The Supreme Court heard oral argument last week in Minerva Surgical Inc. v. Hologic, Inc. over the issue of assignor estoppel (transcript).
As a reminder, the case arose in an infringement suit over U.S. Patent Nos. 6,782,183 and 9,095,348. The patents were directed to "procedures and devices for endometrial ablation." Claim 9 of the '183 patent and claim 1 of the '348 patent were considered by the Court to be representative:
9. A method of detecting a perforation in a uterus, comprising the steps of:
passing an inflation medium into the uterus;
monitoring for the presence of a perforation in the uterus using a pressure sensor;
if no perforation is detected during the monitoring step, permitting ablation of the uterus using an ablation device; and
if a perforation is detected during the monitoring step, preventing ablation of the uterus.
1. A device for treating a uterus comprising:
an elongate member having a proximal portion and a distal portion, the elongate member comprising
an outer sleeve and an inner sleeve slidably and co-axially disposed within the outer sleeve;
an applicator head coupled to the distal portion, the applicator head defining an interior volume and having a contracted state and an expanded state, the contracted state being configured for transcervical insertion and the expanded state being configured to conform to the shape of the uterus, the applicator head including one or more electrodes for ablating endometrial lining tissue of the uterus;
a handle coupled to the proximal portion of the elongate member, wherein the handle comprises a frame, a proximal grip and a distal grip pivotally attached to one another at a pivot point and operably coupled to the applicator head so that when the proximal grip and the distal grip are moved closer together, the applicator head transitions from the contracted state to the expanded state;
a deflecting mechanism including flexures disposed within the applicator head, the flexures including first and second internal flexures and first and second external flexures, the first and second external flexures being coupled to the outer sleeve and the first and second internal flexures being coupled to the inner sleeve, wherein the deflecting mechanism is configured so that translating the inner sleeve relative to the frame causes the applicator head to transition from the contracted state to the expanded state; and
an indicator mechanism operably coupled to the inner sleeve, the indicator mechanism configured to indicate a dimension of the uterus [emphases added to indicate disputed claim terms not further discussed herein].
Inventor Truckai (named on both the '183 and '489 patents) founded Novocept, which developed a system for detecting perforations in a uterus that could cause serious side effects for women undergoing endometrial ablation; the system depends on introducing carbon dioxide into the uterus and monitoring gas escape. It was undisputed that Novocept's ablation product uses the claimed technology, and that inventor Truckai assigned his right to these patents to Novocept. Thereafter, Novocept was acquired by co-plaintiff Cytyc Corp., which was subsequently acquired by co-plaintiff Hologic.
Meanwhile, Inventor Truckai founded accused infringer Minerva and developed the accused infringing article, termed the Endometrial Ablation System (EAS). Hologic sued Minerva over sales of the EAS for infringing the '183 and '349 patents. Hologic moved for summary judgment that Minerva was estopped under the doctrine of assignor estoppel for both the '183 and '348 patents, which motion the District Court granted.
Assignor estoppel has differences in both philosophy and patent policy than licensee estoppel, which was abolished by the Supreme Court in Lear, Inc. v. Adkins, 395 U.S. 653, 666 (1969). Licensee estoppel, according to the Supreme Court, was against public policy because a licensee of an invalid patent, of all parties, has the most incentive to see such patents invalidated. (Similar considerations motivated the Supreme Court in MedImmune, Inc. v. Genentech, Inc.) Assignor estoppel, on the other hand, is a situation where a patent owner (frequently the inventor) has transferred ownership rights in their patent for consideration, and now wishes to challenge the transferred patent's validity. This behavior smacks of "unclean hands" or at least sharp practices, and a court in applying equitable principles should avoid permitting the assignor from involving the power of the Court to support this seeming inequity. Here, the District Court found that Inventor (and assignor) Truckai was intimately involved inter alia as founder, President, and CEO of Minerva in bringing the accused EAS product to market.
The Federal Circuit affirmed with regard to assignor estoppel issue in an opinion by Judge Stoll joined by Judges Wallach and Clevenger. The panel affirmed the District Court's grant of summary judgment based on assignor estoppel with regard to Minerva's invalidity defenses in this litigation regarding the '348 patent. The opinion notes that the Federal Circuit first had occasion to consider (and "affirm the vitality of") assignor estoppel in Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220 (Fed. Cir. 1988), which also held that the estoppel extends to those in privity with the estopped assignor (relevant here, to Minerva). The opinion provides the following basis for the continued vitality of the assignor estoppel doctrine, citing Diamond Scientific:
The public policy favoring allowing a licensee to contest the validity of the patent is not present in the assignment situation. Unlike the licensee, who, without Lear might be forced to continue to pay for a potentially invalid patent, the assignor who would challenge the patent has already been fully paid for the patent rights.
