Milliken & Co. v. Morin
731 S.E.2d 288, 34 I.E.R. Cas. (BNA) 271, 399 S.C. 23 (2012)
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Rule of Law:
Employee confidentiality and invention assignment agreements are not restraints on trade subject to strict scrutiny like non-compete agreements; instead, they are evaluated under a general reasonableness standard.
Facts:
- In 1995, Brian Morin began working for Milliken & Company as a research physicist.
- As a condition of employment, Morin signed an "Associate Agreement" which included a three-year post-employment confidentiality provision and a one-year post-employment invention assignment provision.
- The invention assignment clause applied to inventions relating to Milliken's business or developed using its resources, while the confidentiality clause applied to competitively sensitive information learned through his employment.
- Over nine years, Morin was promoted to Team Leader for the Advanced Yarns Team.
- In the Fall of 2003, Milliken sent Morin to a trade show to research potential uses for a new type of fiber.
- Shortly thereafter, while still employed by Milliken, Morin began drafting a business plan for his own company, Innegrity, to manufacture this new fiber.
- Morin resigned from Milliken on May 19, 2004.
- In November 2004, Morin filed a patent for the fiber, which he named Innegra.
Procedural Posture:
- Milliken & Company sued Brian Morin in a South Carolina trial court for breach of contract, among other claims.
- A jury found in favor of Milliken on its claims for breach of the confidentiality and invention assignment agreements and awarded damages.
- Morin, as appellant, appealed to the South Carolina Court of Appeals, arguing the agreements were overbroad and unenforceable.
- The Court of Appeals, an intermediate appellate court, affirmed the trial court's judgment in favor of Milliken.
- The Supreme Court of South Carolina, the state's highest court, granted certiorari to review the case.
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Issue:
Are employee confidentiality and invention assignment agreements that restrict post-employment activity unenforceable as a matter of law for being overbroad?
Opinions:
Majority - Justice Hearn
No, such agreements are not unenforceable as a matter of law. The court held that confidentiality and invention assignment (or "holdover") clauses are not restraints on trade and therefore should not be strictly construed against the employer, unlike non-compete covenants. Instead, they are subject to a general reasonableness standard which asks whether the restriction is: 1) no greater than necessary to protect the employer’s legitimate business interests, and 2) not unduly harsh and oppressive in curtailing the employee’s ability to earn a living. The court reasoned that these agreements do not limit employment opportunities but rather protect an employer's proprietary information and the fruits of work done for the employer. Applying this standard, the court found Milliken's one-year invention assignment clause and three-year confidentiality clause were reasonably tailored and necessary to protect its legitimate interests without unfairly preventing Morin from working.
Analysis:
This decision significantly clarifies the legal standard for enforcing confidentiality and invention assignment agreements in South Carolina. By distinguishing them from disfavored non-compete covenants, the court established a more employer-friendly 'reasonableness' standard of review. This precedent gives employers greater certainty that their agreements to protect intellectual property and trade secrets will be upheld, so long as they are tailored to protect legitimate business interests and are not unduly oppressive. The ruling shifts the analytical focus from strict limitations on time and geography (as with non-competes) to the substantive scope of the information and inventions being protected.
