August 12, 2021
August 12, 2021
“Assignor Estoppel in Patent Infringement Cases: Supreme Court Upholds, But Narrows Doctrine,” by Thomas Shewmake
Seed IP senior associate, Thomas Shewmake, recently authored the article below. Tom focuses his practice on intellectual property enforcement, defense and litigation matters. His experience includes patent, trademark, copyright, and trade secret cases spanning a wide range of industries and technologies. He received a B.S. degree in Bioengineering from the University of California–Berkeley in 2003 and an M.S. degree in Bioengineering from Arizona State University in 2008. Tom was awarded his J.D. cum laude from the University of Arizona James E. Rogers College of Law in 2011.
"Assignor Estoppel in Patent Infringement Cases: Supreme Court Upholds, But Narrows Doctrine"
On June 28, 2021, the Supreme Court issued its decision in Minerva Surgical, Inc. v. Hologic, Inc., in which the Court rejected the Federal Circuit’s broad interpretation of the patent-law doctrine of assignor estoppel. While the Supreme Court upheld the validity of the doctrine in the 5-4 decision, it also narrowed the doctrine’s application, holding that “[t]he doctrine applies when, but only when, the assignor’s claim of invalidity contradicts explicit or implicit representations he made in assigning the patent.” Slip Op. at 1.
At issue in Minerva was a device used to treat abnormal uterine bleeding, which uses an applicator head to destroy targeted cells in the uterine lining. The device, called the NovaSure System, had originally been invented in the late 1990s by Csaba Truckai. After filing a patent application for the device, Mr. Truckai assigned his interest in the application, as well as any future continuation applications, to a company he founded called Novacept, Inc. The application subsequently issued as a patent, and the device was approved for use by the FDA. Through a series of assignments, the patent and related patent applications were eventually transferred in 2007 to Hologic, who continued to sell the NovaSure System throughout the United States.
In 2008, Mr. Truckai founded Minerva, where he developed a new device for the treatment of abnormal uterine bleeding. Whereas his previous invention utilized an applicator head that was considered “moisture permeable” – meaning that it conducts fluid out of the uterine cavity during treatment – his newly developed device utilized a “moisture impermeable” applicator head, which did not remove any fluid during treatment. Minerva obtained a patent for the device, and in 2015 it was approved for commercial sale.
Hologic meanwhile filed a continuation application in 2013 seeking to expand its patent coverage of the NovaSure System. Among the new claims pursued by Hologic was a broad claim that encompassed an applicator head without regard to whether it is moisture permeable. In 2015, the PTO issued a patent that included the new claim.
Shortly thereafter, Hologic asserted the claim against Minerva in a lawsuit filed in the District of Delaware. In addition to contending that its device did not infringe Hologic’s amended patent, Minerva also asserted that Hologic’s newly issued patent claim was invalid. Specifically, Minerva contended that the broad claim was invalid for lack of enablement and failure to provide an adequate written description, because the claim did not require that the applicator head be moisture permeable. To counter Minerva’s invalidity defense, Hologic invoked the doctrine of assignor estoppel, arguing that because Truckai assigned the original patent application, he and Minerva, which is essentially his alter-ego, could not attack the patent’s validity.
The District Court agreed with Hologic and barred Minerva’s invalidity defense, while also finding that Minerva’s device infringed Hologic’s patent. The Federal Circuit subsequently affirmed the judgment and upheld the District Court’s application of assignor estoppel. In upholding the “continued vitality” of the doctrine, the Federal Circuit rejected Minerva’s argument that the doctrine should be narrowed to exclude application in the situation presented in this case, where the asserted claim was broadened after it had been assigned by Truckai.
The Supreme Court’s Decision
The Supreme Court subsequently granted Minerva’s petition for certiorari. Although the Court upheld the doctrine’s validity, the Court ruled that the Federal Circuit “failed to recognize the doctrine’s proper limits.” That is, “[t]he doctrine applies only when an inventor says one thing (explicitly or implicitly) in assigning a patent and the opposite in litigating against the patent’s owner.” Slip Op. at 5.
Justice Kagan, joined by Chief Justice Roberts and Justices Breyer, Sotomeyor, and Kavanaugh, began the Court’s analysis by recounting the history of the doctrine of assignor estoppel, noting that the doctrine got its start in late 18-century England and first showed up in American courts about 100 years later, in 1880. The Court described the “classic case” of assignor estoppel as follows:
The classic case (different in certain respects from the one here) begins with an inventor who both applies for and obtains a patent, then assigns it to a company for value. Later, the inventor/assignor joins a competitor business, where he develops a similar—and possibly infringing—product. When the assignee company sues for infringement, the assignor tries to argue—contrary to the (explicit or implicit) assurance given in assigning the patent—that the inventor was never patentable, so the patent was never valid.
Slip Op. at 5. The Court then explained that it first endorsed the doctrine of estoppel in Westinghouse Elec. & Mfg. Co. v. Formica Insulation Co., 266 U.S. 342 (1924), in which it grounded the application of the doctrine in a principle of fairness: “If one lawfully conveys to another a patented right, fair dealing should prevent him from derogating from the title he has assigned.” Slip op. at 7 (quoting Westinghouse, 266 U.S. at 350). The Westinghouse decision also recognized certain limits on the doctrine, including that an assignor will not be estopped from arguing about how to construe an asserted patent’s claims, and held open the possibility that other limitations may be appropriate as well. Thus, despite the doctrine’s function in precluding an assignor of a patent from asserting invalidity, the Court noted that the doctrine is not intended to completely bar the assignor from defending against a patent infringement suit.
