When a party transfers a patent to a third party and the third party later sues the transferring party for patent infringement, can the transferring party claim the patent is invalid?
This case asks the Supreme Court to rule on the validity of the assignor estoppel doctrine. Under this doctrine, an assignor of a patent may not, in a suit against the assignee, claim that the patent is invalid. Petitioner Minerva Surgical Inc. argues assignor estoppel is not supported in the Patent Act and Court precedent favors the doctrine’s abolition. Respondent Hologic Inc. counters that assignor estoppel is implicit in the Patent Act and that stare decisis dictates that the Court uphold assignor estoppel. The outcome of this case has significant policy implications regarding the proper balance of the public interest in challenging potentially invalid patents and the interest in promoting equity and fair dealing in the assignor–assignee relationship.
Questions as Framed for the Court by the Parties
Whether a defendant in a patent infringement action who assigned the patent, or is in privity with an assignor of the patent, may have a defense of invalidity heard on the merits.
This case involves U.S. Patents Nos. 6,782,183 (“’183 patent”) and 9,095,348 (“’348 patent”). Hologic, Inc. v. Minerva Surgical at 1260. Both patents lay claim to various devices and procedures related to endometrial ablation treatment, which are used to treat abnormally heavy menstrual bleeding. Id. at 1260–61. Csaba Truckai is listed as the inventor of both patents. Id. at 1261.
In 1993, Truckai co-founded the company NovaCept, Inc. and in the late 1990s, he and his team created the NovaSure system—which incorporates the ’183 patent. Id. at 1260–61. In 2001, Truckai assigned his interest in both patents to NovaCept. Id. at 1261–62. In 2004, Cytyc Corporation acquired NovaCept and the interests in the patents; subsequently in 2007, Respondent Hologic Inc. (“Hologic”) acquired Cytyc, and Hologic is the current assignee of both the ’183 patent and the ’348 patent. Id. at 1262. Since then, Hologic has marketed and sold the NovaSure system nationally. Id.
Truckai left NovaCept and, in 2008, established Petitioner Minerva Surgical Inc. (“Minerva”). Id. There, Truckai and other individuals at Minerva developed the Endometrial Ablation System (“EAS”) which, like NovaSure, is an endometrial ablation device. Id. In August 2015, Minerva began commercial distribution of the EAS. Id.
In November 2015, Hologic sued Minerva in the U.S. District Court for the District of Delaware for patent infringement, alleging that Minerva’s EAS violated both the ’183 and the ’348 patents. Id. Minerva countered by alleging that the patents were invalid; simultaneously, Minerva also initiated a separate proceeding at the U.S. Patent and Trademark Office (“USPTO”) for inter partes review (a procedure for challenging the validity of a patent) of the ’183 and ’348 patents. Id. The USPTO concluded that the ’183 patent was “unpatentable as obvious,” but denied review of the ’348 patent. Id. After the USPTO decision, Minerva moved to dismiss Hologic’s infringement claim based on the ’183 patent. Id. In response, Hologic argued that assignor estoppel—an equitable doctrine that prohibits an assignor, or parties in privity with the assignor, from challenging the validity of the assigned patent—“bars Minerva from challenging the validity of the ’183 and ’348 patents.” Id. at 1262, 1265. The district court agreed with Hologic, stating that the balance of equities favored the finding that “‘Truckai is in privity with Minerva’ and that ‘assignor estoppel applies to Minerva's defenses to Hologic's patent infringement claims.’” Id. at 1262. In finding privity, the district court emphasized the fact that Truckai was the founder of Minerva, used his expertise to develop the EAS, had the responsibility of marketing the EAS as a competitor to Hologic’s NovaSure, and was ultimately responsible for assigning his interest in the patents to Hologic’s predecessor. Id. at 1262–63.
On appeal to the United States Court of Appeals for the Federal Circuit, Minerva argued that assignor estoppel should be abandoned entirely because the doctrine is “inconsistent” with Supreme Court precedent abolishing licensee estoppel—a doctrine that prevents a licensee from attacking the validity of the licensed patent. Id. at 1265, 1267. The Federal Circuit declined to abolish assignor estoppel by holding that the abolition of licensee estoppel does not, by extension, also necessitate the abolition of assignor estoppel. Id. at 1267–68. Indeed, the court cited past Federal Circuit cases that “emphasize the continued vitality of the doctrine of assignor estoppel . . . .” Id. at 1268.
DOES THE TEXT OF THE PATENT AC PRECLUDE ASSIGNOR ESTOPPEL?