The opinion recites four commonly recited justifications for the doctrine:
"(1) to prevent unfairness and injustice; (2) to prevent one [from] benefiting from his own wrong; (3) by analogy to estoppel by deed in real estate; and (4) by analogy to a landlord-tenant relationship." [Diamond Scientific] at 1224 (alteration in original) (quoting Cooper, Estoppel to Challenge Patent Validity: The Case of Private Good Faith vs. Public Policy, 18 Case W. Res. L. Rev. 1122 (1967)).
The Court recognized that the assignor is in a unique position because of the imputed earlier representation (express or implied) that the patent had value and that it would be an injustice to permit the assignor to repudiate that earlier representation. Thus, the Court affirmed the District Court's decision that assignor estoppel prevented Minerva from asserting invalidity defenses against the '348 patent (specifically rejecting Minerva's call for the Court to "abandon the doctrine" as being contrary to Lear (for at least the reasons discussed above). While also recognizing that the doctrine should not be applied automatically it should be applied consistent with the facts and equities before the Court.
On the other hand, the panel concluded that assignor estoppel did not preclude Minerva from relying on the PTAB's decision that the '183 patent was invalid.
Minerva filed a petition for writ of certiorari, on the grounds that the Court should abrogate assignor estoppel on a number of grounds, and Hologic countered that the doctrine remains an important bulwark against the inequities that could be occasioned by permitting an inventor to assign a patent for value and then be able to argue that the patent was invalid when asserted against future infringing acts. The Court granted the writ, and twelve amicus briefs were filed including one by the U.S. Government, which provided an alternative to abrogation or maintenance.
The Court held oral argument last week, and as has become the custom in the absence of in-person argument, the proceedings took the form of each party having a few minutes to set out its position, and then the Justices in order of seniority have time to pose their questions to counsel. This format provides a nice framework for considering what each Justice asked each of the parties, which can (but does not necessarily) shed light on their thinking.
Robert Hochman, representing Petitioner Minerva, set forth the argument that the Court should strike down assignor estoppel. The doctrine is not in the Patent Act and despite the doctrine's approval by the Court in Westinghouse Electric & Manufacturing Co. v. Formica Insulation Co., 266 U.S. 342 (1924), Counsel argued that "the world didn't stop" in 1924 (even if Petitioner was willing to concede that Formica evinced Court approval of the doctrine, which they were not willing to do). This is shown by later cases, such as Scott Paper Co. v. Marcalus Manufacturing Co., 326 U.S. 249 (1945), where the Court permitted an assignor to challenge the validity of a patent. The Court's "logic" requires final abrogation of the doctrine, he argued, and in addition the sound policy goal of "[e]xposing bad patents" was such "vital patent law policy" that the Court should remove impediments against assignors being able to do so. Moreover, other doctrines (he recited "claim preclusion or issue preclusion or even equitable estoppel") were distinct from the "patent-law-specific" doctrine of assignor estoppel and did not counsel against its abrogation by the Court. Evoking equity, he argued that "an inventor should be allowed to show that the assignee is asserting a claim broader than what the inventor adequately described and enabled." The circumstances in this case, where the assignee and not the inventor prosecuted the claims at issue long after the assignment were also factors that he argued were contrary to patent law policy. And, although initially having the Chief Justice inadvertently neglect to permit rebuttal, Petitioner's counsel provided the Court with a succinct synopsis of Petitioner's petition.
Morgan Ratner, arguing for the Government, set forth the "middle path" between having the Court abrogate or uphold the doctrine. She characterized the doctrine as it now exists as being "too broad" because it prevents an assignee from challenging a patent even if the claim at issue "looks nothing like the claims that existed at the time of the assignment." To this extent the Government agreed with Petitioner but believe the doctrine should be saved because "lower courts have applied the doctrine for 140 years," the Court has approved it since 1924, and Congress did not disturb it since that time.
Matthew Wolf, arguing for Respondent Hologic, made his case that precedent favors upholding assignor estoppel, relying on the Formica decision in 1924, the Court's refusal to abrogate the doctrine in prior decisions, that lower courts had followed the doctrine for the past 100 years, and Congress has not seen fit to alter or abolish it. And it is Congress, not the Court, he argued that should address the issue should the costs and benefits of the assignor estoppel doctrine need to be reweighed.
