prohibiting Brown from disclosing the Solution to third parties and requiring Brown to completely disclose the Solution to Alcatel. In the court's order granting Alcatel's motion for summary judg- ment, it held that: (1) Brown had breached the invention disclosure agreement with DSC,41 (2) the invention disclosure agreement between Brown and DSC was valid and enforceable,42 (3) pursuant to the agree- ment, Alcatel, through its acquisition of DSC, owned all rights to the processes and/or methods Brown had developed for (a) converting ma- chine executable binary code into high level source code, (b) reverse-engi- neering existing computer programs into high-level program code, and (c) converting machine-executable programs written for DSC's computer systems into source code,43 (4) Brown was obligated to fully disclose the Solution to Alcatel,44 (5) Brown could not disclose, sell, assign, or trans- fer the Solution to anyone other than Alcatel, nor could he negotiate any such transaction with anyone other than Alcatel,45 and (6) Brown could not further develop or market the Solution to anyone other than 46 Alcatel. IV. THE COURT'S ANALYSIS By granting summary judgment, the court found that no genuine issues of material fact existed and that Alcatel was entitled to judgment as a matter of law.47 The court effectively accepted Alcatel's analysis of 39. Id. 40. Alcatel USA, Inc. v. Brown, No. 199-0056-97 (Tex. Dist. Ct. 219th Dist. Jul. 26, 2002). 41. Id. 42. Id. 43. Id. 44. Id. 45. Id. 46. Id. 47. Tex. R. Civ. P. 166(a)(c). 302 JOURNAL OF COMPUTER & INFORMATION LAW [Vol. =X the facts and rejected Brown's.48 First, the court found that the inven- tion disclosure agreement was valid and enforceable.49 Although Brown asserted, in a hearing on DSC's motion for a temporary injunction, that the agreement was unenforceable as unsupported by consideration,50 the court rejected the argument. The court accepted DSC's assertion that the cases Brown had cited were distinguishable.51 Second, the court found that the Solution fell within the scope of the invention disclosure agreement. DSC presented evidence that Brown had become aware of DSC's software conversion efforts through internal memoranda written both to Brown's group and directly to Brown him- self,52 and had done conversion work for DSC.53 The court also found 48. Alcatel USA, Inc. v. Brown, No. 199-0056-97 (Tex. Dist. Ct. 219th Dist. Jul. 26, 2002). During a hearing on DSC's summary judgment motion, counsel for the company claimed that this was a simple breach of contract case. S.J. Hrg. Tr. 24:20-22. The com- pany argued that Brown signed an invention disclosure agreement one week after he started work for the company. Id. at 25:6-25. The agreement obliged Brown to communi- cate his inventions to the company. Id. The company further alleged that Brown's work on various software tools related to program conversion showed that the Solution was related to its business and to Brown's employment. Finally, the company claimed that by request- ing a release to pursue a patent, Brown acknowledged that the Solution was an invention covered by the agreement. S.J. Hrg. Tr. 25:6-32:1. Brown argued that the agreement was unenforceable for lack of consideration, that the Solution did not fall within the scope of the agreement because it was not related to DSC's business of telecommunications, and that the Solution was not an invention. Id. at 37:6-46:24. 49. Alcatel USA, Inc. v. Brown, No. 199-0056-97 (Tex. Dist. Ct. 219th Dist. Jul. 26, 2002). 50. Temp. Inj. Hrg. Tr. 56:7-9 (Jun. 30, 1997). Brown asserted that continued employ- ment was an illusory promise that was insufficient consideration to support the enforce- ability of the invention disclosure agreement. Id. 51. Temp. Inj. Hrg. Tr. 60:19-61:20. Brown cited Light v. Centel Cellular Co., 883 S.W.2d 642, 644 (Tex. 1994), which held, in a former employee's challenge to the enforce- ability of a covenant not to compete, that consideration for a promise, by either the em- ployee or the employer in an at-will employment, cannot be dependent on a period of continued employment. Counsel for DSC stated that the Light rule dealt with covenants not to compete, and was inapplicable to the case. Counsel further stated that Brown's con- tinued employment and the resulting benefits of employment constituted sufficient consid- eration to support the invention disclosure agreement. Temp. Inj. Hrg. Tr. 60:19-61:20. 