Using a textual analysis, Minerva argues that the text of the Patent Act precludes assignor estoppel. Brief for Petitioner, Minerva Surgical Inc. at 17. Minerva notes that the Patent Act states that “invalidity . . . ‘shall be’ a defense ‘in any action involving the validity or infringement of a patent.’” Id. at 17. Minerva claims that statutory construction dictates that courts must define words using their ordinary meaning unless the statute provides otherwise. Id. First, Minerva states that “shall” is a “nondiscretionary term” that courts must obey. Id. Next, Minerva notes that “any,” when used in this context, is not limited in scope. Id. Thus, Minerva concludes that the Patent Act’s text mandates that parties in an infringement suit must be free to challenge the patent’s validity. Id. at 18.
Hologic counters that the Patent Act’s text is consistent with assignor estoppel. Brief for Respondent, Hologic Inc. at 23. Hologic contends that invalidity remains a defense “if properly pleaded and proven.” Id. Hologic argues that assignor estoppel merely prevents “particular defendants” from “pleading and proving” invalidity in “particular cases.” Id. Indeed, Hologic analogizes assignor estoppel to other preclusion doctrines—such as collateral estoppel—and emphasizes that past Supreme Court precedent has held that collateral estoppel applies to invalidity defenses if there was already a prior adjudication of invalidity. Id. Thus, Hologic concludes that Minerva’s textual argument fails because it “proves too much.” Id.
IS ASSIGNOR ESTOPPEL IMPLICIT IN THE PATENT ACT?
Minerva argues that Congress did not assume assignor estoppel as part of the Patent Act. Brief for Petitioner at 28. Though Minerva concedes that Congress occasionally reads common-law doctrines into federal statutes, Minerva emphasizes Congress only does so when the common-law doctrine is well established; here, Minerva argues that assignor estoppel was not well established when Congress was legislating on the Patent Act. Id. at 28–29. Minerva argues that assignor estoppel was not implicit in the first Patent Act because assignor estoppel first appeared in England in 1789 and Congress, when passing the first Patent Act in 1780, deliberately allowed defendants to raise invalidity claims in all infringement cases. Id. at 29. Though Minerva admits that assignor estoppel gained traction in the mid-19th century, Minerva states that, in 1924, Westinghouse Electric v. Formica Insulation significantly narrowed assignor estoppel and Scott Paper v. Maracalus Manufacturing, in 1945, essentially “wiped out estoppel by assignment.” Id. at 20–21, 30. Minerva argues that after Scott Paper, assignor estoppel became “unsettled,” and courts were conflicted on the doctrine’s viability. Id. at 30. Minerva emphasizes that, in both 1952 and 1971, Congress had an opportunity to respond to the decline of assignor estoppel yet failed to do so, despite explicit requests to codify assignor estoppel in the Patent Act. Id. at 30–31. Minerva concludes that history shows that assignor estoppel was not well-established when Congress was legislating regarding patent invalidity defenses and thus, assignor estoppel should not be read into the Patent Act. Id. at 31–32.
Hologic counters that assignor estoppel is implicit in the Patent Act because the Westinghouse Court presumed assignor estoppel in the Patent Act and Congress, when subsequently revising the Act, did not preclude assignor estoppel. Brief for Respondent at 15. First, Hologic states that the Westinghouse Court explicitly analyzed the assignor estoppel doctrine. Id. at 17. Hologic explains that Westinghouse noted that, in deed conveyances, deed estoppel prevents the grantor of a deed from subsequently arguing the invalidity of the grant against the grantee. Id. at 17–18. Then, Hologic notes that Westinghouse found clear evidence that, when enacting the 1870 Patent Act, Congress—noting the similarities between deed conveyances and patent assignments—intended to provide similar protections to patent assignments as existed for deed conveyances. Id. at 17. Hologic thus explains that Westinghouse explicitly held that assignor estoppel is implicit in the Patent Act. Id. at 18. Next, Hologic argues that Congress’ subsequent revisions must be analyzed in light of Westinghouse’s explicit holding that assignor estoppel is implicit in the Patent Act. Id. at 19–20. Hologic argues that the prior construction canon dictates that courts must presume Congress is aware of a “judicial interpretation of a statute” and chooses “to adopt that interpretation when it re-enacts a statute without change.” Id. Hologic emphasizes that Congress, in 1952, chose to re-enact the Patent Act’s assignment provision without material change. Id. at 20. Indeed, Hologic notes that in other areas of the Patent Act, Congress was explicit when it chose to override the Supreme Court’s prior constructions of the Patent Act. Id. at 21. Thus, in light of Westinghouse’s interpretation of assignor estoppel in the Patent Act, Hologic concludes that the prior construction canon dictates that Congress chose to adopt Westinghouse’s interpretation and incorporate assignor estoppel into the Patent Act when Congress chose to re-enact the assignment provision without change. See id.