The Chief Justice opened the questioning of Petitioner's counsel by asking about the policy arguments of "good" versus "bad" patents and the influence of assignor estoppel on efforts to promote the former and discourage the latter. Counsel emphasized the nature of the patent "bargain" that a patentee not be able to extend the scope of patent protection to aspects the specification does not entitle her to have. The Chief followed up by asking Minerva's position on the Government's compromise position, which Counsel refused to endorse. Petitioner did ask the Court not to remand back to the Federal Circuit (and hence to the District Court) based on the costs and time such an outcome would impose on Minerva.
In quizzing the Government's counsel, the Chief Justice focused on the aspects of their brief regarding the equitable factor of there having been valuable consideration obtained by the assignor that is the basis of assignor estoppel, asking what "valuable consideration" means. Counsel stated that when an inventor agrees to assign before an invention exists for example there can be no representation that the invention has value. In response to the Chief Justice's query regarding instances where the inventor is an employee who is obligated to assign inventions, the Government responded by saying that such a situation does not involve valuable consideration.
For Hologic, the Chief's questions centered around Respondent's position that the Court's precedent consistently affirmed the doctrine, noting dicta in the Court's decisions characterizing assignor estoppel as being a failure and other negative statements. In response, Counsel noted that the Court had had an opportunity to abrogate the doctrine in Scott Paper Co. v. Marcalus Manufacturing Co., 326 U.S. 249 (1945), and had not.
Justice Thomas asked Petitioner's counsel to distinguish assignor estoppel from other doctrines such as issue preclusion, which are not a part of statutory law but nevertheless are sound principles. Counsel responded by noting the differences in that those other principles had a more general application than patent law and also a different posture with regard to stare decisis. In response to the Justice's question about changes to the patent from the time it was assigned to when it was asserted, Counsel somewhat unproductively got into the weeds on patent-specific issues regarding what was disclosed and what was claimed that led the Chief Justice to more questioning along to Justice Breyer.
Turning to the Government's counsel Justice Thomas asked about the relevant assignments at issue in the case, and Counsel (perhaps wisely) noted that this was the sort of issue for the Federal Circuit to resolve.
Finally, in questioning Hologic's counsel Justice Thomas asked how far from the original assignment could assignor estoppel principles apply, relevant here because the patent in suit was different (although related by priority) from the one assigned. Counsel responded that the issue isn't what the inventor thought the invention was but what was disclosed (which determined what was assigned), and also that if the Court believed that the doctrine should be changed it was up to Congress to do so (to which the Justice asked whether Hologic wanted Congress to include assignor estoppel expressly in the statute).
In Justice Breyer's turn, he asked Petitioner's counsel about the weight of precedent and asked what limitations would be best to cabin the doctrine if the Court did not abrogate it entirely. Counsel responded that the Government's alternative formulation, that the claim at issue be "materially identical" to what was assigned, had too much ambiguity and that the issue required what Counsel termed "textual identity," and also whether the standard should be claims as pending at the time of the assignment.
Justice Breyer challenged the Government's position by positing what would be a recurring hypothetical: if the original patent claimed a widget, and the accused infringing article was a "widget-prime," wouldn't the doctrine's preclusion of the inventor challenging validity lead to a situation where the assignee could "foist [an] invention on the public forever" (fortunately that is not the case in any event). The Government responded that this is a question of claim breadth (i.e., scope) and that their formulation was intended for an arms-length transaction, not applicable to employee assignments. Counsel also noted that this was a question of what was valuable at the time of the assignment and what is at issue in the litigation with regard to claim scope.
When questioning Hologic's counsel, Justice Breyer challenged on the basis of the "problems" with assignor estoppel precedent, and that "employment practices, the nature of invention, [and] complexity " had changed since the Court's foundational case in 1924 (Formica). The Justice reiterated his concern regarding the "widget versus widget-prime" hypothetical, and his understanding that under Federal Circuit application of assignor estoppel such an extension could not be argued by an assignor. This would permit "monopolies [to be] extended improperly." Respondent replied that the world had changed "in amount not kind," and offered the post-grant review provisions of the American Invents Act as a shield against the outcome concerning the Justice.
Justice Alito asked Petitioner why this issue was before the Court and suggested the Federal Circuit was empowered by Congress for determine the scope of these patent-specific doctrines, and further that Petitioner can go to Congress if they believe the doctrine is contrary to the statutory regime. Counsel responded that assignor estoppel was another patent "doctrinal dinosaur" produced by the courts and the Court's abrogation was consistent with other instances. In response to Justice Alito's question regarding whether parties could contract around the doctrine or if that would be against public policy, Counsel stated that assignor estoppel is not "settled law" and that much of the Supreme Court's precedent "hints away" from it, for the same policy reasons enunciated in Lear, Inc. v. Adkins, 395 U.S. 653, 666 (1969), regarding licensor estoppel.
