Pre-Invention Innovations Not Captured by Employment Agreement Duty to Assign

by Dennis Crouch

Bio-Rad Labs, Inc. v. ITC and 10X Genomics (Fed. Cir. 2021)

At its core, this is an employer-inventor dispute in the area of gene sequencing technology.  Saxonov & Hindson co-founded company QuantLife that was bought out by Bio-Rad. The pair then became Bio-Rad employees. At both companies they signed agreements to transfer invention rights to Bio-Rad. In April 2012 the pair left Bio-Rad; in July 2012 formed 10X; and began filing new patent applications in August 2012. These applications eventually issued as patents and include the patents-in-suit: US Patent Nos. 9,689,024, 9,695,468, and 9,856,530.

Bio-Rad and 10X are competitors and 10X sued for patent infringement.  In defense, Bio-Rad argued that it owns the patents.  The USITC rejected that argument and the Federal Circuit has now affirmed.

The agreements are clear that they are limited to the term of employment: Each promised to assign anything conceived, developed, or reduced-to-practice “during the period of my employment.”

In this case, it appears that Hindson and Saxonov conceived of some aspects of the inventions while still at Bio-Rad, but did not have complete conception until after leaving employment.   Still, Bio-Rad argued that the advances while employees was enough.  In reviewing the record, the ITC found that these early-stage ideas were too generic to count.  Bio-Rad then renewed the argument on appeal. The following comes from Bio-Rad’s brief:

About a year after selling QuantaLife to Bio-Rad for more than $160 million, the two inventors left Bio-Rad to form 10X. Then, in less than four months, they filed applications leading to the asserted patents. Under well-established ownership and inventorship principles, Bio-Rad owns a pro rata share of the patents based on the work that two of the six inventors conceived at QuantaLife/Bio-Rad. Their work was not a vague hope for a future research plan, but a specific solution to a problem using specific reagents. At a minimum, their work met the threshold required for co-inventorship. The error below was to require a single “eureka” moment contrary to the controlling contractual language; the ITC ignored that multiple people can contribute to patented inventions over time and that co-inventors each do not have to conceive all elements of a patent claim.

BioRadBriefOnAppeal.

On appeal, the Federal Circuit affirmed — affirming that “the assignment provisions do not apply to a signatory’s ideas developed during the employment (with Bio-Rad or QuantaLife) solely because the ideas ended up contributing to a postemployment patentable invention in a way that supports co-inventorship of that eventual  invention.”  In particular, the terms of the agreement was limited to Intellectual Property, and mere ideas don’t count as intellectual property.

The Agreement covers: All inventions . . . which I may solely or jointly conceive, develop, or reduce to practice during the period of my employment by Bio-Rad

Federal Circuit: 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.

This was a California employment contract — adding additional weight to the conclusion that prior employer gets nothing:

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 in post-employment inventions.

Id. Note that the court cited its own prior precedent as to the scope of California Law rather than actual California cases.

= = = = =

This case offers an interesting piece in the puzzle of inventorship. One interpretation of Bio-Rad is simply that ownership and transfer of intangibles, including pre-invention intangible rights, are a matter of state law. In this case, the contract (as interpreted under California law) would not require transfer of ownership rights to the former employer.  In this vein, employers may be reevaluating their employment contracts to ensure that they capture rights to innovations do not raise to the level of invention.

At the same time, the case also offers a counterpoint to Dana-Farber Cancer Inst., Inc. v. Ono Pharm. Co., Ltd., 964 F.3d 1365 (Fed. Cir. 2020). In Dana-Farber,we had pre-conception contribution of ideas that – on their own – were not patentable. The court found those contributions sufficient for a claim of co-ownership.

= = = = =

The court does not go into this, but I’ll also note that Saxonov & Hindson’s employment contract with Bio-Rad was not a standard contract signed by regular scientists or engineers.  These two founded a company that was bought out for more than $100 million.  I’m confident that these terms were negotiated and well-lawyered before the deal was done.

16 thoughts on “Pre-Invention Innovations Not Captured by Employment Agreement Duty to Assign

  1. 7

    If state law applies here, then what are the implications for the FilmTec line of cases? In FilmTec, the Federal Circuit justified using Federal Circuit law to interpret an assignment provision because it had implications on the issue of standing in a case asserting the patent. The specific issue in this case has the same implications. If BioRad is not the owner, then it has no standing to sue anyone for infringement of this patent. Should we read the FilmTec line of cases as limited to the issue of whether an assignment provision is an automatic assignment or an agreement to assign? Is that consistent with the Fed. Circuit’s rational for applying Federal Circuit law in the first place in FilmTec?

    1. 7.1

      10X sued BioRad…not the other way around.

      1. 7.1.1

        I noticed when I actually read the opinion after posting my comment. But the issue I raise still exists. If Bio-Rad is a co-owner of the patent, then 10X cannot sue anyone else on the patent if Bio-Rad does not join as plaintiff.

