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Assignor Estoppel Narrowed but Largely Intact After Minerva Surgical v. Hologic

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The U.S. Supreme Court’s June 29 decision in Minerva Surgical, Inc. v. Hologic, Inc. refined the boundaries of assignor estoppel and reined in lower courts’ broad reading of the doctrine.  No. 20-400, Slip Opinion (June 29, 2021).  The Federal Circuit had been “expansively” applying assignor estoppel to bar assignors of patent rights from challenging the validity of the patent. See id. at 9.  In Minerva, the Supreme Court limited the application of assignor estoppel to “when an invalidity defense in an infringement suit conflicts with an explicit or implicit representation made in assigning patent rights.” Id. at 17. 

In reaching this conclusion, the Court retraced the steps of prior court decisions and explained that the doctrine of assignor estoppel is rooted in “the equitable principle long understood to lie at its core”—“an idea of fair dealing.” Id. at 1.  The Court referred to Westinghouse Elec. & Mfg. Co.  v. Formica Insulation Co., 266 U.S. 342 (1924), the first Supreme Court case approving assignor estoppel, as a decision grounded in “a principle of fairness.”  No. 20-400, Slip Op. at 7.  That is, “if one lawfully conveys to another a patented right” “fair dealing should prevent him from derogating from the title he has assigned.” Id. (quoting Westinghouse, 266 U.S. at 350).  The Minerva Court also noted that Westinghouse “made it clear that the doctrine has limits”“[a]lthough the assignor cannot assert in an infringement suit that the patent is invalid, the Court held that he can argue about how to construe the patent’s claims.” Id. at 7.  The Court further pointed out that Westinghouse “left for another day several other questions about the contours of assignor estoppel” including, among others, an issue relevant to the case before the Court“whether estoppel should operate differently if the assignment was not of a granted patent but of a patent application.” Id. at 8.

In Minerva, the inventor, Csaba Truckai, assigned his interest in a patent application, as well as all continuation applications, to Novacept, a company he co-founded, for a device to treat abnormal uterine bleeding.  Later Novacept sold its assets, including its portfolio of patents and patent applications to another company, which was subsequently acquired by Hologic.  Mr. Truckai, in the meantime, left Novacept and founded Minerva Surgical, which sells a version of the device Hologic accused of infringing a patent later granted as a continuation of Mr. Truckai’s initial patent application.  Based on assignor estoppel, Hologic sought to preclude Minerva from challenging the validity of the asserted patent in the district court.  Minerva, however, argued that because Hologic broadened the claims during prosecution after Mr. Truckai’s assignment, it would be unfair to prohibit Minerva from challenging the breadth of those claims.  The district court disagreed and ruled for Hologic.

On appeal, the Federal Circuit upheld  the district court and rejected Minerva’s argument, stating that it “considered it ‘irrelevant that, at the time of the assignment,’ the inventor’s ‘patent applications were still pending’ and that assignee [] ‘may have later amended the claims in the application process (a very common occurrence in patent prosecutions), with or without [the inventor’s] assistance.’” Hologic, Inc. v. Minerva Surgical, Inc., 957 F.3d 1256, 1268 (Fed. Cir. 2020) (quoting Diamond Sci. Co. v. Ambico, Inc., 848 F.2d 1220, 1226 (Fed. Cir. 1988)).  The Supreme Court disagreed and reasoned “[a]ssignor estoppel should apply only when its underlying principle of fair dealing comes into play;” “[w]hat creates the unfairness is contradiction;” and “when assignor has made neither explicit nor implicit representations in conflict with an invalidity defense, then there is no unfairness in its assertion.”  No. 20-400, Slip Op. at 14–15.  Hence, the Court concluded that “[i]f 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 there would be no “prior inconsistent representation” as a “basis for estoppel.” Id. at 16.  The Court vacated the Federal Circuit’s decision and remanded the case to Federal Circuit to determine whether Hologic’s new claim is materially broader than the ones Mr. Truckai assigned.

Similar to what its predecessor Court did, Minerva continued to refine the doctrine and announced a new, narrower standard delineating the boundaries of assignor estoppel“[a]ssignor estoppel applies when an invalidity defense in an infringement suit conflicts with an explicit or implicit representation made in assigning patent rights.” Id. at 17.

The Court carefully limited its holding to “an infringement suit,” thus leaving lower court decisions applying assignor estoppel in other proceedings undisturbed.  For example, the Federal Circuit in its opinion below held that “the doctrine of assignor estoppel does not bar an assignor from filing a petition for IPR.” Hologic, 957 F.3d at 1266 (quoting Arista Networks, Inc. v. Cisco Sys., Inc., 908 F.3d 792, 804 (Fed. Cir. 2018)).  Notably, the Supreme Court denied Hologic’s cross-petition for a writ of certiorari on this very issue, which urged the Court to find that the Federal Circuit erred in allowing assignors to use IPRs to challenge the validity of another assigned patent.  Accordingly, it remains good law that an assignor may challenge in an IPR proceeding the patent he or she assigned unhindered by the doctrine of assignor estoppel1.