Justice Alito asked the Government's counsel whether their brief just enunciated a policy position (which in the context of the Justice's question to Minerva's counsel suggested an extension of his "go to Congress" sentiments). The Government's counsel argued that assignor estoppel was doctrinally related to estoppel by deed as opposed to estoppel by conduct, otherwise known as equitable estoppel. In response to the Justice's question regarding application of the doctrine Counsel responded that proper application was more difficult regarding instances where claims were pending at the time of an assignment, but that the Court's Westinghouse decision provides the proper analysis.
When it was Hologic's turn, Justice Alito had no questions.
Justice Sotomayor began her questioning of Petitioner's counsel with regard to their response to the Government's suggested compromise, and asked whether it isn't close to the Court's decision in Westinghouse? Pursuing the "things have changed" argument, the Justice asked whether the Government wasn't asking the Court to return to earlier applications of the doctrine, and why the Court should rule in Petitioner's favor in view of Congress not abrogating the doctrine when revising the Patent Act in 2011? Counsel asserted that between Lear and the Federal Circuit's decision in Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220 (Fed. Cir. 1988), the doctrine was believed to be dead and the Federal Circuit "revived" it. (Somewhat provocatively, Counsel asked that the Court should not permit the Federal Circuit to overrule it on this issue.)
The Justice asked the Government's counsel whether she accepted Petitioner's suggestions regarding the "materially identical" aspects of their formulation, noting that the Government's proposal did not reach overbroad claims but was limited to the claims at the time of the assignment. Counsel responded that the Government takes no issue with what is assigned being "rock solid" but that the Government does not agree "that [the] claim should exist both at the time of the assignment from the assignor and at the time of the assignment to the person ultimately bringing the challenge." This colloquy included the Justice's supposition that perhaps the doctrine has "outlived its usefulness," and also considered the changes in concepts such as "practicing the prior art" as a counter to infringement and the primacy of claim construction in modern patent jurisprudence around the issue of exactly what was estopped.
With regard to Hologic, Justice Sotomayor raised a fairness issue to the extent that what was estopped was not tethered to what was assigned, and whether it was fair to prevent the assignor from challenging aspects of the invention that the assignor had not agreed to assign? (In this, the Justice followed other Justices in focusing on what was claimed rather than what was disclosed as the basis for the estoppel.) Respondent's counsel focused on the assignment comprising what was disclosed and not limited to what was claimed at the time of the assignment, and that in this case the assignor's invalidity case was incorrect.
Justice Kagen asked Petitioner to assume precedent was sufficiently sound that the Court was not willing to abrogate it absent "special factors" as enunciated in her opinion in Kimble v. Marvel Entertainment, LLC. The Justice did not permit counsel to take recourse in the Court's Scott Paper decision, who responded with their argument that "the law has moved" from the situation in which these earlier decisions were handed down, where "practicing the prior art" was a non-infringement position rather than an invalidity argument. The Justice asked about the fairness question from the assignee's perspective, terming the behavior the doctrine precludes as "a total bait-and-switch," and Counsel responded that equitable estoppel was available as a remedy (the Justice termed this response "semantics"). When pressed by the Justice about the vitality of having the estoppel reach "exactly what was assigned" Counsel desisted from pushing back on the Justice's argument.
The Justice's questions to the Government involved distinguishing assignor and equitable estoppel, and asked whether the instances where assignor estoppel would not apply under the Government's formulation -- pre-invention assignments, continuation applications, and changes in the law -- was exhaustive. Counsel responded that she was not "hiding something" from the Court but that the principle underlying the Government's formulation was "the basic notion that what someone is saying at time two was inconsistent with what they're saying at time one." When asked about Petitioner's argument that equitable estoppel would satisfy the policy aims of assignor estoppel, Counsel responded that equitable estoppel required reliance and knowing misrepresentation. The issue here from the Government's position was "not necessarily about one party misleading another as much as confidence and conclusiveness in a particular type of formal transaction."
For Hologic's counsel, Justice Kagen asserted the hypothetical of an assignor assigning and the assignee broadening the scope of the patent; what then? Counsel reverted to the argument that Congress had provided post-grant review provisions in the AIA to police any such instances of overbroad claiming. The Justice did not acquiesce to a discussion of the Section 112 aspects of this case, and Counsel responded that the claims can be construed more narrowly when appropriate. Also, to the extent the Court perceived a need on fairness grounds for changing the practice Counsel argued it should be changed by statute by Congress.
