Supreme Court Clarifies Process for Challenging Patent Validity

The US Supreme Court has recently issued a decision on the doctrine of assignor estoppel – a rule that prevents patent owners that assign their patents from then challenging the validity of those patents.

As the Court noted,

In the late 1990s, Csaba Truckai invented a device to treat abnormal uterine bleeding. The device, known as the NovaSure System, uses a moisture-permeable applicator head to destroy targeted cells in the uterine lining. Truckai filed a patent application and later assigned the application, along with any future continuation applications, to his company, Novacept, Inc. The PTO issued a patent for the device. Novacept, along with its portfolio of patents and patent applications, was eventually acquired by respondent Hologic, Inc. In 2008, Truckai founded petitioner Minerva Surgical, Inc. There, he developed a supposedly improved device to treat abnormal uterine bleeding.

Hologic then sued Minerva for patent infringement.

Minerva claimed that Hologic’s patent was invalid because the newly added claim did not match the invention’s written description, which addressed applicator heads that are water permeable.

In response, Hologic invoked the doctrine of assignor estoppel. Hologic argued that because Truckai had assigned the original patent application, he and Minerva couldn’t impeach the patent’s validity.

A district court found that assignor estoppel barred Minerva’s invalidity defense, and the Federal Circuit agreed.

Minerva argued that “contemporary patent policy—specifically, the need to weed out bad patents—supports overthrowing assignor estoppel.”

The Court noted that

Assignor estoppel reflects a demand for consistency in dealing with others. When a person sells his patent rights, he makes an (at least) implicit representation to the buyer that the patent at issue is valid. In later raising an invalidity defense, the assignor disavows that implied warranty. By saying one thing and then saying another, the assignor wants to profit doubly—by gaining both the price of assigning the patent and the continued right to use the invention it covers. That course of conduct by the assignor is unfair dealing. And the need to prevent such unfairness outweighs any loss to the public from leaving an invalidity defense to someone other than the assignor

The Supreme Court agreed with the Federal Circuit that assignor estoppel barred Minerva’s invalidity defense, but noted that “assignor estoppel applies only when the assignor’s claim of invalidity contradicts explicit or implicit representations he made in assigning the patent.”

As the Court explained,

Assignor estoppel comes with limits: it applies only when its underlying principle of fair dealing comes into play. That principle demands consistency in representations about a patent’s validity. When an assignor warrants that a patent claim is valid, his later denial of validity breaches norms of equitable dealing. But when the assignor has made neither explicit nor implicit representations in conflict with an invalidity defense, then there is no unfairness in its assertion—and so there is no ground for applying assignor estoppel. One example of non-contradiction is when an assignment occurs before an inventor can possibly make a warranty of validity as to specific patent claims. That situation arises in certain employment arrangements, when an employee assigns to his employer patent rights in any future inventions he may develop during his employment. A second example is when a later legal development renders irrelevant the warranty given at the time of assignment. Third, and most relevant here, a post-assignment change in patent claims can remove the rationale for applying assignor estoppel. The last situation arises most often when an inventor assigns a patent application, rather than an issued patent. There, the assignee may return to the PTO [Patent and Trademark Office] to enlarge the patent’s claims. Assuming that the new claims are materially broader than the old ones, the assignor did not warrant to the new claims’ validity. And if he made no such representation, then he can challenge the new claims in litigation: Because there is no inconsistency in his positions, there is no estoppel.

As the National Review discusses,

The Minerva decision has important implications for inventors and businesses alike. Some key take-aways are as follows:

1. Generic assignment language may create an estoppel as to a validity challenge to a claim or claims of the patent assigned, but may not cover claims of pending applications that differ in scope and claims of patents issuing from such pending applications….
2. To the extent the Minerva decision ties a particular validity representation to claim language, assignments should seek to cover all permutations of claims to any subject matter disclosed in the subject application and/or patent.
3. Additional representations in an assignment may be required to help the assignee estop validity challenges to claims issuing from pending patent applications that are assigned. For example, assignors may try to utilize separate no-challenge clauses in their assignments, such as imposition of fines, payment of legal fees for defending against the challenge, and/or forfeiture or refund of royalties paid to the assignor.