DOES STARE DECISIS FAVOR ABOLISHING ESTOPPEL?
Minerva argues that Supreme Court precedent—stare decisis—favors abolishing assignor estoppel. Brief for Petitioner at 20. Though Minerva admits that Westinghouse endorses assignor estoppel, Minerva stresses that the rationale for the doctrine has been significantly eroded; indeed, in a subsequent case, the court called the rationale for assignor estoppel a “logical embarrassment.” Id. at 20–21. Minerva argues that the abandonment of the closely related doctrine of licensee estoppel (which bars one who licenses patents from later challenging the validity of the patent) dictates that assignor estoppel should also be abolished. Id. at 22. Minerva explains that, in Lear v. Adkins, the Court held that the strong public interest in eliminating invalid patents and promoting free competition outweighed private contractual inequities. Id. at 23. Minerva argues the same rationale calls for abolishing assignor estoppel. Id. at 24. Minerva notes that assignor estoppel would similarly allow invalid patents to stifle innovation and impede competition by preventing validity challenges to potentially invalid patents. Id. at 24. Indeed, Minerva notes that the Lear reasoning applies “with greater vigor” because inventors are in a stronger position than licensees to challenge any attempts by assignees’ to overly broaden interpretations of the patents. Id. In addition, Minerva notes that the Court has generally disfavored placing contractual rights above the public interest in challenging potentially invalid patents—for example, the Court has rejected enforcing private contractual agreements not to challenge a patent’s validity. Id. at 26. Therefore, Minerva concludes that Court precedent prioritizes allowing validity challenges to patents over contractual obligations, which significantly undermines the rationale for assignor estoppel. Id.
Hologic counters that Minerva does not meet the high burden of overruling established precedent and abolishing assignor estoppel. Brief for Respondent at 28. Hologic advances three arguments that Westinghouse should not be overturned. Id. First, Hologic notes that Westinghouse was an interpretation of federal statute and is thus more insulated from overrule because critics of the decision should petition Congress to make changes. Id. Second, Hologic argues that Westinghouse should not be overruled because Congress could have explicitly repudiated the decision in subsequent revisions of the Patent Act yet refused to do so. Id. at 29. Lastly, Hologic argues that decisions involving contract and property rights, as Westinghouse does, receive greater deference because of party reliance on such decisions. Id. Furthermore, Hologic claims that Minerva errs in equating licensee estoppel with assignor estoppel because there are different rationales underlying the two doctrines. Id. at 30. Hologic notes two significant distinctions that favored abolishing licensee estoppel but is inapplicable to assignor estoppel. Id. at 31. First, in a licensee transaction, a licensee might be compelled to “shut up and keep paying” even if the patent was invalid—in contrast, Hologic asserts an assignor would never be compelled to pay because the assignor is the one receiving the benefit. Id. at 31. Second, licensee estoppel implicated antitrust concerns that unscrupulous licensors could stifle competition by licensing invalid patents to licensees then wielding licensee estoppel to prevent the licensees from attacking the patent’s validity—Hologic claims there are no such concerns with assignor estoppel. Id. at 31–32. Thus, Hologic concludes that Minerva errs in equating assignor estoppel with licensee estoppel because the policy rationale for abolishing licensee estoppel is not present in assignor estoppel. Id. at 32.
IMPACT ON INVALID PATENTS
A group of intellectual property law professors (“The Professors”), in support of Minerva, argue that the Federal Circuit’s application of assignor estoppel protects bad patents from invalidity challenges. Brief of Amici Curiae Intellectual Property Law Professors, in Support of Petitioner at 15. The professors contend that preserving these “worthless” patents abrogates Congress’ policy objectives in patent law by depressing competition and innovation, costing the economy $25.5 billion each year in the process. Id. at 15, 17. The professors also assert that because assignor estoppel makes it exceedingly difficult to challenge the validity of patents, the holders of invalid patents can maintain monopolies, something which patent law seeks to prevent. Id. at 16. Further, the professors argue that assignor estoppel creates a perverse incentive for individuals and companies to use bad faith tactics to acquire patents as there is little risk of these patents being challenged on the grounds of invalidity. Id. The professors also contend that the Federal Circuit’s broad application of assignor estoppel permits the holders of initially valid patents to expand the scope of these patents beyond that permitted by Congress. Id. at 17. Finally, the professors note that the present interpretation of assignor estoppel requires a significant amount of discovery during litigation in order to build a strong case for a patent’s invalidity. Id. Therefore, the professors assert that assignor estoppel bars all but the wealthiest plaintiffs from bringing patent validity cases before the courts, contributing to economic inequality. See id. at 17–18.
