Business Law Journal

On June 29, 2021, the Supreme Court upheld but narrowed the “well settled” patent law doctrine of assignor estoppel, a common law equitable doctrine that prohibits an inventor from assigning a patent to someone and later challenging the validity of the assigned patent in litigation.  In a 5-4 decision authored by Justice Kagan, the Supreme Court clarified in Minerva Surgical, Inc. v. Hologic, Inc., 594 U.S. ___ (2021), that “the doctrine applies when, but only when, the assignor’s claim of invalidity contradicts explicit or implicit representations he made in assigning the patent.”  Under Minerva, assignor estoppel does not apply where an assignee asserts patent claims that are materially broader than what the assignor had assigned.

While the Court’s clarification and narrowing of the assignor estoppel doctrine is not likely to have significant impacts on patent litigation generally, it may mark a significant victory for employee mobility and public policy in favor of post-employment competition in disputes with former employees and their new employers over patented inventions assigned to the former employer in an employee inventions assignment agreement.

The invention at the heart of the dispute is a device to treat abnormal uterine bleeding.  The inventor filed a patent application for the device which used a “moisture permeable” applicator head to destroy targeted cells in the uterine lining.  He later assigned his interest in the application and any future continuation applications to his company, Novacept, Inc. (“Novacept”).  A patent was eventually granted for the device, and Novacept, along with its assets and patent portfolio, were sold to another company.  In another subsequent sale, Hologic acquired all patent rights to the device originally assigned by the inventor to his former company, Novacept.

Soon thereafter, the inventor founded Minerva, a competing company where he developed and patented an improved device to treat abnormal uterine bleeding that, unlike the original device, was “moisture impermeable.”  Meanwhile, Hologic filed a continuation application to add a claim that covered all applicator heads, including “moisture impermeable” heads.  After the continuation application issued, Hologic sued Minerva for infringing the newly expanded patent.

Minerva argued that the new, broad patent claim was invalid because it did not match the original patent’s description, which described the “water-permeability” of the device.  In response, Hologic invoked the doctrine of assignor estoppel and argued that the inventor and Minerva (his new company and, essentially, his alter ego) could not challenge the patent’s validity.  The District Court agreed that assignor estoppel barred Minerva from asserting an invalidity defense and ruled that Minerva had infringed Hologic’s patent.  The Court of Appeals for the Federal Circuit mainly upheld the judgment on assignor estoppel grounds.  The Supreme Court granted Minerva’s petition for a writ of certiorari.

Justice Kagan, joined by Chief Justice Roberts and Justices Breyer, Sotomayor, and Kavanaugh, rejected Minerva’s argument that assignor estoppel should be abolished.  The Court explained that the doctrine of assignor estoppel is “rooted in an idea of fair dealing” and “well grounded in centuries-old fairness principles.”  It prevents the about-face when an inventor assigns a patent for value and then asserts that the patent is invalid, which, if allowed, would permit the inventor to reap double profits—by gaining the consideration exchanged for assigning the patent as well as the continued right to use the covered invention.  This often arises in the context of employee invention assignment agreements in which employee-inventors assign to their employers for whom they are developing the invention all of the rights to the invention, including the right to patent the invention (and all improvements to the invention), or assign a patent application to their employer before or during the prosecution of the application.

The doctrine has a long history that began in 18^th century England and was unanimously approved by the Supreme Court nearly a hundred years ago in Westinghouse Elec. & Mfg. Co. v. Formica Insulation Co., 266 U.S. 342 (1924).  The Court also noted that adopting Minerva’s view would be untenable because it would foreclose the application of many other common law preclusion doctrines in patent cases, which would conflict with Supreme Court precedent.

The Court concluded, however, that assignor estoppel has its limits and that “[t]he Federal Circuit, in both its opinion below and prior decisions, failed to recognize those boundaries.”  In narrowing the doctrine, the Court explained that “[a]ssignor estoppel should apply only when its underlying principle of fair dealing comes into play,” such as when an inventor explicitly or implicitly warrants the validity of an assigned patent but later impeaches its validity.  The Court then identified three examples where the doctrine of assignor estoppel should not apply because the assignor never made any representations about a patent’s validity:  (i) where the assignment is for future inventions and the inventor cannot certify the validity of a patent because the invention does not yet exist; (ii) where the governing law changes so that previously valid patents become invalid; and (iii) where, like here, there is a change in the patent claims post-assignment.  Because the parties disagreed whether Hologic’s asserted claim was in fact materially broader, the Court remanded the case to the Federal Circuit to make that determination.  The Court observed that resolution of that issue will determine whether assignor estoppel applies.

Justice Barrett, joined by Justices Thomas and Gorsuch, wrote the principal dissent and contended that the doctrine of assignor estoppel was abrogated by the Patent Act of 1952, which allows an invalidity defense in any patent infringement case without exception.  Justice Barrett also disagreed with the notion that the doctrine had been “well-settled” when Congress legislated the Patent Act.  Justice Alito also dissented, stating that the question of whether assignor estoppel bars Minerva from asserting an invalidity defense cannot be answered without deciding whether Westinghouse v. Formica, which recognized assignor estoppel, should be overruled.

The Court’s decision will have important ramifications on patent litigation, technology transactions, and perhaps most significantly, employment agreements, particularly employee invention assignment agreements and other assignments of patent rights by employees to their employers, including principals and non-owners alike.  Employers should review their employee invention assignment agreements and other patent assignment agreements and consider whether revisions or additions are necessary in light of the Court’s decision in Minerva.  Organizations should also consider whether there are additional measures they can take or representations and warranties they can include in patent application assignments from inventor-employees to bolster the potential applicability of the assignor estoppel doctrine as a defense against invalidity challenges by a former employee-inventor and his or her new company/employer-competitor.

If you are an inventor or employer, or are engaged in the transfer of patent or other invention rights, it is important to consult with experienced intellectual property counsel to determine how the decision impacts you.

AALRR has a dedicated group of attorneys on its Intellectual Property Team with the experience and expertise to vigorously enforce your patents and defend you against claims of patent infringement.  Attorneys on the Firm’s Intellectual Property Team can also assist you with negotiating and drafting assignment agreements and other transfer documents.  Contact the authors for assistance with your patent and other intellectual property needs.

This AALRR post is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process.   © 2021 Atkinson, Andelson, Loya, Ruud & Romo