An employment agreement that required a former employee to assign patent rights for inventions he created after he left the company is invalid under California law, the Federal Circuit said.
The U.S. District Court for the Southern District of California improperly enforced a contract between Whitewater West Industries and former employee Richard Alleshouse that restrained his post-employment patent rights, the U.S. Court of Appeals for the Federal Circuit said in a precedential opinion.
“The impairment of the individual’s ability to pursue his profession, trade, or business would be significant,” the court said.
The lower court’s decision is an outlier among federal district courts in California that have considered “invention-assignment provisions that go beyond protection of proprietary information and ensnare post-employment inventions,” the court said. Such provisions run afoul of California laws that protect former employees, it said.
Richard Alleshouse and Yong Yeh are named as the inventors on U.S. Patent Nos. 9,044,685 and 9,302,189, on water-park attractions that individuals may ride as if surfing, and on U.S. Patent No. 9,592,433, which claims nozzle configurations for regulating water flow in those attractions. Alleshouse worked for the predecessor of Whitewater West Industries Ltd., where he signed an employment agreement giving the company rights to his future inventions.
Whitewater sued to enforce its rights to the patents, and to argue Yeh shouldn’t be listed as an inventor because he never worked for the company.
The trial court held that the agreement was valid, Alleshouse breached it, and Whitewater was entitled to the patents. It also found Yeh was improperly joined as an inventor.
The Federal Circuit reversed, finding the assignment provision void under California law because it is too restrictive.
The contract’s restrictions were unlimited in time and geography, and apply to any post-employment invention"suggested by” Alleshouse’s work for Whitewater, the court said. “The restraining effect of these requirements is evident,” it said.
Because the contract is void, Whitewater doesn’t own the patents and lacks standing to contest inventorship, the appeals court said.
Judge Richard G. Taranto wrote the opinion, joined by Judges Timothy B. Dyk and Kimberly A. Moore.
Buchalter APC represented Whitewater. Manuel de la Cerra in Carlsbad, Calif.; Fairchild, Price, Haley & Smith LLP; and Roberts IP Law represented Alleshouse and Yeh.
The case is Whitewater W. Indus. v. Alleshouse, Fed. Cir., No. 19-1852, 11/19/20.