Arcane aspects of the law are frequently analogized as constituting "traps for the unwary," and patent law seems to have more than its share of minutiae that fall within that characterization. The equitable principle of assignor estoppel is one example of such minutiae, and it recently became even easier to entrap the unwary with the Federal Circuit's decision in MAG Aerospace Industries, Inc. v. B/E Aerospace, Inc.
The case involved U.S. Patent Nos. 6,536,054 ("'054 patent"), 6,536,055 ("'055 patent"), and 6,353,942 ("'942 patent") directed to repairing vacuum toilets used in commercial aircraft. The details of the substantive portions of the case, including claim construction and summary judgment of non-infringement, were unremarkable. But the District Court granted summary judgment that the claims of the three patents-in-suit were not invalid not on substantive grounds but on the basis that defendant B/E was estopped from challenging validity based on assignor estoppel.
The factual predicate for the District Court's decision is as follows. One of the named inventors, Mark Pondelick, assigned his rights to his employer who in turn assigned its rights to MAG. Thereafter, Mr. Pondelick was employed by B/E and there was evidence adduced at trial that he was hired as part of B/E's efforts to market a product to compete with MAG. This evidence was sufficient for the District Court to apply the assignor estoppel doctrine in granting summary judgment in favor of MAG.
The Federal Circuit affirmed, in an opinion by Chief Judge Prost joined by Judges Mayer and Reyna. The opinion relies upon Diamond Sci. Co. v. Ambico, Inc., 848 F.2d 1220, 1224 (Fed. Cir. 1988) for the principle that the assignor or his privity is estopped from challenging the validity of the assigned patent. The showing of privity, that is, extending the estoppel from the inventor to another party in privity with the inventor, is (like the doctrine itself) dependent on the equities. The Court recited these considerations, taken from its Shamrock Techs., Inc. v. Med. Sterilization, Inc., 903 F.2d 789, 793 (Fed. Cir. 1990) decision, as follows:
If an inventor assigns his invention to his employer company A and leaves to join company B, whether company B is in privity and thus bound by the doctrine will depend on the equities dictated by the relationship between the inventor and company B in light of the act of infringement. The closer that relationship, the more the equities will favor applying the doctrine to company B.
The factors relied upon by the District Court (that formed the basis for the Federal Circuit's affirmance) were also taken from the Court's Shamrock Technologies decision and included:
(1) the assignor's leadership role at the new employer;
(2) the assignor's ownership stake in the defendant company;
(3) whether the defendant company changed course from manufacturing non-infringing goods to infringing activity after the inventor was hired;
(4) the assignor's role in the infringing activities;
(5) whether the inventor was hired to start the infringing operations;
(6) whether the decision to manufacture the infringing product was made partly by the inventor;
(7) whether the defendant company began manufacturing the accused product shortly after hiring the assignor; and
(8) whether the inventor was in charge of the infringing operation[.]
Here, the District Court found that B/E benefited from Mr. Pondelick's knowledge of the claimed invention in developing the accused infringing product and indeed that B/E hired him specifically to develop that product. Mr. Pondelick was B/E's Director of Engineering and later Vice President and General Manager of the company division that made the product. B/E argued that Mr. Pondelick joined the company only after it had made the decision to develop the accused infringing toilet and that he was hired in an effort to avoid infringement. In addition, unlike the precedent relied upon by the District Court, Mr. Pondelick did not have any more than a "negligible" financial interest in B/E.
The Federal Circuit held that, in view of all these factors it could not conclude that the District Court erred, particularly insofar as B/E had "'availed itself of [Mr. Pondelick's] knowledge and assistance' to conduct the alleged infringement," citing Intel Corp. v. U.S. Int'l Trade Comm'n, 946 F.2d 821, 839 (Fed. Cir. 1991).
While this decision, like all decisions in equity, is fact-specific and particular to the parties involved and their conduct, the decision does suggest that the Federal Circuit will permit district courts to spread a wide net in discerning assignor estoppel whenever the assigning inventor is employed by the accused infringer and the infringer has made use of the inventor's particular knowledge in designing the accused infringing article. This suggests that parties should scrutinize prospective employees' backgrounds carefully; the very expertise that may make someone an attractive hire may make it less likely that a company will ever be able to challenge the validity of any patent with which the employee has been involved.
MAG Aerospace Industries, Inc. v. B/E Aerospace, Inc. (Fed. Cir. 2016)
Panel: Chief Judge Prost and Circuit Judges Mayer and Reyna
Opinion by Chief Judge Prost
