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IP Alert: Ownership Rights Cannot Be Assigned Until Conception of the Claimed Invention

May 7, 2021

On April 29, in Bio-Rad v. USITC, the Federal Circuit addressed issues relevant to employment contracts and inventorship, refusing to declare the accused infringer, Bio-Rad, a co-owner of the asserted patents. The court affirmed the ITC’s findings of infringement and validity against Bio-Rad in a patent infringement action brought by complainant 10X Genomics under section 337 of the Tariff Act of 1930.

Bio-Rad had argued that it was a co-owner of the asserted patents because two of the inventors were former Bio-Rad employees who had assigned intellectual property rights to Bio-Rad. According to Bio-Rad, the inventors had “co-inventorship-qualifying ideas” while employed by Bio-Rad or its predecessors. The court rejected that argument. The court held that the inventors’ conception of ideas at Bio-Rad that later become a “significant contribution” to conception of an invention while employed at 10X was insufficient to establish joint inventorship while employed at Bio-Rad, and, therefore, no joint invention rights were assigned to Bio-Rad under the inventors’ employment agreements.   

10X brought its complaint in the ITC, alleging that Bio-Rad’s importation and sale of microfluidic systems and components used for gene sequencing and related analyses violated section 337. 10X alleged that Bio-Rad infringed certain claims of several of 10X's patents that were directed to methods for using microcapsules in the form of gel beads for tagging molecular barcodes onto droplets containing target nucleic acid analytes for gene sequencing. Bio-Rad asserted as a defense that it could not be liable for infringement because it co-owned the asserted 10X patents under assignment provisions of employment agreements with two of the named inventors. Bio-Rad argued that while employed at Bio-Rad, the inventors had conceived of ideas that became significant contributions to the later conception of the inventions of the asserted patents. Therefore, Bio-Rad argued, the inventors, as alleged joint inventors while employed at Bio-Rad, had assigned their joint invention rights to Bio-Rad under the assignment provisions of their employment agreements, and Bio-Rad could not be found guilty of infringement as a co-owner of the asserted patents. The ITC rejected Bio-Rad’s co-ownership defense and found the patents to be valid and infringed by Bio-Rad.

The Federal Circuit affirmed the ITC decision and held that the assignment provisions in the Bio-Rad employment agreements do not apply to patentable inventions developed after employment at Bio-Rad. Instead, “the assignment provisions are limited temporally” to IP developed during the term of employment with Bio-Rad and thus were limited to inventions that could be “protected as intellectual property before the termination of employment.”

The court explained that just because a person’s work might one day turn out to contribute significantly to later conception of a patentable invention, such work does not create any existing preconception IP rights that could be assigned to the employer because IP rights in an invention do not exist until the time of conception of the invention. The Federal Circuit pointed out that the conception of the “ideas” of the inventors while at Bio-Rad were “at a level of generality that cannot support joint inventorship” and/or “involve nothing more than elements in the already-published prior art.” Instead, the court found that the “common core” of the inventions in the asserted claims was conceived by the inventors after they left employment at Bio-Rad and were employed by 10X. Therefore, the court held, there was no assignment of rights to Bio-Rad because the “assignment duty is limited to subject matter that itself could be protected as intellectual property before the termination of employment.”

The Federal Circuit also noted that California law recognizes significant policy constraints on employer agreements that restrain former employees in the practice of their profession, including agreements that require assignment of rights to later-developed, post-employment inventions. The court stated that the contract language is not broad enough to “test the California-law constraints,” and “[w]e do not think it reasonable to test those constraints here by adopting a broader reading of the contract language than the straightforward reading we have identified.”

This decision is notable in confirming that an inventor’s conception of an unpatentable idea during employment with Company A that later becomes a “significant contribution” to the inventor’s conception of patentable invention during employment at Company B cannot be bootstrapped into a claim of co-ownership by Company A under its employment agreement with the inventor.   

For more information regarding this decision, please contact Fitch Even partner Karl R. Fink, author of this alert.

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