The opinion of the court was delivered by: ZAGEL
This case is about the maneuvers of men who envision the possibility of transforming an idea into a fortune. In the early 1980s, defendants Robert Bach and Christopher Nagel met at Wayne State University in Michigan where Bach was an Organic Chemistry professor and Nagel was a student. In 1986, Bach and Nagel (the "Inventors") patented a process that they invented for the destruction of hazardous waste. (U.S. Patent 4,574,714 and continuation-in-part patent 4,602,574) (the "Patents").
Around 1986, Camel and the Inventors began discussing ways to commercialize the Patents. Camel introduced the Inventors to Sain and Carroll. Camel, Sain and Carroll ("Plaintiffs) and the Inventors agreed that technical, governmental and social processes needed to be engaged to render the patents commercially viable, and they decided to work together towards this goal. The parties did not have a written agreement at this time, but it was understood that plaintiffs would receive some compensation for their services.
In September 1987, Plaintiffs and the Inventors executed the Exotherm Incorporation Agreement drafted by an attorney at Carroll & Sain, Ltd., thereby creating Exotherm. Inc. for the purpose of commercializing the Patents and "designing, developing, constructing and operating a process for the destruction of hazardous waste." Exotherm Incorp. Agreement at 1. Between September 1987 and November 1989, Plaintiffs contacted government officials, investment bankers, corporations, and individuals to solicit interest in and development funds for the patented technology. Also, the Inventors and Plaintiffs attended numerous meetings and disseminated a business plan they had jointly prepared. However, they failed to gain financing to commercialize the Patents.
Now the plot thickens. Some time in 1989, Charles Harris, a venture capitalist interested in environmental technologies, contacted the Technology Licensing Office at the Massachusetts Institute of Technology ("MIT") and was introduced to John Preston, MIT's Director of Licensing. Preston told Harris that Chris Nagel, a doctoral candidate at MIT at that time, had invented a process for treating hazardous waste. Shortly thereafter, Harris met with Nagel and discussed the Patents.
In early November 1989, the Inventors decided to work with Harris, and they called Sain and Camel to tell them the news. Meanwhile, Harris formed Molten Metal Technology, Inc. ("MMT") for the purpose of commercializing the process of hazardous waste destruction described in the Patents. By November 6, 1989, Nagel knew that he would become an employee of MMT and receive stock options from the corporation. On November 8, 1989, Harris incorporated MMT as a wholly-owned subsidiary of H&H Venture Capital, Inc.-- itself a wholly-owned subsidiary of Harris & Harris Group, Inc., a publicly-held company run by Charles Harris. At its inception, MMT had two directors: Harris and his business associate, Rick Childress. Harris provided MMT with $ 1,000,000 in initial capital.
On November 13, 1989, the Inventors engaged in a telephone conference call discussion with their attorney Anthony Carroll, John Preston of MIT, Gene Whittemeyer of MIT, and the Plaintiffs to discuss their intention to sell an option on the Patents to MMT.
On November 14, 1989, Harris & Harris Group, Inc. issued a press release announcing the formation of MMT for the purpose of commercializing the Nagel-Bach process for waste destruction and the acquisition of an option to purchase the Patents. The press release also announced that Harris would serve as the Chairman and CEO, Nagel as the company's President and Bach as its Vice-Chairman. On this date, Nagel and Bach began serving in these positions at MMT.
In December 1989, MMT, Bach and Nagel executed an Initial Technology Option Contract ("TOC" or "Option Contract") granting MMT the right to purchase the Patents and "certain know-how, processes" for $ 3 million. Under this TOC, the Inventors had to "use their best reasonable efforts to cause all of the shareholders of Exotherm ... to waive and release ... any ownership rights ... with respect to the Patents, the Technology...."
Around April 12, 1990, the Inventors and the Plaintiffs executed the Settlement Agreement. By this agreement Plaintiffs agreed to release any claims in Exotherm and the Patents in exchange for the Inventors' promise to compensate them according to a formula set out in the agreement. But on May 29, 1990 MMT terminated its option without exercising it.
By an agreement dated May 31, 1990 the Inventors and MMT executed the Technology Assignment Agreement ("TAA") by which the Inventors assigned their interests in the Patents to MMT in exchange for MMT's promise to pay to them $ 4,000,000 according to a seven-year payment schedule.
