For U.S. Supreme Court, assignor estoppel is a question of fairness

Kirk Teska, BridgeTower Media Newswires

Assignor estoppel in patent cases prevents, in some cases, a patent owner who sells a patent from later arguing the patent is invalid. The U.S. Supreme Court recently clarified the extent of assignor estoppel.

If an inventor or Company 1 assigns (transfers) a patent for a device to Company 2, and later the inventor or Company 1 makes and sells the device resulting in Company 2 suing the inventor or Company 1 for patent infringement, assignor estoppel prohibits the inventor or Company 1, unlike any other alleged infringer, from defending itself by asserting the patent is invalid. 

One good argument against assignor estoppel is that it prevents challenges to bad patents by those (the inventor or Company 1) in the best possible position to do so. The main argument in favor of assignor estoppel is fairness: If the inventor or Company 1 received payment for the patent transfer, the implicit warranty provided to Company 2 was that the patent was valuable and valid. It would be unfair later in time to let the transferor argue the exact opposite and, according to case law, “deny the existence of that which he has sold.”

It’s unfair dealing when somebody both sells and retains an invention — unfair because it’s a contradiction: This patent has value; no, it does not. And, if it really is a bad patent, others can challenge it in the courts or back at the Patent Office. And so, since 1924, assignor estoppel has been applicable in U.S. patent cases.

But what if the inventor or Company 1 assigned only a pending patent application for the device to Company 2? That was the fact pattern in Minerva Surgical, Inc. v. Hologic, which the Supreme Court decided on June 29. 

The usual difference between a patent and a pending patent application is that the claims describing and protecting an invention in a pending patent application can and often do change before the patent issues — sometimes to the point of protecting, in the patent, more than what was originally claimed in the application.

In such cases, a 5-4 majority of the Supreme Court held, there is no contradiction since the assignor did not warrant the validity of those later post-assignment patent claims. “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.”

Some commentators have suggested, in light of the court’s decision, that the assignor execute a confirmatory assignment once the patent issues. That could work for employees who are still with the assignor company when the patent issues but not for employees who have left the company between the patent application and the issuance of the patent, or for patent assignments between two companies. 

For important inventions described in a single initial assignor patent application, it is not unusual for the assignee to later procure several patents with claims of varying scope in an attempt to cover the main invention and close proximities of it. Patent attorneys representing assignees will be amending their assignment contracts to cover such situations in an attempt to be able to invoke assignor estoppel. And, the Court of Appeals for the Federal Circuit, which must now decide this specific fact pattern in the Minerva case, could provide us with additional guidance. 

There are other cases and fact patterns over the years in which the courts have weakened assignor estoppel, and, to be sure, the Minerva case weakens it further. But, for now, the Supreme Court has declined to eradicate assignor estoppel completely. 

How you feel about assignor estoppel probably depends on whether you are the assignor or the assignee. The court believes it’s a question of fairness.

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Kirk Teska is managing partner of Iandiorio, Teska & Coleman, an adjunct professor at Suffolk University Law School, and author of “Patent Savvy for Managers” and “Patent Project Management.”