May 4, 2021
On April 21, the U.S. Supreme Court heard oral arguments in Minerva Surgical, Inc. v. Hologic, Inc., a case involving whether the doctrine of assignor estoppel should be retained, abolished, or limited. In general, assignor estoppel bars assignors and their privies from challenging the validity of patent rights they have assigned. The Court’s decision in this case could affect whether an inventor or other assignor of patent rights will be estopped from challenging the validity of a patent asserted against the assignor.
The Supreme Court first endorsed the doctrine of assignor estoppel in a 1924 decision in Westinghouse Electric & Mfg. v. Formica Insulation, calling assignor estoppel a settled rule of law. Since Westinghouse, many courts have applied the doctrine of assignor estoppel to bar validity challenges. However, the doctrine of assignor estoppel was somewhat undermined by the Supreme Court’s decision in Lear, Inc. v. Adkins, which abolished a similar doctrine of licensee estoppel. Assignor estoppel was further undermined by the Federal Circuit’s decision in Arista Networks, Inc. v. Cisco Systems, Inc. holding that assignor estoppel does not apply in inter partes review (IPR) proceedings. The Federal Circuit in Arista Networks commented that Lear “cast some doubt on [assignor estoppel’s] continued viability.” Currently the doctrine of assignor estoppel is only relevant to validity challenges in federal court.
In Minerva, one of the inventors, Csaba Truckai, assigned his rights in a patent application to NovaCept, Inc., a company that Truckai cofounded. Later Cytyc Corporation acquired NovaCept, and subsequently Hologic acquired Cytyc Corporation. Truckai left Hologic and founded Minerva Surgical, where he developed an endometrial ablation system that Minerva began selling. Hologic sued Minerva for infringement of patents that had issued from the patent application that Truckai had assigned to NovaCept.
Here the relevant patent claim (claim 1) Hologic asserted against Minerva was prosecuted nine years after Truckai assigned the patent application to NovaCept. Claim 1 is not expressly limited to a moisture-permeable applicator head, and Minerva contended that claim 1 is invalid because the specification described only a permeable applicator head, not an impermeable applicator head. Minerva sought to invalidate claim 1 under 35 U.S.C. § 112. Hologic asserted that assignor estoppel barred Minerva from challenging the validity of the patents.
The district court granted a motion by Hologic for summary judgment that assignor estoppel barred Minerva from asserting invalidity of the Hologic patents. The case proceeded to trial, and a jury awarded $4.8 million in damages. Hologic subsequently moved to enjoin Minerva from continuing to sell the accused medical device.
The Federal Circuit held that the district court did not abuse its discretion in holding that assignor estoppel barred Minerva’s section 112 invalidity challenge to the validity of claim 1. The Federal Circuit rejected Minerva’s argument that assignee estoppel should not bar its invalidity challenge because Hologic broadened its patent claims after Truckai’s assignment to cover non-moisture-permeable applicator heads.
In the Supreme Court, Minerva argued that the doctrine of assignor estoppel should be abolished in the context of district court proceedings, aligning district courts with the Federal Circuit’s Arista Networks holding that the doctrine does not apply in IPR proceedings. Minerva argued that the Supreme Court’s decision in Scott Paper Co. v. Marcalus Mfg. Co. held that assignor estoppel does not apply when an assignor contests a patent’s validity on the ground that the invention in the asserted patent practices an expired patent.
Minerva further argued that assignor estoppel should not apply to a claim that was not in the patent application that Truckai assigned. Minerva sought to have the case remanded for consideration of the section 112 issue of whether the asserted claim was supported by the claim in the application at the time Truckai assigned it. At the least, Minerva argued, assignor Truckai should be allowed to show that the assignee is asserting a patent claim that is broader than what Truckai adequately described and enabled.
