Employment Agreement Assignment Provisions Don’t Reach Post-Employment Inventions
The US Court of Appeals for the Federal Circuit rejected a biotechnology company’s argument that assignment provisions in its employment agreements granted ownership rights in post-employment inventions. Bio-Rad Laboratories, Inc. v. Int’l Trade Comm’n, Case No. 20-1785 (Fed. Cir. Apr. 29, 2021) (Taranto, J.)
10X filed an International Trade Commission (ITC) complaint against Bio-Rad, alleging that Bio-Rad’s microfluidic systems infringed 10X’s gene sequencing patents. Bio-Rad raised an affirmative defense alleging that it co-owned the asserted patents because two of the named inventors, formerly employed by Bio-Rad and its predecessor QuantaLife before forming 10X, conceived the ideas embodied in the patents while they were still employed by Bio-Rad. The two inventors had executed employment agreements, including provisions requiring disclosure and assignment of intellectual property created during their employment with Bio-Rad. The two inventors left Bio-Rad and formed 10X several months before the earliest conception date of the asserted patents.
The ITC administrative law judge rejected Bio-Rad’s co-ownership defense, concluding that Bio-Rad had not shown the inventive concept of the asserted patents was conceived before the inventors left Bio-Rad. The administrative law judge also found that Bio-Rad infringed 10X’s patents and that 10X satisfied the technical domestic industry requirement by practicing the asserted patents. The ITC affirmed the administrative law judge’s determinations and also found that the asserted claims were not invalid for indefiniteness. Bio-Rad appealed.
Bio-Rad argued, among other things, that the ITC erred in not finding co-ownership of the asserted patents based on the assignment provisions. Bio-Rad also contended that during their employment at Bio-Rad, the two inventors had conceived the ideas that contributed to the inventions reflected in the 10X patents, and the invention assignment provisions of their employment agreement required assignment of their interest to Bio-Rad.
The Federal Circuit affirmed the ITC. On the co-inventorship issue, the Court adopted the ITC’s conclusion and found that Bio-Rad had no ownership interest in the asserted patents, explaining that the assignment provisions did not apply to ideas developed during employment solely because the ideas ended up contributing to a post-employment patentable invention. The Court found that the language was limited to a grant of actual intellectual property, i.e., subject matter protectable as a patent created during the term of employment with Bio-Rad. The Court reasoned that a person’s work that contributes, even significantly, to a later patentable invention does not create protectable intellectual property until a patentable invention is made, and that therefore, the assignment provisions did not reach the ideas that Bio-Rad alleged were conceived during the inventors’ Bio-Rad employment.
The Court also noted policy reasons for limiting the reach of the assignment provisions, including the difficult compliance issues raised by requiring assignment of rights in post-employment inventions. The Court explained that such provisions might deter a former employee from pursuing work related to their prior work, or deter a potential future employer from hiring that individual to work in an area similar to that in which they had prior experience. The Court also agreed with the ITC’s conclusion that the ideas that Bio-Rad alleged formed key aspects of the claimed inventions were within the scope of the published prior art and at a level of generality that could not support joint inventorship.