Justice Gorsuch asked Petitioner's counsel whether equitable estoppel (which would survive should the Court abrogate assignor estoppel) be sufficient as a defense? And what if the Court adopts the Government's suggestion -- can the Justices "save the day"? Counsel noted there were disputed meanings over the claims here, and that the Government's position risks inconsistent application. The Justice then asked why equitable estoppel solves those problems and Counsel answered that equitable estoppel is based on actual representations (and requires evidence thereof, as well as reliance). The Justice then asked whether the Government's position wouldn't always favor the "big guys" (i.e., corporations) who have the resources to understand the scope of what was being assigned and would not depend on reliance, in comparison to the usual sole inventor assignor?
The Justice asked Government's counsel why there wasn't a stare decisis issue with adopting their proposal? Further, with regard to the estoppel by deed analogy, wouldn't the Government's test permit liability even in the absence of misrepresentation, particularly in instances involving a [big corporate] buyer better positioned to assess (accurately) patent scope? Government counsel argued that their proposal respected stare decisis but the issue is not reliance (which isn't a factor in assignor estoppel), saying the Government was not suggesting the Court "get rid of reliance" (the Justice disagreed). And yet further, the Justice asked why use estoppel by deed as the analogy when patents are more like personal property than real property? The Justice asked if the Government is asking the Court to modify the doctrine, "why not try to get it right"?
The Justice challenged Hologic's counsel on precedent, asserting that both Scott Paper ("a logical embarrassment") and Lear suggest assignor estoppel is defective and Westinghouse did not address the issue. The Justice also picked up on the post-grant review argument by noting that assignor estoppel applies only in district court litigation and "isn't that strange"? Respondent's counsel disagreed with the Justice's characterization of precedent, and the Justice reiterated the idea that equitable estoppel is a better "fit" than estoppel by deed due to the similarities between patents and personal property.
Justice Kavanaugh asked Petitioner's counsel why the Court should abrogate settled law since 1924, and Counsel responded that the law isn't settled, citing Scott Paper. In response to the Justice's assertion that assignees have had a reliance interest in the existence of assignor estoppel, Counsel reasserted the argument that in the 30 years between Lear and Diamond assignor estoppel was thought to be defunct.
To the Government Justice Kavanaugh cited three examples in their brief and followed Justice Kagen's argument regarding employee to employer assignments. The Government responded by saying in these instances there were not implicit allegations of value. And with regard to "materially identical" and Petitioner's objection to the phrase, Counsel stated the Government was comfortable with "rock solid" but not trivial differences between claim scope when assigned and as issued.
In response to the Justice's question to Respondent regarding the distinctions between their position and the Government's, Counsel responded that the Government's position was more stringent than invalidity, which has no "materially identical" requirement. Counsel also noted that the Government's position would present a "Hobson's choice" to an assignee during prosecution between changing pending claims by amendment for patentability reasons and then losing recourse to assignor estoppel under the Government's proposal.
Finally, Justice Barrett asked Petitioner how things would work out under an equitable estoppel regime with regard to allegations, as here, that the inventor lied? Counsel responded that equitable estoppel would not be available under the circumstances in this case. Turning to the fairness question with regard to the "turncoat inventor," the Justice asked whether there was no reliance interests to be protected because purchasers (such as large corporations) would typically not be "led down the primrose path" by assigning inventors. Counsel asserted that there would be no reliance (required for equitable estoppel) because prosecution is a "give and take" proposition (any further elaboration on this point being cut off by the Chief Justice).
The Justice noted in her questioning of the Government that while Blonder Tongue (issue preclusion) made litigation more efficient, the Government's proposal (regarding the "materially identical" requirement) would complicate matters. Government counsel responded that the issue would be straightforward, and that the estoppel shouldn't be a bright line, "on off" switch as it has been applied by the Federal Circuit. Indeed, Counsel asserted that "to the extent there are some factual questions here, we think that that's a benefit of our theory."
For Respondents, the Justice asked whether the argument implicated the re-enactment canon or settled common law argument, and if it mattered? Counsel responded that it could be either and doesn't matter, and that there is no ambiguity in the Court's precedent. The Justice challenged this assertion on the basis that the language in Scott Paper and Lear did not completely embrace the assignor estoppel doctrine and that just because the Federal Circuit had not abolished the doctrine the Court was in a position to do so.
While there are some common threads in the Justices' questioning, the current argument format has quelled to a large extent the ability for the Justices to interact during argument in a way that illustrates their inclinations. And because the Justices frequently pose questions contrary to their thinking on the issues before them it is foolhardy to attempt to discern from their questions how they are leaning. It is clear that the Justices do not see the Government's suggestion as a panacea, but other than that we must wait until the end of this Term at the latest for the Court's decision.