GOLDEN EAGLE SATELLITE ARCHERY INC v. EPLING (1997)

Supreme Court erred in denying plaintiff's motion for partial summary judgment on the first cause of action alleging a breach of fiduciary duty.   Plaintiff established that defendant Marvin Epling was the president and chief executive officer of plaintiff and was fully responsible for overseeing the day-to-day operations, including sales, marketing, distribution, finance, manufacturing, and new product development.   Further, it is not disputed that Epling used company assets, including computers, personnel and resources, in the development of the product for which Epling later sought a patent.

In Cahill v. Regan, 5 N.Y.2d 292, 184 N.Y.S.2d 348, 157 N.E.2d 505, the Court of Appeals held that, where “an employee is hired to invent or is given the task of devoting his efforts to a particular problem, the resulting invention is the employer's, and any patent obtained by the employee must be assigned to the other.  * * * On the other hand, an employee whose employment is ‘general’ is entitled to retain any patent which he procures and need not assign it to his employer, even though his employment ‘cover[s] a field of labor and effort in the performance of which the employee conceived the invention for which he obtained a patent’ ” (Cahill v. Regan, supra, at 296, 184 N.Y.S.2d 348, 157 N.E.2d 505, quoting United States v. Dubilier Condenser Corp., 289 U.S. 178, 187, 53 S.Ct. 554, 557, 77 L.Ed. 1114 [citations omitted] ).   In Great Lakes Press Corp. v. Froom, 695 F.Supp. 1440, 1446, the court carved out an exception to the rule enunciated in Cahill “where the employee is the President, Chief Executive Officer, and a Director of the corporation.”   The basis for that exception is the fiduciary duty owed by the president and chief executive officer to the corporation.   Under the circumstances of this case, the exception enunciated in Froom applies because Epling was not only the president and chief executive officer of plaintiff, but worked on the patent using plaintiff's employees and computers (cf., Radiant Energy Corp. v. Roberts-Gordon, Inc., 225 A.D.2d 1025, 639 N.Y.S.2d 237).   Thus, Epling had a fiduciary duty to act in the best interest of plaintiff and not deprive it of any corporate opportunity (see, Great Lakes Press Corp. v. Froom, supra;  Grip Nut Co. v. Sharp, 150 F.2d 192, cert. denied 326 U.S. 742, 66 S.Ct. 55, 90 L.Ed. 443).

Order unanimously modified on the law and as modified affirmed with costs to plaintiff.

MEMORANDUM: