981 F.3d 1045
Fed. Cir.2020Background
- Plaintiffs: Whitewater West (successor to Wave Loch) sued inventors Richard Alleshouse and Yong Yeh and assignee Pacific Surf Designs, alleging Alleshouse’s employment agreement required assignment of three patents (U.S. Pat. Nos. 9,044,685; 9,302,189; 9,592,433) and that Yeh was improperly named as co‑inventor.
- Alleshouse had signed a broad Covenant Against Disclosure and Covenant Not to Compete with Wave Loch while employed; its assignment clause required assignment of inventions “resulting from or suggested by” his work or “in any way connected to” the employer’s existing or contemplated business, with no temporal or geographic limit.
- Alleshouse resigned in 2012, later filed provisional patent applications (Oct. 2012) with Yeh; patents issued in 2015–2017. Whitewater claimed ownership via the assignment clause and sought correction of inventorship.
- The district court held the assignment clause valid, found breach by Alleshouse, and removed Yeh as co‑inventor. Defendants appealed, challenging validity under California Business & Professions Code § 16600 and California Labor Code §§ 2870, 2872.
- The Federal Circuit reversed: it held the assignment provision invalid under § 16600 as an unlawful restraint on former employment; it concluded § 2870 does not clearly authorize temporally unlimited post‑employment assignment clauses and therefore does not save the clause; because the assignment was invalid, Whitewater lacked standing to pursue inventorship correction under 35 U.S.C. § 256.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of assignment clause under Cal. Bus. & Prof. Code § 16600 | Clause valid; it only captures inventions tied to employer business or arising from employment | Clause is an unlawful, broad restraint on post‑employment invention rights | Clause is invalid under § 16600 as a substantial restraint on former employee mobility |
| Whether Cal. Lab. Code § 2870 authorizes/overrides § 16600 for post‑employment inventions | § 2870 permits assignment of inventions that "relate to" employer; thus it saves clause | § 2870 does not clearly reach post‑employment inventions and cannot override § 16600 | § 2870 does not clearly apply to post‑employment inventions; harmonization requires reading § 2870 not to save the clause |
| Breach of contract (assignment failure) | Whitewater: Alleshouse breached by not assigning patents | Defendants: agreement invalid so no enforceable assignment obligation | District court found breach, but appellate court reversed because assignment provision invalid |
| Correction of inventorship under 35 U.S.C. § 256 | Whitewater: as assignee it can seek correction and removal of Yeh | Defendants: Whitewater lacks ownership interest (no valid assignment), so no standing | Whitewater lacked standing once assignment provision invalidated; inventorship judgment reversed |
Key Cases Cited
- Ixchel Pharma, LLC v. Biogen, Inc., 470 P.3d 571 (Cal. 2020) (california supreme court stresses § 16600’s broad protection of employee mobility and limits on post‑employment restraints)
- Edwards v. Arthur Andersen LLP, 189 P.3d 285 (Cal. 2008) (invalidates restrictive post‑employment covenants under § 16600; emphasizes public policy favoring employee mobility)
- Golden v. California Emergency Physicians Medical Group, 896 F.3d 1018 (9th Cir. 2018) (explains § 16600 forbids restraints of substantial character on former employees)
- Golden v. California Emergency Physicians Medical Group, 782 F.3d 1083 (9th Cir. 2015) (holds § 16600’s categorical language covers restraints beyond classic noncompetes)
- Board of Trustees of Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 583 F.3d 832 (Fed. Cir. 2009) (distinguishable; involved non‑employment visitor arrangement and found no § 16600 restraint)
- Applied Materials, Inc. v. Advanced Micro‑Fabrication Equip. (Shanghai) Co., 630 F. Supp. 2d 1084 (N.D. Cal. 2009) (invalidates broadly phrased invention‑assignment clause under § 16600)
- Guth v. Minnesota Mining & Mfg. Co., 72 F.2d 385 (7th Cir. 1934) (early precedent criticizing perpetual assignment of post‑employment inventions as unconscionable)