In an unusual move, Amazon has agreed to assign a patent application to a former employee who sued the company to regain control of his invention.

Late yesterday, Amazon filed court papers agreeing that the former employee’s original assignment of the invention to the company “was null and void due to lack of consideration,” among other factors.

amazonsignage2The surprise reversal supports the basic argument made by the former employee, Kivin Varghese — who contended that the only tangible consideration he received for his invention was an acrylic commemorative puzzle piece. After making the concession and agreeing to hand over the patent rights, Amazon is now seeking to dismiss the case, saying it has met the terms sought by Varghese.

A dismissal would allow Amazon to avoid a public trial in the case, set for next week in King County Superior Court.

However, court filings indicate that Varghese isn’t going along with Amazon’s proposal. In email exchanges filed with the court by Amazon’s lawyer, Varghese’s lawyer says her client will be seeking a judgment permanently enjoining Amazon from using the invention, and declaring that the invention wasn’t covered by his original employment agreement with the company.

Amazon has agreed to “a non-disclosure provision prohibiting it from disclosing any information related to the application,” but the company has so far stopped short of agreeing to a judgment preventing it from using the invention.

The case has raised a variety of questions about the boilerplate employment agreements and invention assignments used by Amazon and many other companies in the tech industry. A formal ruling would have the potential, at least, to influence how these contracts are interpreted and applied in similar situations in the future.

The patent application filed by Amazon based on Varghese’s invention isn’t yet public, but a past court filing describes it as “a web and mobile video advertising application that works to improve ad engagement and product purchase conversion rates from broadcast TV, cable and online video advertising.”

Varghese, the former CEO of online ad startup BrandPort, says he came up with the idea before joining Amazon, and he now wants to pursue it on his own with another company. Varghese sought monetary damages in the original complaint, in part to make up for his lack of ability to pursue the invention while it was tied up in litigation.

In one of the email exchanges yesterday with Amazon’s lawyers, filed with the court, Varghese’s lawyer Theresa Pruett tells the Amazon lawyers, “Of course, this could all be resolved quickly if Amazon puts some serious money on the table.”

According to court records, Varghese had hoped to build a new business inside Amazon based on his idea, and receive additional compensation as a leader of the project. However, he was separately terminated after helping to identify and resolve a problem with the Kindle Fire ad platform prior to its launch, he said in his complaint. Varghese alleged that he was let go in retaliation for going over his manager’s head to raise the issue internally.

The latest filings indicate that Varghese’s lawyers will oppose Amazon’s motion to dismiss the case, leaving it up to King County Superior Court Judge John Erlick to decide whether the trial will go forward next week. Stay tuned.

Update, 10:30 a.m. In a statement, Varghese’s lawyers explain their position …

“Mr. Varghese is pleased that Amazon conceded Mr. Varghese’s rights in the invention and the patent application but he is disappointed that it took until just three court days before trial to do so.  Unfortunately this was after Mr. Varghese expended substantial resources to prosecute this action and has been, for the duration of the litigation, prevented from marketing and practicing his invention.  Mr. Varghese looks forward addressing the remaining issues in the declaratory action and adjudicating his damages and other claims, including a claim of unfair competition, conversion and wrongful termination, at a separate trial later.”

GeekWire has also contacted an Amazon representative for comment.

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