The Court next turned to Minerva’s three arguments for abolishing the doctrine: 1) that Congress repudiated the doctrine in the Patent Act of 1952; 2) that the Supreme Court’s post-Westinghouse cases “leave no room for the doctrine to continue”; and 3) that the doctrine keeps bad patents alive by imposing too high of a barrier to invalidity challenges.
On the first point, the Court was not convinced by Minerva’s assertion that the statutory language stating that “[i]nvalidity” of a patent “shall be [a] defense in any action involving infringement” meant that invalidity must be an available defense in every infringement action, such that it precluded the application of assignor estoppel. Minerva’s interpretation of the statute would improperly foreclose a number of other well-established doctrines, including equitable estoppel, collateral estoppel, res judicata, and law of the case. Instead, the Court concluded that assignor estoppel was a recognized “background principle” of patent law in 1952, and Congress gave no indication in the Patent Act that it should be terminated.
The Court similarly rejected Minerva’s second argument that the Court’s prior decisions in Scott Paper Co. v. Marcalus Manufacturing Co., 326 U.S. 249 (1945), and Lear, Inc. v. Adkins, 395 U.S. 653 (1969), repudiated or eliminated the assignor estoppel doctrine. Rather, the two post-Westinghouse cases merely “police[d] the doctrine’s boundaries.” Scott Paper “did nothing more than decline to apply assignor estoppel in a novel and extreme circumstance.” Slip Op. at 11. Lear, on the other hand, dealt with a different type of estoppel—licensee estoppel—which is not supported by the same rationale as assignor estoppel because “[t]he licensee is a buyer of patent rights, not a seller” and “has given no assurances of the patent’s worth.” Id. at 12.
Minerva’s third argument concerning public policy similarly failed to convince the Court to do away with assignor estoppel. Any policy goal of “weed[ing] out bad patents” was outweighed by the more significant “demand for consistency in dealing with others” reflected by the assignor estoppel doctrine: “When a person sells his patent rights, he makes an (at least) implicit representation to the buyer that the patent at issue is valid—that it will actually give the buyer his sought-for monopoly. In later raising an invalidity defense, the assignor disavows that implied warranty.” Slip Op. at 13-14.
After giving its endorsement of the validity of assignor estoppel, the Court next provided examples of some limitations on the doctrine. First, the Court noted that assignments from employees to employers involving patent rights in future inventions will typically not include any representation that a patent is valid because the invention may not yet exist at the time of assignment. Second, in some cases a change in governing law may operate such that a patent that was valid at the time of its assignment later becomes invalid. Finally, a change in the scope of the claims of a patent or patent application that occurs after the patent or patent application is assigned may result in the scope expanding to beyond that which the assignor intended to be patentable. In each of these cases, there is no express or implied warranty at the time of the assignment that is inconsistent with the assignor’s later assertion of invalidity, and therefore assignor estoppel would not apply.
The Court found the third limitation to be most relevant to the facts of this case. Specifically, Minerva argued that assignor estoppel should not apply because the claim it was challenging—which Hologic had sought in the continuation application in 2013—was materially broader than the claims that Truckai had originally assigned in the 1990s. Because the Federal Circuit declined to consider this issue, the Court remanded the case to the lower court to determine whether the doctrine could properly be applied to bar Minerva’s invalidity defense: “If Hologic’s new claim is materially broader than the ones Truckai assigned, then Truckai could not have warranted its validity in making the assignment. And without such a prior inconsistent representation, there is no basis for estoppel.” Slip Op. at 16.
Justices Alito and Barrett filed dissents, with Justices Thomas and Gorsuch joining Justice Barrett’s dissent. Justice Alito did not believe that the issue presented could be decided without the Court deciding whether or not to overrule Westinghouse. Because the Court declined to do so, Justice Alito believed that the writ of certiorari was “improvidently granted.” Justice Barrett, on the other hand, argued that assignor estoppel could have survived the 1952 Patent Act only “(1) if Congress ratified Westinghouse when it reenacted the assignment provision in 1952, or (2) if assignor estoppel was part of the well-settled common-law backdrop against which Congress legislated in 1952.” Finding neither of these alternatives satisfied, Justice Barrett would have held that the 1952 Act did not incorporate the doctrine as a valid challenge to an invalidity defense.
Assignor estoppel continues to be a valid means for challenging the ability of an assignor of a patent or patent application to later assert that the patent is invalid. However, the application of the doctrine is limited to only situations in which the assignor’s later assertion of invalidity is inconsistent with an express or implied warranty made by the assignor at the time of assignment. Thus, whenever possible, assignees of patent rights should ensure that such warranties are actually made at the time of assignment in order to preserve a potential future application of the doctrine. Assignees should also be aware that attempts to materially broaden the scope of patent claims after the assignment may result in a patent that is susceptible to an invalidity challenge by the assignor.
Please read the full case here.