As published in the Texas Bar Journal
Vol. 84, No. 10
November 2021, TBJ Online
Victor H. Segura
Your key inventor has gone to work for a competitor and is helping them produce the same product covered by a patent he previously assigned to your company. You sue the competitor for patent infringement. Your former inventor now claims the patent he assigned is invalid and unenforceable. Not fair, you say? A recent U.S. Supreme Court decision has set the standard to determine when an inventor can challenge the validity of his own assigned patent.
Assignor Estoppel is a doctrine in U.S. patent law that prevents an inventor who assigns (assignor) a patent to another (assignee) from later contending that the patent is invalid. As an equitable doctrine, assignor estoppel is grounded in the 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.”[i]
Assignor Estoppel (hereinafter “AE”) has effectively served as an enforceable noncompete canon. Not only does AE prevent the assignor from doing an about face regarding the validity of the assigned patent, it also reaches those in privity with the assignor. What constitutes “privity” in an AE assessment? Privity depends on the nature and extent of the relationship between the assignor and the other party. The Federal Circuit considers privity as determined upon a balance of the equities. “If an inventor assigns his invention to his employer company A and leaves to join company B, whether company B is in privity and thus bound by the doctrine will depend on the equities dictated by the relationship between the inventor and company B in light of the act of infringement. The closer that relationship, the more the equities will favor applying the doctrine to company B.”[ii] Companies should take note of the broad encompassing scope of AE when considering new hires or performing acquisition studies, as its restrictions affect not only the inventor but also those in privity with the inventor, and even affiliated companies.
In Minerva Surgical, Inc. v. Hologic Inc., the U.S. Supreme Court recently affirmed the vitality of the AE doctrine.[iii] The court clarified that AE is not a blanket rule, noting situations where the prohibition imposed on assignors and their privies does not apply. The court noted that AE should apply only when the principle of fair dealing is involved. The decision established a new standard for determining when AE applies: “The doctrine applies when, but only when, the assignor’s claim of invalidity contradicts explicit or implicit representations he made in assigning the patent.”[iv] The court provided three examples where the majority concluded AE does not apply:
1. The assignment of patent rights occurs before invention (e.g., an employment agreement requiring assignment of future inventions not yet conceived);
2. A post-assignment change in the law that renders the patent invalid; or
3. A post-assignment change altering the scope of the patent claims.
The common element in the cited examples is that something changed subsequent to the assignor's “representations.” In Minerva, the Petitioner argued that the assignee (the company that acquired the inventor’s patent) allegedly broadened the claims in the patent application after the inventor assigned the application. The court stated that “assuming that the new claims are materially broader than the old claims, 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.”[v] The court remanded the case to the U.S. Court of Appeals for the Federal Circuit to determine whether the assignee’s new patent claim is materially broader than the claims that were assigned.
The Minerva decision should not be taken lightly by patent owners and companies with active patent portfolios if they seek to maintain full enforceability of their patents. Patent owners, particularly employers, must now remain cognizant that they may not be able to prevent a validity challenge to their patents under AE if they have materially broadened the claims of the patent applications or patents after receiving the assignment from the inventor. This situation is common as inventors often assign their patent rights to an invention at the initial stage when a patent application is prepared and filed by the assignee. If at a later point, the assignee (e.g., the employer) broadens the claims during prosecution of the patent application before the patent office and is subsequently issued a patent with the broadened claims, the inventor (assignor) could then challenge the validity of the patent claims that were changed after assignment. Under Minerva, the employer-assignee could no longer rely on AE to prevent the invalidity challenge from a competitor who hires the former employee-inventor.
What can companies do to protect themselves in the wake of the Minerva decision? As discussed above, the most likely situation to arise would be an inventor raising a validity challenge after an assignee broadens the patent claims. To help prevent this issue from arising, employers should consider keeping their inventors engaged during the entire prosecution of patent applications to preserve any AE defense. The intellectual property assignment document signed by the inventors should seek to cover all permutations of claims to any subject matter disclosed in the particular patent application and/or patent. Keeping in mind that the inventor’s representations made in assigning the patent rights are key to an AE assessment, employers may also consider drafting employment contracts with employee cooperation clauses requiring cooperation with execution of supplemental assignments and oaths or declarations after any amendment (particularly if broadening claims) is made to the assigned patent application or patent. Employers may also want to have inventors execute confirmatory assignments when a patent issues. By having employees/inventors review and sign off on claim amendments and execute confirmatory assignments, it could mean the difference between being able to raise AE and expensive litigation to defend a patent’s validity.
Another option for employers to consider is filing the initial patent application with broad claims, which can be narrowed during prosecution of the patent application if necessary. This could preserve an AE defense by blocking a subsequent assertion by the inventor that the claims were broadened by a later amendment. Such filings would serve to confirm that the inventor explicitly assigned narrower claims as well. In cases where an employer wishes to defer filing and prosecuting a regular patent application, yet desires to preserve its AE defenses, the employer can file a U.S. provisional patent application with a set of broad claims. Such a provisional application filing would establish a priority filing date while providing the employer additional time to decide whether or not to proceed with the patent application. Care would need to be taken to ensure that the broad claims are supported by the disclosure in the patent application to avoid other validity issues.[vi]
The correct naming of inventors on patent applications is also not to be overlooked. Under U.S. patent law, a person should only be listed as an inventor on a patent application if he or she meets the legal standard as associated with at least one claim in the application. If amendments are made to the claims during prosecution of a patent application, it may be necessary to revise the named inventors depending on the respective inventive contribution to the claims. Recalling that under Minerva AE should apply only when the principle of fair dealing is involved, employers may also consider educating their inventors regarding the various options available to a patent applicant at the USPTO for prosecuting patent applications, including the option to broaden the claims of issued patents.[vii] Such measures may help curtail an inventor’s allegation of “unfairness” in an AE dispute.
Although the Minerva decision established limiting parameters, the doctrine of AE continues to provide a means by which patent owners and employers can defend the validity of their patents when an inventor-assignor breaches norms of equitable dealing. AE litigation will now entail determination whether an inventor truly gave up the ability to challenge the validity of the patent in question at the time of assignment. By taking measures to ensure that explicit representations are and have been made by inventors when assigning past, current, and future patent rights, patent holders can preserve their right to defend against validity challenges under the AE doctrine. Inventors, on the other hand, should be mindful of what is being assigned and when. Anyone acquiring a patent should also consider conducting a review of the file history for issues that could bar an AE defense against later validity challenges.
The lower courts are now tasked with refining the legal contours of the AE standard set by Minerva.Decisions will be issuing addressing issues such as what constitutes a “material” patent claim amendment and when an assignor’s claim of invalidity contradicts representations made in assigning patent rights. Nonetheless, patent owners and employers can take proactive measures to better preserve their ability to invoke the AE doctrine in defending their patents against validity challenges.
[i] Westinghouse Elec. & Mfg. Co. v. Formica Ins. Co., 266 U.S. 342, 349 (1924).
[ii] Shamrock Tech. v. Med. Sterilization, Inc., 903 F.2d 789, 793 (Fed. Cir. 1990).
[iii] Minerva Surgical, Inc. v. Hologic Inc., No. 20-440, 2021 U.S. LEXIS 3563 (June 29, 2021).
[vi] 35 U.S.C. §112 (claims require written-description support in the patent application).
[vii] 35 U.S.C. § 251 (a reissue patent may be granted to enlarge the scope of the original patent claims under certain circumstances).