Then in early June 1990, Harris withdrew from MMT. He resigned from the Board of Directors and withdrew his capital investment in the corporation. MMT retained approximately $ 137,517.20 of capital as of June 13, 1990. William Haney, who had invested $ 100,000 in MMT between November 1989 and March 1990, replaced Harris as the Chairman and CEO of the corporation. Preston replaced Bach as the Vice Chairman of the board, and Nagel remained on the board.
During the summer of 1990, Preston and Nagel negotiated a deal related to the Patents with the Travelers Insurance Company ("Travelers") in which Travelers tentatively agreed to invest $ 5,000,000 in MMT.
On October 12, 1990, MMT and the Inventors executed the amended TAA that reduced the Inventors' compensation for assigning their Patents to MMT from $ 4,000,000, as agreed upon in the TAA, to $ 1,500,000. Travelers financed MMT in the late fall of 1990.
Since June 1990, MMT has developed into a publicly-traded company that, inter alia, employs several hundred people, owns more than sixty patents, licenses and permits, and operates two commercial facilities for processing waste. The Inventors have not yet received the $ 1,500,000 due under the amended TAA. They have received two payments to date: $ 25,414 in April 1992 and $ 88,696.50 in April 1996 which they have placed in escrow pending a resolution of the claims presented here. The Plaintiffs have not received any payment related to the Patents thus far.
Plaintiffs filed a six-count amended complaint against the Inventors and MMT stemming from their business dealings and claiming that the Inventors owe them compensation pursuant to the Settlement Agreement. Specifically, Plaintiffs allege claims against the Inventors for a breach of the Settlement Agreement (Count I), fraud (Count II), and a breach of fiduciary duties (Count III). Plaintiffs allege three claims against MMT for civil conspiracy (Count IV), inducement of breach of fiduciary duties (Count V), and tortious interference with contractual relations (Count VI). The Inventors asserted three counterclaims against the plaintiffs for a violation of the Illinois Fair Invention Development Standards Act ("FIDSA" or "Act") (Count I), breach of fiduciary duties (Count II) and misappropriation of corporate opportunities (Count III).
Now the Inventors, MMT and Plaintiffs each move for summary judgment. The Inventors move for summary judgment on Counts I, II and III of the complaint. MMT moves for summary judgment on Counts IV, V and VI of the complaint. Plaintiffs move for summary judgment on the Inventors' counterclaims I and II. I consolidate these motions for review now.
A court grants summary judgment only "if the pleadings, depositions, answers to interrogatories, and admission on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In determining whether there are any genuine issues of material fact, the court will make all inferences in the light most favorable to the nonmovant. Bartman v. Allis-Chalmers Corp., 799 F.2d 311, 312 (7th Cir. 1986). A genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).
II. The Plaintiffs' Motion
Plaintiffs move for summary judgment on the Inventors' counterclaims I and II.
This case presents an issue of first impression regarding the applicability of the Illinois Fair Invention Development Standards Act, 815 ILCS 620/101 et seq. Plaintiffs move for summary judgment on grounds that the FIDSA does not apply here. The Inventors claim that the Act applies, the Exotherm Incorporation Agreement does not meet its requirements and therefore the agreement is void and all subsequent agreements between the parties, including the Settlement Agreement, are voidable under 815 ILCS 620/502. The portion of the FIDSA that the Inventors refer to, 815 ILCS 620/502, provides that
Any contract for invention development services
which does not comply with the applicable provisions of this Act shall be void and unenforceable as contrary to public policy....
Compliance with the Act, requires, inter alia, that "invention developers" make disclosures to "customers"
prior to any contract formation (815 ILCS 620/201, 202), express any agreement in writing and include notice provisions and mandatory terms in contracts for invention development services.
(815 ILCS 620/301, 302, 401, 402).
Plaintiffs contend that the Act does not apply to them because they did not meet the statutory definition of an "invention developer." An "invention developer" is "any person, firm, corporation, association or other entity that performs "invention development services", except... any person, firm, corporation, association or other entity that does not charge a fee for invention development services." 815 ILCS 620/103(e) (emphasis added). Plaintiffs contend they never billed, charged or collected a fee (or even an expense reimbursement) from the Inventors or Exotherm for services they performed in connection with Exotherm. The Inventors allege that the shares of Exotherm stock that Plaintiffs received under the incorporation agreement constitute a "fee." The Exotherm Incorporation Agreement, governing the working relationship between the plaintiffs and the Inventors, does not ...