Doctrine of Assignor Estoppel to be Reviewed by U.S. Supreme Court

Mintz - Intellectual Property Viewpoints

On January 8, 2021, the U.S. Supreme Court agreed to hear a case calling for it to abolish or limit the doctrine of assignor estoppel. See Minerva Surgical, Inc. v. Hologic, Inc., et al., No. 20-440, 2021 WL 77248 (U.S. Jan. 8, 2021). Mintz previously discussed the Federal Circuit’s decision, which found assignor estoppel to be applicable. The Federal Circuit’s decision highlighted discrepancies that exist in the application of assignor estoppel in district court cases and proceedings before the Patent Trial and Appeal Board (PTAB). The Supreme Court’s review should help resolve this discrepancy.

Assignor estoppel prevents an assignee who assigned his or her patent or patent application rights from later challenging the validity of the patent. Typically, it arises when an assignee sues the assignor or the assignor’s new company alleging patent infringement. In such a case, the assignor (and anyone in privity with the assignor) is estopped from raising patent invalidity as a defense in an infringement suit.

Proponents of assignor estoppel argue the doctrine prevents unfairness and injustice as it would be unfair to allow an assignor, such as an inventor, to assign patent rights (making a profit in doing so) and then turn around and claim what was divested to the assignee is actually invalid. See Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1224 (1988).

Opponents of assignor estoppel argue the doctrine is outdated and shields bad patents from challenges by the very people who know the patent’s claims the best. Opponents also contend assignor estoppel restricts employee mobility because once an inventor moves to a new company or starts a new company, the new company faces a significant disadvantage if sued by the assignee as it cannot raise patent invalidity as a defense. As such, they argue assignor estoppel can disincentivize competitors from hiring inventor-assignors or even former employees who worked with an inventor-assignor (who may be in privity with the assignor) for fear they are a liability if patent infringement litigation ensues.

Furthermore, an assignee can invoke assignor estoppel in district court, but not in an inter partes review (IPR) at the PTAB. As such, the fate and validity of a patent in an assignee/assignor infringement case depends heavily on the forum in which the case is heard. Both sides in Minerva agree the Court should address this discrepancy.

If the Court abolishes assignor estoppel this would allow assignors and their privies to challenge the validity of their assigned patent, either as an affirmative defense to a patent infringement action or to seek declaratory relief invalidating the patent altogether. The Court could also limit assignor estoppel to apply only to the assignor (rather than a wide range of parties in privity with the assignor) or to only apply to claims prosecuted by the inventor-assignor (rather than amended claims covering things the inventor never intended).

Consequently, if assignor estoppel is abolished or limited, a potential assignee will likely want to invest more in the due diligence phase, such as seek a patent validity opinion prior to acquiring a patent. A future assignee may also want to consider bargaining for stronger contractual language in assignment agreements, such as require the assignor to assist with any challenges to the patent’s validity. However, it remains unknown whether a court would enforce such contractual language.

Minerva’s brief was submitted this week on February 22, 2021, so the Court has yet to hear oral arguments. As the case progresses, stay tuned for what will hopefully be a clarifying decision on assignor estoppel.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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