      2. 7.1.2

        I noticed that when I actually read the opinion after posting my original comment. The issue I raised still exists, however. If Bio-Rad is a co-owner of the patent, then 10X would not be able to sue anyone else on the patent if Bi0-Rad is not a co-plaintiff.

  2. 6

    Anyone in the patent profession understands that the word “invention” unqualified includes both patentable and nonpatentable inventions (except I guess these Fed Circ judges)

  3. 5

    First, not sure why the aversion to listing which judges are involved continues, but:

    Before TARANTO, CHEN, and STOLL, Circuit Judges. TARANTO, Circuit Judge.

    Second, timing here seems odd. The case itself plainly states: “On the record and arguments before us, we take as a given that the conception date for the claims at issue was no earlier than in January 2013.

    But a competing date is provided by, “in July 2012 formed 10X; and began filing new patent applications in August 2012. These applications eventually issued as patents and include the patents-in-suit: US Patent Nos. 9,689,024, 9,695,468, and 9,856,530.

    That’s a neat trick: file an application in August 2012, and conceive the invention in January 2013.

    1. 5.1

      Thanks for the laugh, anon.

      Can’t comment for the USA but if you look at the family member at the EPO, you will see a filing date of August 2013 but declarations of the (Paris Convention) priority of five earlier-filed US patent applications, the earliest one having been filed at the USPTO 14 August 2012.

      It is commonplace for claims of issued European patents to be entitled to the PCT filing date but not to any earlier date. So too, perhaps, for the “claims at issue” in the US litigation?

      If so, not so much a “neat trick” as a handy defence against the charge of running away with somebody else’s property? Mind you, in a FtF jurisdiction, loss of Paris Convention priority can be decisive to the fate of the claims, and not in a good way.

    2. 5.2

      Caught by the filter, here’s another attempt, cropped back:

      Can’t comment for the USA but if you look at the family member at the EPO, you will see a filing date of August 2013 but declarations of the (Paris Convention) priority of five earlier-filed US patent applications, the earliest one having been filed at the USPTO 14 August 2012.

      It is commonplace for claims of issued European patents to be entitled to the PCT filing date but not to any earlier date. So too, perhaps, for the “claims at issue” in the US litigation?

    3. 5.3

      Not really – file a provisional in August 2012 with some early ideas; add disclosure and claims at the 2013 date; the issued patents refer to claims added in 2013 (and wouldn’t be entitled to 2012 priority date). Often we update with specific species at a later date during the provisional year – and the issued claims are sometimes limited to those species.

      1. 5.3.1

        Yes – I hear you, and DIGGING in can supply many of those telling details.

        Not sure if this was just ‘lay Z’ writing, but at a minimum, it was a lost teaching opportunity of how structuring of provisionals, applications, continuations, divisionals, and continuations-in-part can be intertwined.

  4. 4

    Wonder if the inventors were made to sign a non-compete at the time of acquisition. The non-compete would not impact patent ownership (Whitewater West Industries v. Alleshouse, No. 2019-1852 (Fed. Cir. Nov. 19, 2020)), but I think it would mitigate damages.

    While California courts frown upon non-competes in employment agreements, I believe they will enforce a non-compete if it was tied to their share of the $100 million acquisition consideration.

  5. 3

    On the one hand, I can see the reason for

    “..constraints on employer agreements that restrain former employees in the practice of their profession..”

    I ask myself, are there any constraints on what is meant by “profession”. I mean, is the profession here research scientist or is it starting up companies?

    On the other hand, if two top employees file fully fleshed out patent applications in the name of their newly-formed corporation 10X only 4 months after leaving their employer, I am left wondering how much of the work of getting the conception ready to file had already taken place in advance of that four month period. When did the inventors first conceive the idea of forming 10X, I wonder.

    Bad luck for Bio-Rad, that there is probably little they can do to challenge the validity and enforceability of the 10X patent portfolio outside the USA.

    1. 3.1

      Not sure there’s going to be much of a portfolio to argue about, outside the USA. Looks like there was one PCT filing, WO2014028537, that gave rise to one EPO filing, 2885418, which has met with a slew of objections at the EPO. Still, 10X has recently filed a divisional at the EPO. Perhaps that can be carried through to issue.

      It’s an occupational hazard of hiring motivated and highly creative business-savvy persons, isn’t it? If you don’t make it worth their while to stay, they leave, and take their creative thoughts with them. Nothing wrong with that though, is there?

  6. 2

    Yeah I noticed that too. I think it was meant to be in reference to the earlier sentence: “In defense, Bio-Rad argued that it owns the patents.”

  7. 1

    Spanning two paragraphs, the writing is unclear:

    and the Federal Circuit has now affirmed.

    The Federal Circuit disagreed.

    1. 1.1

      Specifically, the “disagreed” part was meant to refer back to that sentence, I think.

Leave a Reply

Your email address will not be published. Required fields are marked *

You can click here to Subscribe without commenting

Add a picture