This article was originally published in IEEE Boston’s Digital Reflector and is a follow-up to the April 2022 article, “A Potential and Unintended Consequence of ‘Routine’ Patent Assignments.”
Assignor estoppel is a judicially-created doctrine that prevents one from asserting that a patent that he or she assigned to another is invalid. The doctrine is based on the requirements of good faith and fair dealing between contracting parties and was created to prevent one from selling something for value and later asserting that what was sold is worthless.
The Supreme Court’s 2021 Minerva Surgical, Inc. v. Hologic, Inc. decision limited the application of the doctrine to circumstances where an invalidity claim contradicts and explicit or implicit representation by the assignor that the assigned patent was valid. The Court noted several examples where the estoppel might not arise, including assignments of future, as-yet unmade inventions, inventions whose patentability is affected by significant changes in patent law following the assignment, and claims that were materially broadened following the assignment, such that the assignor could not be said to have warranted validity of the full scope of the broadened claim.
The Minerva case involved an inventor who assigned a patent to Hologic. The inventor subsequently formed a new company, Minerva, to compete with Hologic. Hologic filed suit accusing Minerva of infringing a patent that Hologic had filed after the assignment but that claimed priority to the assigned patent.
The Federal Circuit has now on remand found that assignor estoppel applies, precluding Minerva from challenging the validity or enforceability of the patent-in-suit. The Federal Circuit considered whether a particular claim that had been advanced during prosecution but ultimately cancelled before the assignment took place was something that had been warranted by the assignor to be valid, and if so, whether it was broad enough to encompass the scope of the claim in suit.
Regarding the first consideration, the patentee had argued for the validity of the earlier claim and had received a notice of allowability from the Patent and Trademark Office. That claim was subsequently withdrawn and ultimately cancelled in response to a restriction requirement that forced the patentee to elect between method and product claims. Of import, the withdrawal and cancellation were made “without prejudice,” meaning the patentee (or whoever ended up owning the patent) could refile the claim in a new, “divisional” application. The Federal Circuit found that this cancellation thus did not constitute a disclaimer of validity of the claim, and that the assignment, which assigned not just the application as it then existed but also all rights to continuations and divisional patent applications, resulted in the cancelled claim being assigned to Hologic. Further, the inventor had signed an oath when he filed the patent application that indicated his “implicit good-faith belief” that the claims were patentable, and had both argued that the claim should be allowed during prosecution and had indicated in the assignment that he had “no present knowledge from which [he] could reasonably conclude” that the assigned intellectual property rights were invalid of unenforceable. This was enough for the Federal Circuit to determine that the patentee had warranted, explicitly or implicitly, that the subject matter of the cancelled claim was valid.
The Federal Circuit next determined, after construing the claims, that the scope of the claim in suit was encompassed by the original claim, and that it therefore did not fall within the exception to the estoppel of claims that were materially broadened following the assignment. The Court noted that to fall outside of the scope of the estoppel, the claim would have to be “’materially broader’ (rather than just broader)” than the original claim, although it did not provide any guidance on where this distinction might lie. Finally, the court noted that there was no dispute regarding the other aspects of the application of estoppel – that the inventor had executed a broad assignment of patent rights and had received appreciable value for the assignment, that he founded Minerva to compete with Hologic, and that he was in privity with Minerva. Accordingly, the Federal Circuit estopped Minerva from arguing that the claim was invalid or unenforceable. Hologic had already obtained summary judgment of infringement and damages of about $5 million, which remain in effect.
This decision provides guidance on when the estoppel will apply, but questions remain. The Federal Circuit expressly stated that the holding should not be stretched to cover claims that were cancelled for reasons other than in response to a restriction requirement. It remains uncertain whether claims cancelled “without prejudice” for other reasons would be treated similarly. There are times, for example, where some claims are deemed unpatentable by the PTO and an applicant opts to cancel the claims to obtain allowance of other claims deemed allowable. Usually these claims are cancelled without prejudice to the right of the applicant to reassert them in a continuation application, and presumably such a right would travel with an assignment of comparable breadth. Indeed, any patent rights that are assigned while a family member remains pending would seem to carry along each and every claim that is not expressly abandoned, as the failure to include the “without prejudice” language does not prevent the refiling of a cancelled claim in a continuation or divisional application.
Further, the Court seemed to stretch the import of the oath that is filed with a patent application to “implicitly” become a warranty of patentability by the inventor(s). The oath signed by the inventor in this case stated “I believe I am the original, first and sole inventor… of the subject matter which is claimed and for which a patent is sought on the invention…” This merely states the inventor’s subjective belief, and cannot “warrant” patentability – else why go through examination? The decision, however, identifies this as an implicit warranty of patentability. Likewise, the assignment language that the inventor had “no present knowledge from which [he] could reasonably conclude” that the assigned intellectual property rights were invalid of unenforceable can reasonably be interpreted to warrant patentability over art known to the inventor as of the assignment, but it seems like a stretch to interpret this as warranting patentability over all prior art, as the Federal Circuit seems to do. In light of this, patent-holders may wish to put express language disavowing any warranties in their assignments to (hopefully) preclude the application of estoppel. Assignor estoppel eliminates a key defense to patent infringement allegations. Parties that assign patents and patent applications should ensure that they have taken any and all steps that they can to avoid the estoppel, especially if they intend to continue to work in the field and potentially compete with the assignee. Assignees, on the other hand, should ensure that warranties of patentability are expressly included in the assignment to avoid any doubt, and should familiarize themselves with the scope of all claims presented, not just those in existence at the time of the assignment, to understand the full scope of what they are receiving.
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