The United Therapeutics Corporation (“United”), in support of Hologic, argues that discarding the doctrine of assignor estoppel will stifle innovation. Brief of Amicus Curiae United Therapeutics Corp., in Support of Respondent at 5. United notes that inventors often assign their patents to third parties because they know this is likely to increase the value of their inventions. Id. at 6–7. United contends that inventors will be unwilling to assign patents in the absence of a robust assignor estoppel doctrine out of fear that the assignees will later repudiate the patents’ validity. See id. at 6. United then asserts that if the Court weakens or eliminates assignor estoppel, millions of patents assigned on the assumption that the assignor estoppel doctrine applies could become the subject of litigation. Id. at 6–7. In addition, Leading Technology Composites and Clarkwestern Dietrich Building Systems (“Leading Technology”), in support of Hologic, contends that these lawsuits are much more likely to be opportunistic attempts to invalidate good patents than genuine claims of invalidity. See Brief of Amici Curiae Leading Technology Composites, Inc. and Clarkwestern Dietrich Building Systems LLC, in Support of Respondent at 11–12. Also Pharmaceutical Research and Manufacturers of America, in support of Hologic, argues that while assignor estoppel bars assigned patent holders from challenging the validity of their own patents, invalid patents are unlikely to escape scrutiny as any other plaintiffs could challenge the validity of these patents. Brief of Amicus Curiae Pharmaceutical Research and Manufacturers of America, in Support of Respondent at 14–15.
IMPACT ON EMPLOYEE MOBILITY
Engine Advocacy, in support of Minerva, argues that the Federal Circuit’s application of assignor estoppel acts as a significant barrier to employee mobility. Brief of Amicus Curiae Engine Advocacy, in Support of Petitioner at 14. Engine Advocacy contends that assignor estoppel exposes employers to patent infringement lawsuits if they hire listed inventors away from other companies. Id. at 15. Without the realistic ability to challenge these lawsuits on the grounds of the patent’s invalidity, Engine Advocacy asserts that most employers will be forced to segregate their new employees from their area of expertise. Id. Therefore, Engine Advocacy argues that many employers will decline to hire listed inventors, negatively impacting both their own businesses and the prospective employees. Id. Engine Advocacy notes that this scenario is especially harmful to small businesses and startups who require the expertise of experienced employees but lack the resources to defend themselves against patent infringement lawsuits under the strict requirements of assignor estoppel. Id. at 15–16. Engine Advocacy goes on to argue that assignor estoppel effectively operates like a twenty year covenant not to compete which is unlimited in scope and has a significant adverse impact on the named inventors’ livelihoods. Id. at 17–18. The professors echo this argument and contend that due to the negative impact assignor estoppel has on inventors’ careers, the doctrine has the effect of discouraging innovation because being named as an inventor can significantly limit an employee’s future career opportunities. See Brief of Intellectual Property Law Professors at 20–21.
In contrast, the Intellectual Property Owners Association (“the IPO”) argues that the privity requirement in the doctrine of assignor estoppel places significant limits on how the doctrine can be applied. See Brief of Intellectual Property Owners Association, in Support of Neither Party at 15. The IPO contends that assignor estoppel would not be triggered in the majority of cases where a company challenges another company’s patent while employing a named inventor if that inventor has little to no involvement in the “infringing activities.” See id. at 15. According to the IPO, assignor estoppel would only be triggered in cases where the named inventor is directly involved in the alleged patent infringement. Id. The IPO further notes that the privity requirement of assignor estoppel is automatically met only when the former employee and named inventor is the sole owner of a company and will usually not be met in cases where the named inventor is an employee or one of many partners in a company. Id. at 17. Further, Leading Technology notes that assignor estoppel was not designed to deter employees from moving between companies but to prevent them from benefiting from a patent in one job only to repudiate the validity of that patent in a later job and is thus, not comparable to a covenant not to compete. See Brief of Leading Technology Composites, Inc. and Clarkwestern Dietrich Building Systems LLC at 26–27.
- Christina Sperry & Monique Winters Macek, Doctrine of Assignor Estoppel to be Reviewed by U.S. Supreme Court, National Law Review (Feb. 25, 2021).
- Eileen McDermott, Supreme Court Will Review Doctrine of Assignor Estoppel, IPWatchdog (Jan. 11, 2021).