Hologic argued that Westinghouse and a long line of precedent are a clear affirmation of assignor estoppel. Congress has maintained the relevant statutory language through multiple revisions of patent law since Westinghouse. Hologic further argued that if the costs and benefits of assignor estoppel are to be reweighed, it should be left to Congress to do so. The Supreme Court should not undermine the hundreds of thousands of still-extant bargains struck against the backdrop of assignor estoppel. Truckai and his co-inventors sold the rights to future patent applications with the understanding that the assignee would secure whatever claims the USPTO would allow. If Truckai wanted a different deal, he was free to contract around assignor estoppel under Mentor Graphics.
The United States filed a brief as amicus curiae, supporting neither party. In its brief, the federal government argued that the Federal Circuit’s test for assignor estoppel, which bars an assignor from challenging any claim relating to an assigned invention, even if that claim looks nothing like the claims that existed at the time of the assignment, is too broad. Assignor estoppel should be limited to a true estoppel doctrine reflecting its origins in estoppel by deed. The federal government argued that the Supreme Court should use this case to clarify the “contours” of assignor estoppel, but not abolish the doctrine. Specifically, the U.S. argued in its amicus brief:
Courts should therefore apply assignor estoppel only where the assignor sells patent rights for valuable consideration in an arm’s-length transaction, then either contests the validity of a claim materially identical to a claim issued or pending at the time of the assignment, or otherwise contradicts pre-assignment representations about the patent’s validity.
The justices’ questions at the April 21 oral argument provide clues regarding their concerns and how the Court might rule in the case.
Justices Roberts, Alito, Kagan, Gorsuch, Kavanaugh, and Barrett asked questions about the possible implications of the doctrine of stare decisis for the Court’s decision on assignor estoppel. Questioning by Justices Roberts, Gorsuch, and Barrett suggests they may not feel strongly constrained by stare decisis in this case. On the other hand, questioning by Justices Alito, Kagan, and Kavanaugh suggests they may feel more constrained by stare decisis in limiting or eliminating assignor estoppel.
Some of the justices’ questioning suggested they may be reluctant to make any changes to assignor estoppel, with one of them noting that for decades, millions of patents and applications have been assigned on the assumption that assignor estoppel bars assignors from later challenging the validity of assigned patent rights. The questioning also noted that Congress did a major overhaul of the Patent Act in 2011 without changing assignor estoppel.
The federal government’s test for applying assignor estoppel would require an arm’s length transaction for valuable consideration and materially identical claims. At least one justice indicated the proper analogy to assignor estoppel is estoppel with respect to personal property where the elements of misrepresentation and reliance are required, rather than to estoppel by deed (as the federal government had argued), where neither misrepresentation nor reliance is required.
Some of the justices questioned why estoppel should be applied where there has been no misrepresentation by the assignor and where the buyer—often large and sophisticated, and often more so than the inventor assignor—could easily determine validity on its own (i.e., where there is no reliance by the assignee). Several of the justices indicated that getting rid of reliance would disadvantage individual inventors to the advantage of very large corporations, who often are the purchasers.
Some of the justices’ questions indicated support for requiring the claim assigned to be materially identical to the patent claim being challenged for assignor estoppel to apply. At least one justice cited a fairness question, namely, if assignor estoppel is not tethered in some way to the scope of the rights assigned, then why is it fair to estop an assignor from seeking to invalidate something that he or she did not actually assign?
At least one justice questioned whether an assignment has valuable consideration where a company hires an employee and the employee signs over to the employer all inventions that they may discover in the course of their employment.
In conclusion, the outcome of this case will merit close attention by inventors, employers of inventors, and other potential assignees of inventors. The Court’s decision could affect the situations in which assignor estoppel will be relevant and, if relevant, the scope of that estoppel. Possibly, assignor estoppel may not apply to claims not materially identical to claims assigned or where the assignee did not rely on representations by the assignee. This case also potentially could impact what is deemed valuable consideration paid to inventors for assignor estoppel to attach to an assignment.
For more information regarding this case, please contact Fitch Even partner Stanley A. Schlitter, author of this alert.
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