Can an inventor challenge a patent that came from an application he originated?
|Argument||April 21, 2021|
|Decision||June 29, 2021|
|Opinion Below||Federal Circuit|
|Petitioner Brief||Minerva Surgical|
On June 29, 2021, the Supreme Court upheld the validity of the Assignor Estoppel doctrine. However the Court limited the doctrine and remanded the case to determine if Minerva can use it in this case.
Scroll down for our Decision Analysis.
April 19, 2021
This case involves a patent covering a medical device for treating Abnormal Uterine Bleeding (AUB). AUB is a serious and frequently debilitating condition which impacts approximately ten million Americans each year. Conventional treatment of AUB involves endometrial ablation or destroying a layer of uterine lining to stop or reduce abnormal bleeding.
In 1993, Csaba Truckai co-founded NovaCept, Inc. which developed an ablation device called NovaSure for treating AUB. The NovaSure device uses an applicator head that conforms to a contour of the uterine cavity, heats the endometrial lining of the uterus and concurrently removes steam and moisture to avoid unintended ablation during treatment.
In 1998, NovaCept filed U.S. Application No. 09/103,072 (‘072 Application) for “A Moisture Transport System for Contact Electrocoagulation,” and Truckai assigned his rights in the invention, the patent application, and any future continuation applications. Claim 31 in the as-filed application claimed a device that did not require any means of moisture transport.
In 2004, Cytyc Corporation acquired NovaCept, including NovaCept’s patents and patent applications, for $325 million. In 2007, Hologic, Inc. acquired Cytyc Corporation. Hologic (respondent in this case) currently markets and sells the NovaSure device in the United States.
In 2008 Truckai left NovaCept and founded Minerva Surgical, Inc. (petitioner in this case). At Minerva, Truckai developed and brought to market the Minerva Endometrial Ablation System (EAS). Minerva’s device uses an applicator head that, in contrast to the NovaSure device, is impermeable to moisture. In 2015, Minerva received FDA approval to use its device to treat AUB and began commercial distribution.
Meanwhile, in 2013, Hologic filed a continuation patent application that claimed priority to the now 15-year-old ’072 Application. In the new continuation application, