Minerva Surgical, Inc. v. Hologic, Inc. (2021)

Supreme Court Retains Doctrine of Assignor Estoppel, But With Limits

By Kevin E. Noonan and Joshua R. Rich --

Patent law is replete with arcane (and often judge-made) doctrines, such as the doctrine of equivalence and obviousness-type double patenting.  In addition, long having been considered a property right (Oil States to the recent contrary), patents have been bound to greater or lesser degrees with equitable considerations attendant on the transfer of property and proper limits thereof.  These two strands of patent law and jurisprudence converge in the doctrine of assignor estoppel, the question before the Court in Minerva Surgical, Inc. v. Hologic, Inc.  On Monday, a five-justice majority of the Supreme Court, reaffirmed the doctrine, while at the same time limiting its application.

Simply put, assignor estoppel prohibits an inventor or other owner of rights in a patent from selling that patent to another party, then practicing the invention while attempting to avoid infringement liability by claiming the patent was invalid from the start.  The Minerva majority found that the doctrine was well-established in the law and thus was unwilling to abandon it.  However, consistent with the equitable nature of the doctrine, the Court limited the doctrine to those instances where the assignor could be fairly understood to have warranted (either expressly or implicitly) the validity of the claims ultimately issued.  Thus, in many circumstances -- such as when an inventor assigns rights to a patent application that ultimately issues with significantly broader claims -- the doctrine will not apply.

In Minerva, the Court faced a clear example of one of the potential exceptions to the rule of assignor estoppel.  The inventor, Csaba Truckai, conceived a device with a moisture-permeable head that could treat abnormal uterine bleeding.  He filed a patent application that described that invention and assigned it to a company he formed.  After he sold the company (including the patent rights), he founded a second company, Minerva Surgical.  At Minerva, he developed a device with a moisture-impermeable head that could also treat abnormal uterine bleeding (the Court's opinion noting that Minerva's device worked in a different manner that the original device disclosed in the putatively infringed patent).  The successor-in-interest to Truckai's first company (Hologic), unhappy with his direct competition, filed a continuation of the original application and pursued claims that would encompass devices regardless of the permeability of the head despite the differences in the two inventions.  Those claims issued and the successor sued Minerva on that patent.  Minerva argued that those later-added claims lacked support in the written description of the application, but the trial court refused even to consider the argument based on the doctrine of assignor estoppel.  Denied the ability to assert invalidity as a defense, Minerva was found to infringe the broader claims.  On appeal, the Federal Circuit agreed with this application of the assignor estoppel doctrine.

The Supreme Court majority, citing and discussing some of the precedent that established the doctrine of assignor estoppel, found that the doctrine was well established (both before and after the 1952 Patent Act) and that its application should be addressed as a matter of fairness.  If a party sells patent rights based on a representation that the claims are valid, it would be unfair to allow that assignor to come into court and argue that the claims are invalid.  And even if that representation is not explicit in the contract, the assertion of validity of the assigned patent may be implied because the inventors have represented to the Patent and Trademark Office in an oath and declaration that the application disclosed and claimed their invention.  Thus, the patent assignor -- who would often be best positioned to compete with the assignee because of experience in the field -- should in fairness not be able to raise invalidity as a defense to a patent infringement claim.  But it would similarly be unfair to assignors that had not made such a representation of validity of the claims asserted against them to be precluded from challenging validity.  An example that resonated with the majority was the case of an employee who prospectively assigns all inventions made in the workplace as part of an employment agreement; the employee could scarcely be held accountable regarding claims for a later-developed invention since the invention had not yet been conceived, let alone claimed.  It would also be the case when a patent application is assigned and the claims are later broadened to cover a scope not initially within the claims at the time of the assignment.

The majority decision, written by Justice Kagan and joined by the Chief Justice and Justices Breyer, Sotomayor, and Kavanaugh, parsed as is the Court's wont the judicial history of the doctrine, which is of much less ancient provenance than other doctrines (a fact upon which Justice Barrett in part bases her dissent).  The principal case is Westinghouse Elec. & Mfg. Co. v. Formica Insulation Co., 266 U.S. 342, 349 (1924), where the Court opined that the doctrine of assignor estoppel was "well-settled" law.  But perhaps more important to the majority was the essential fairness as set forth above, the majority making the distinction that the equitable principles underlying the assignor estoppel doctrine were the stuff of "centuries-old fairness principles," tracing the roots of assignor estoppel in English law (Oldham v. Langmead (1789)) that "grew in favor throughout the 1800s as an aspect of fair dealing," as well as estoppel by deed in English real property law.  Its first appearance in U.S. law was in 1880, Faulks v. Kamp, 3 F. 898 (CC SDNY), and by 1893 was "so well established and generally accepted that citation of authority is useless," Griffith v. Shaw, 89 F. 313, 315 (CC SD Iowa 1893).  And Westinghouse, consistent with the rationale espoused in this precedent, "grounded assignor estoppel in a principle of fairness."

But the Court also apprehended the circumstances, perhaps present here, where essential unfairness is just as important a consideration.  Such considerations have been present in the Court's application of doctrine in Westinghouse, according to the majority opinion, because the assignor should be allowed to argue how to construe the claims based on the prior art and, for example, obtain a construction narrow enough to avoid infringement.  (In a footnote, the Court acknowledges that while today the practice of the court construing claims limits the opportunity for an assignor to take refuge in this stratagem, the majority notes that "[t]he critical point for our purpose is that even while affirming the assignor estoppel doctrine, the Court made clear that it did not always bar assignors from effectively defending against infringement suits.")  The Westinghouse Court had "left for another day" a question that "most interested" them: "whether estoppel should operate differently if the assignment was not of a granted patent but of a patent application."  The distinction is that for an application the patent right is "inchoate" and not "certainly defined."

The Court noted that the Federal Circuit, in addition to somewhat slavishly relying on the doctrine, also rejected consideration of Minerva's argument that Hologic had broadened the claims in its patent expressly to ensnare Minerva's device.  This was where the Federal Circuit erred, according to the majority, for not recognizing that "[t]he doctrine applies only when an inventor says one thing (explicitly or implicitly) in assigning a patent and the opposite in litigating against the patent's owner."  The majority announced that it rejected Minerva's call to abrogate the doctrine completely but had decided that the scope of the estoppel should be constrained.  The Court rejected Minerva's contention (persuasive to Justice Barrett) that the 1952 Patent Act abrogated the doctrine by including a provision that invalidity must be available as a defense in every case in 35 U.S.C. § 282(b) because like language was in the Patent Act when Westinghouse was decided.  In addition, such a statutory construction "would foreclose applying in patent cases a whole host of common-law preclusion doctrines" such as equitable estoppel, collateral estoppel, res judicata, and law of the case contrary, inter alia, to cases like SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, 137 S. Ct. 954 (2017).  Moreover this interpretation would be contrary to the principle that Congress "legislate[s] against a background of common-law adjudicatory principles," a proposition for which the majority cited Astoria Fed. Sav. & Loan Assn. v. Solimino, 501 U.S. 104, 108 (1991).  Thus, the majority opined that assignor estoppel was "such a background principle of patent adjudication" by 1952 that without an express, evident statutory purpose in the Patent Act, the Court was not persuaded by Minerva's argument.

Nor did the majority believe that its decisions including Lear, Inc. v. Adkins, 395 U.S. 653 (1969), which eliminated licensee estoppel, and Justice Frankfurter's dissent in Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249, 264 (1945), limiting assignor estoppel, had "eviscerated any basis for assignor estoppel."  Rather, the opinion surmised that these decisions did nothing more than "police the doctrine's boundaries" (which is how the Court characterized its decision in this case).  In an amusing aside, the majority characterized the dissent as "worked-up" in its disagreements over the Court's decision in Scott Paper where in the majority's opinion the Court likewise refused to abrogate the assignor estoppel doctrine.  And Lear "gives Minerva still less to work with" the majority thought, being directed to licensee estoppel and reciting dicta that in the assignment context the "equities" are "far more compelling than those presented in the typical licensing arrangement."

Finally, the Court ignored the clarion call that all of the patent law might be struck down to rid the innovation ecosystem of "bad" patents (and that this provided a sufficient incentive to abrogate the doctrine here).

While hewing to the equitable application of assignor estoppel in certain instances, the majority believed that the doctrine requires limits.  The most significant of these limits is that it should be applied "only when its underlying principle of fair dealing comes into play."  And where "the assignor has made neither explicit nor implicit representations in conflict with an invalidity defense, then there is no unfairness in its assertion" and assignor estoppel should not apply.  The Court notes the common occurrence that an inventor assigns to an employer "future rights" in patents for later-developed inventions.  Here, it is the assignee that determines which inventions to patent, and thus the assignor can have no representations to make.  But most relevant to this case, the Court notes that the basis for a representation of validity can be diminished -- if not abolished -- by a change in patent claims, which can arise when an application not yet a granted patent is assigned (as characterized in Westinghouse, comprising an "inchoate" right").  The majority believed that this understanding of the limits of the proper application of the doctrine was the Court's concern in Westinghouse as it is here (appreciating that opinion to have "liberally dropped hints" to that effect).  Thus, the Court set out the rule 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.  The limits of the assignor's estoppel go only so far as, and not beyond, what he represented in assigning the patent application.

Here, because prior Federal Circuit precedent called for the blanket application of assignor estoppel, there was no record of whether application of the doctrine would be fair; the Federal Circuit's error was in not recognizing the boundaries that the majority enunciate here.  The Court therefore remanded the matter for further consideration on this point.

Two groups of Justices dissented from the decision; Justice Barrett wrote for three Justices (herself and Justices Thomas and Gorsuch), while Justice Alito wrote for himself alone.

Unlike the majority, Justice Barrett believed the doctrine was not so well-established that revision of the Patent Act in 1952 could be considered to have adopted (or at least not abrogated) the doctrine.  Justice Barrett's dissent dissected the Court's consideration of the doctrine prior to and after enactment of the 1952 Act and found no basis in the text of the Act for the majority's acceptance that assignor estoppel was so established that Congress could be presumed to have drafted the Act assuming the existence of assignor estoppel as an essential backdrop.  Thus, after coming to the conclusion that the doctrine was not well-established prior to the 1952 Act, Justice Barrett treated the question as one of statutory interpretation.  She found no discussion of assignor estoppel in the plain language of the statute and hence no reason to hold that it had survived the sweeping revisions of patent law enacted by the 1952 Act.

Justice Alito wrote a separate dissent voicing his opinion that the Court should have considered explicitly whether the clearest precedent regarding the doctrine, Westinghouse v. Formica, should be expressly overruled (which would abrogate the doctrine).  Because neither the majority nor the primary dissent addressed that issue, he believed that the case should not have been considered by the Court at all.

Minerva Surgical, Inc. v. Hologic, Inc. (2021)
Opinion by Justice Kagan, joined by Chief Justice Roberts and Justices Breyer, Sotomayor, and Kavanaugh; dissenting opinion by Justice Alito; dissenting opinion by Justice Barrett, joined by  Justices Thomas and Gorsuch

Comments

[skeptical]

Across several blogs, coverage of this case has raised a related issue of just what an inventor's oath and declaration covers.

While somewhat cerebral, there are real world processing issues that are implicated.

Some take the direct words of the USSC as meaning that ANY change from an 'as-filed' claim NECESSARILY implicates a change from the oath taken by inventors.

This has been 'charged' as changes made to enlargen scope, but on a direct read, there is no reason to limit instances to which the scope may be increased, as those atttempting to read the oath/declaration tightly cannot 'pick and choose' the type of change from the as-filed claims.

On the other hand, it has been pointed out that the oath/declaration directly impacts not only the as-filed claims, but the entire specification as well.

With such a view, it can ONLY be in those cases in which the "No New Matter" rule is violated that any inventor would have a legitimate case for raising later qualms.

I am curious as to how 'The Docs' here view this collateral issue.

[Kevin E Noonan]

Skeptical: I think the Court by thinking about this abstractly (i.e., what would be fair to the parties) has made it possible for an assignor to argue almost always that what has been claimed is outside the scope of what had been assigned. At the "in the weeds" level this would mean a claim scope that (arguably) was not expressly disclosed (but a proper interpretation of Sec. 112 should preclude that; indeed, in this case there was more than a flavor that had the assignor been able to raise this as a ground for invalidity they would have prevailed). At a "30,000-foot level" I think there will be a lot more gnashing of teeth whether a claim that clearly encompasses an embodiment not expressly disclosed was assigned. Think a claim reciting a fastener (nail, screw, nut-and-bolt, rivet, glue) where the alleged infringing article uses Velcro (and does it make a difference if Velcro was known at the time of invention?). That will be where the issue is decided, making the fine distinctions of claim construction broad enough to capture the accused infringing article while not encompassing the prior art or violating Sec 112 even more important. Whether the results turn out on balance to be fair is anyone's guess.

Thanks for the comment.

[skeptical]

Dr Noonan,

With your comment of, "had the assignor been able to raise this as a ground for invalidity" are you drawing a distinction between the mechanism of post grant review (IPR having a subset of items to which to challenge with) and a normal Article III challenge (all items)?

Also, you state, "whether a claim that clearly encompasses an embodiment not expressly disclosed was assigned." - As I noted, the ONLY way for this assertion to stand is a violation of the no new matter rule - remembering that the SEPARATE oath/declaration trumps whatever time of assignment may exist.

[Kevin E Noonan]

Skeptical: as to the first point, the issue is clearly with regard to proceedings before an Article III court; the post-grant review proceeding will proceed without any estoppel preventing the Office from continuing in the absence of Petitioner, so if the Petitioner was estopped the Director could step into her shoes.

And yes, in one aspect the new matter rule would need to be violated (which I think was what Minerva wanted to argue). But there is an interpretive question of whether the specification disclosed broadly a device described without limitation to the water permeability of the head (so it would pass muster under 112) but that the inventor subjectively did not invent (no claims to one embodiment, for example). Not sure the Court majority would not have permitted the challenge by the inventor if s/he had been able to testify that s/he had NO subjective appreciation of embodiments comprising the accused infringing article. The point is that in the district court Minerva had no opportunity to make that argument due to application of the estoppel