Last Week in the Federal Circuit (April 26-30): The Potentially Limited Life Of IP Assignment Provisions In Employment Contracts

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Today’s big news in the patent world is probably the CVSG in American Axle and the potential for a new Supreme Court case on subject-matter eligibility. But the day-to-day work goes on at the Federal Circuit, including with an interesting decision on the scope of IP assignment provisions in employment contracts. Below we provide our usual weekly statistics and our case of the week—our highly subjective selection based on whatever case piqued our interest.

Precedential opinions:

Non-precedential opinions:

Rule 36: 1 

Case of the week: Bio-Rad Laboratories, Inc. v. International Trade Commission, No. 20-1785 (Apr. 29, 2021) 

Panel: Judges Taranto, Chen, and Stoll, with Judge Taranto writing the opinion

You should read this case if: you have a dispute about whether an employment contract assigned ownership of an invention

Consider this scenario: an employment contract requires an employee to assign to the employer the entire right to any IP that the employee conceives, develops or creates during the term of employment. Does that provision give the employer co-ownership rights in an invention admittedly conceived after employment ends if the former employee based the invention at least in part on ideas allegedly developed during employment? The Federal Circuit said no in this week’s case of the week, interpreting an employment agreement like the above under California law.

The case comes from the International Trade Commission, where the Commission found that Bio-Rad had violated section 337 of the Tariff Act of 1930 by infringing three patents related to tagging DNA samples with a barcode for genetic sequencing. As one of its defenses, Bio-Rad argued it could not be liable for infringement because it co-owned the asserted patents under assignment provisions that two named inventors signed when they were employees of Bio-Rad (and its predecessor). On appeal Bio-Rad did not dispute that the complete invention was conceived only after those two co-inventors left Bio-Rad. But it argued that those co-inventors developed ideas while employed with Bio-Rad (and its predecessor) that sufficiently contributed to the post-employment invention to qualify them as joint-inventors regardless of any contributions they made after leaving Bio-Rad. Bio-Rad believed that during-employment development meant it was a co-owner of the patents under the assignment agreement.

The Federal Circuit rejected that defense for two reasons. First, the Court agreed with the Commission that “the assignment provisions do not apply to a signatory’s ideas developed during the employment solely because the ideas ended up contributing to a post-employment patentable invention in a way that supports co-inventorship.” The Court focused its analysis on the assignment provision’s language referring to “intellectual property,” which the Court read as a limitation on coverage. The assignment was a “right” to “intellectual property” and was temporally limited to IP “that Employee conceives, develops or creates … during the term of Employee’s employment.” “The most straightforward interpretation is that the assignment duty is limited to subject matter that itself could be protected as intellectual property before the termination of employment.” For a patent, the Court explained, there is no protectable intellectual property right “until at least conception.” The Court thus agreed with the Commission that “a significant contribution to post-employment invention” that fell short of conception was beyond the assignment provision’s reach.

Second, the Court found no reversible error in the Commission’s independent determination that the co-inventors’ work during employment (as opposed to post-employment work) did not qualify them as joint inventors of the asserted patents. The Commission had found, and substantial evidence showed, that most of the ideas Bio-Rad pointed to as purportedly developed during employment had become public knowledge by the time of the invention’s post-employment conception. At most, then, Bio-Rad showed that the co-inventors “while at Bio-Rad, were working on the overall, known problem” of tagging small DNA segments, a problem “that was the subject of widespread work in the art.” That was insufficient to show a joint-inventorship-qualifying contribution to the eventual invention.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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