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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 [...]

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US Courts Can Compel Parties to Transfer Ownership of Foreign Patents

Addressing a district court decision agreeing to transfer ownership of certain US patents, but declining to do likewise for the related foreign patents, the US Court of Appeals for the Federal Circuit explained that US courts have authority to compel litigants before them to transfer ownership of their patents and held that ownership of the foreign patents should have been transferred as well. SiOnyx LLC v. Hamamatsu Photonics K.K., Case Nos. 19-2359, 20-1217 (Fed. Cir. Dec. 7, 2020) (Lourie, J.).

In 1998, a professor at Harvard discovered a process for creating black silicon with unique properties and launched a company, SiOnyx, to commercialize the invention. SiOnyx eventually met with Hamamatsu, a manufacturer of silicon-based photodetector devices, and entered into a nondisclosure agreement (NDA) to share confidential information to explore a potential joint venture. SiOnyx provided information to Hamamatsu under the NDA, but the joint venture plans never came to fruition, and Hamamatsu allowed the agreement to lapse. A short time later, Hamamatsu began marketing photodetector devices using black silicon and applied for foreign patents covering its products, along with related US patents. SiOnyx sued Hamamatsu for breach of contract, infringement of a SiOnyx patent and for ownership of Hamamatsu’s patents.

The case ultimately went to trial and led to a jury verdict in SiOnyx’s favor on breach of contract and infringement. The jury also found that one of SiOnyx’s employees had contributed to the inventions claimed by Hamamatsu’s patents. Based on that inventorship finding, the district court transferred sole ownership of the US patents to SiOnyx pursuant to an NDA provision retaining intellectual property rights for confidential information shared under the agreement. The district court also treated the ownership transfer as an equitable remedy in view of Hamamatsu’s breach of the agreement. However, the district court declined to transfer ownership of the foreign patents because it questioned its authority to do so. Both parties appealed.

On appeal, the Federal Circuit first disposed of most of the appellate issues as being resolved by the jury verdict. Regarding ownership of the patents, Hamamatsu argued that the jury finding of co-inventorship by SiOnyx’s employee, rather than sole inventorship, implied that Hamamatsu employees also contributed to the invention and thus warranted partial ownership. The Court rejected this argument because it found that Hamamatsu had not shown that its contribution was derived from confidential information shared under the NDA and thus did not trigger any ownership rights under the agreement. The Federal Circuit also reasoned that Hamamatsu’s inventive contribution would not bar the equitable relief imposed by the district court. As for the foreign patents, the Court agreed with SiOnyx that the same grounds that led to transfer of the US patents also warranted transfer of the foreign patents, and reiterated that US courts have authority to compel the parties properly before them to transfer ownership of their patents.