52. S.J. Hrg. Tr. 29:14-30:11. Counsel for DSC described two 1993 memoranda that had been sent to Brown's group at DSC and to Brown himself. Id. One dealt with the conversion of DSC's existing code into another format. Id. The other described a conver- sion utility for a different set of software tools. Id. 53. In Brown's self-review in 1989, he stated that he converted several source modules from assembly language into high-level source code. Id. at 31:2. In 1992, a similar review listed the development of tools for the conversion of assembly language to source code as a career goal. Id. at 30:18-31:15. On the other hand, Brown presented evidence that DSC was focused on providing telecommunications services and that its business did not include any other fields. Id. at 37:11-19. Brown also attacked the relevance of DSC's prior software conversion attempts. Brown claimed that those projects involved the conversion 2003] DOES YOUR BOSS OWN YOUR BRAIN? that the Solution qualified as an invention. In its final order, the court found that the Solution was a process and/or method developed by Evan Brown for (1) converting machine executable binary code into a high-level source code using logic and data abstractions, (2) taking existing computer programs and re- verse-engineering the intelligence from those programs and re-coding the intelligence into portable high-level language, and (3) converting ex- ecutable Z8000 machine code into C language source.54 Counsel for DSC argued that Brown had breached a provision of the agreement that required him to disclose to the company any inventions he had developed along the lines of the business of the company and to disclose any inventions resulting from his work for DSC.55 Third, the court found that Brown had breached the agreement by failing to disclose the Solution to DSC.56 In support of its motion for summary judgment, DSC claimed that Brown had two duties under the invention disclosure agreement: (1) to disclose inventions along the lines of the business, work, or investigations of the company, and (2) to dis- close inventions resulting from or suggested by his work for DSC.57 Counsel for DSC stated that the company had been engaged in investiga- tions of conversion technology similar to Brown's Solution. In order to show that the Solution was an invention along the lines of the business, work, or investigations of DSC, or resulting from or suggested by Brown's work for the company, counsel pointed to efforts by DSC in 1993 and 1995 to develop software conversion tools.58 During the temporary injunction hearing, a witness for DSC testified that the company was in the business of software development and that it spent a significant per- of code from one language to merely another version of the same language, S.J. Hrg. Tr. 38:2-7, and manual software conversion, S.J. Hrg. Tr. 38:8-11. 54. Alcatel USA, Inc. v. Brown, No. 199-0056-97 (Tex. Dist. Ct. 219th Dist. Jul. 26, 2002). 55. S.J. Hrg. Tr. 25:15-20. During a hearing on DSC's motion for a temporary injunc- tion mandating full disclosure of the Solution, which Brown had allegedly fully worked out, counsel for DSC argued that the fact that the Solution existed solely in Brown's mind and had not been written down or otherwise implemented was irrelevant to its status as an invention covered by the disclosure agreement. Temp. Inj. Hrg. Tr. 51:8-51:24. The court accepted that argument when it ordered Brown to disclose the Solution to DSC in its en- tirety (Temp. Inj. Order 3) and when it found Brown in breach of the agreement on sum- mary judgment. Alcatel USA, Inc. v. Brown, No. 199-0056-97 (Tex. Dist. Ct. 219th Dist. Aug. 26, 2002). Despite the fact that even after Brown completed the disclosure, the Solu- tion as described was "woefully incomplete and inadequate by steps." S.J. Hrg. Tr. 24:16- 17. 56. Alcatel USA, Inc. v. Brown, No. 199-0056-97 (Tex. Dist. Ct. 219th Dist. Aug. 26, 2002). 57. S.J. Hrg. Tr. 25:15-20. 58. Id. at 27:1-17.