On Jan 8, 2021, the U.S. Supreme Court granted certiorari in Minerva Surgical, Inc. v. Holigic, (Fed. Cir. 2020), a case dealing with patent law’s doctrine of assignor estoppel. The doctrine applies when a patent assignor is sued for patent infringement by the assignee of the previously assigned patent in federal district court. The assignor (the defendant) is estopped from claiming as a defense that the assigned patent is invalid.
On the other hand, assignor estoppel apparently does not currently apply to a post-grant administrative proceeding before the Patent Trial & Appeal Board (“PTAB”) brought by an assignor to invalidate the assigned patent. Indeed, 35 U.S.C. § 311(a) provides that “a person who is not the owner of a patent” may file an inter partes review (IPR) proceeding to address validity issues. The commentator opines that a straight-forward reading of the statutory language can hardly be interpreted to mean that “non-owner” includes a patent assignor. Unfortunately, the statute does define “owner.” Nevertheless, the Federal Circuit Court of Appeals has held that “assignor estoppel has no place in IPR proceedings.” That is, an assignor is free to seek patent invalidation in an IPR proceeding. Arista Networks, Inc. v. Cisco Sys., Inc. (Fed. Cir. 2018).
Currently, assignor estoppel as used by the federal courts does not preclude reliance by the assignor-defendant on a prior invalidity decision by the PTAB. In Minerva, alleged infringer Minvera Surgical, Inc. (a company later started by the patent assignor), which sold a surgical procedure system competing with Plaintiff-Assignee Holigic’s own system, managed to invalidate one of the patents originally assigned to Holigic’s predecessor-in-interest in an IPR administrative proceeding. Although the district court could not itself invalidate the patent under the doctrine of assignor estoppel, it could rely on the IPR’s invalidation. At the district court level, the PTAB’s earlier invalidation prevented the possibility of on-going royalties payable to Holigic by Minerva and an injunction blocking sales of Minerva’s system.
The Federal Circuit Court of Appeals reluctantly affirmed the district court’s judgement in April 2020, mindful of the seeming unfairness to Holigic. For example, Judge Kara Stoll’s opinion stated: “Given the odd circumstances created in this case, I suggest that it is time for this court to consider en banc the doctrine of assignor estoppel as it applies in the district court and in the Patent Office.”
The Federal Circuit did not take up her suggestion, but the Supreme Court now has.
This commentator is on the side of the Assignee’s successor-in-interest (Hologic) and would argue an Assignor should not be eligible to invalidate a patent in an IPR proceeding. For good and valuable consideration, the patent inventor sold his patent rights, originally assigned to the company he founded (Novacept), to Cytyc Corp. for $325 million in 2004. Cytyc was in turn acquired by Holigic. Presumably the valuation was based on the value of the patents being acquired and the inventor’s company was adequately compensated through arms’ length dealing. Also, good faith and fair dealing are supposed to be “built in to” any contract. In fact, assignment is a way for many inventors to receive good and valuable monetary consideration when they do not have the financial resources or desire to commercialize their invention. The ability to assign patent rights also encourages innovation.
Then, after collecting a lot of money, and, instead of developing a patently distinct system, the inventor started Minerva Surgical to sell the very system disclosed in the assigned patents. Patent Owners, and by extension Patent Assignees, ought to be entitled to stability in patent law during the patent’s lifetime. Unfortunately, this stability is being routinely eroded through both IPR proceedings and the courts particularly with respect to lawsuits stemming from the infamous Alice v. CLS decision and its progeny.
Allowing patent assignors to invalidate assigned patents would only further erode patent stability. It is one thing for an invalidation IPR proceeding to be commenced by an infringer with no former contractual relationship with the patent owner as in an assignor-assignee relationship; it’s quite another situation where the alleged infringer is the original assignor as in the Minerva Surgical v. Holigic case. Even Judge Stoll opined that the IPR’s invalidation of the assigned patent was unfair. Additionally, potential acquirers of patents may well question whether the assignor will behave nefariously and may have information (e.g., knowledge of prior art) that could be used to invalidate the patent he is assigning for a “pretty” sum whether by the assignor or a third party.
Although “tight” assignment contracts can be written, any contract is only as good as the fair-dealing of the contracting parties. Accordingly, the commentator hopes that the Supreme Court concludes that the doctrine of assignor estoppel is found to be applicable to both IPR proceedings and patent infringement lawsuits brought in a court of law. Common sense should tell us that Congress was not intending that the word “non-owner” includes the assignor of a patent who would later turn against the assignee and seek patent invalidation of the assigned patent. If the Court concludes otherwise, perhaps patent assignment contracts should start including a provision that for good and valuable consideration received, the Assignor/successor in interest will not seek to invalidate the patent being assigned in an IPR proceeding.
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