To illustrate the boundaries of the doctrine, the Court discussed three scenarios where assignor estoppel will not apply: (1) claims are broadened after assignment (as occurred in Minerva); (2) the assignment occurred before the invention existed such as in the context of employment agreement; and (3) a change in law renders irrelevant the warranty given at the time of assignment.  No. 20-400, Slip Op. at 15–16.  Under each of the scenarios, the assignor generally would not have made representations about the validity of the patent claims that later became the subject of dispute.  Nevertheless, while the above scenarios may be outside the purview of assignor estoppel, as defined by the Court, contract provisions (e.g. no-challenge clauses) can still be incorporated into an assignment agreement to explicitly prohibit an assignor from challenging the validity of patent claims that eventually result from the patent rights assigned. See Transocean Offshore Deepwater Drilling Inc. v. Noble Corp. Plc, 4:17-CV-123, 2020 WL 1666119 (S.D. Tex. Apr. 2, 2020) (finding the no-challenge clause enforceable in a settlement license agreement despite of the stricken licensee estoppel doctrine).  Additionally, an assignee may also propose first-party indemnification and fee shifting clauses to discourage the assignor from challenging the validity of the patent.  See generally, Maxwell Terhar, American v. British Rule: The Impact of James G. Davis Construction Corp. v. HRGM Corp. on Fee-Shifting Provisions in the Maryland and D.C. Area, 8 Am. U. Bus. L. Rev. 67 (2019).  However, as Professor Lemley pointed out in his influential article, Rethinking Assignor Estoppel, 54 Houston L. Rev. 513 (2016), which is cited in the Minerva opinion, “it is at least plausible that courts will hold that the scope of assignor estoppel cannot be varied by contract” and “[t]he contract would bind only those in privity with the assignee,” “significantly narrower than the modern version of the doctrine.”  Lemley at 543.

To guard against above undesirable results, it behooves a prospective assignee, to the extent possible, to include in the subject patent application the broadest claims supportable by the specification so as to stay within the applicable boundaries of the doctrine of assignor estoppel.  This is particularly relevant in an employee-employer patent rights assignment scenario, where the employer typically bears the cost and is in charge of the patent prosecution.  Relatedly, a prospective assignment of any future inventions of an employee, as typically embedded in an employment agreement, clearly falls outside the boundaries of assignor estoppel under Minerva, should the employee assignor decide to challenge the validity of the assigned patents in later litigation.  It appears, however, that an employer can readily remedy the situation by requesting that the employee execute an assignment after the patent applications are filed and/or the patents are granted, thus returning to the realm where assignor estoppel is applicable.

While the refined boundaries of assignor estoppel in Minerva may materially impact the interests of the parties-in-suit, they do not appear to present the substantial shift that critics of the doctrine had hoped for.  For example, Professor Lemley criticized the Federal Circuit for “expand[ing] assignor estoppel dramatically from its roots,” including by “cast[ing] a wide privity net” to bar anyone in privity with the assignor from challenging the patent and by not limiting assignor estoppel to “those who actually sell a patent for revenue.”  Lemley at 520–21.  Professor Lemley opined that, as a result, “the doctrine of assignor estoppel reduces employee mobility and likely [] reduces the number and speed with which new technologies are deployed.” Id. at 540.  He proposed that estoppel should apply “only when an inventor makes a factual representation that drives the patenting of the invention and sells her rights in exchange for money.”  Id. at 541.

By contrast, the Minerva Court refrained from addressing both the privity and consideration questions, even though the Court recognized that Westinghouse left both open, i.e., when a party closely affiliated party with the assignor would be estopped (privity) and whether a nominal payment would be sufficient to invoke estoppel (consideration).  No. 20-400, Slip Op. at 8.  As such, Minerva left Federal Circuit precedents on important issues largely intact.  To be sure, the Supreme Court’s holding in Minerva left room for lower courts to resolve the exact contours of “when an invalidity defense in an infringement suit conflicts with an explicit or implicit representation made in assigning patent rights.”  The Federal Circuit, however, does not appear obligated at this time to revisit either the privity or the consideration issues.

1 Since a petitioner in IPR petition proceedings can only challenge the validity of a patent on grounds under 35 U.S.C. §§102 and 103 (see Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131, 2141-42 (2016)), an inventor’s personal knowledge may be of less relevance as compared to a district court proceeding where other invalidation grounds are available to the patent challenger.

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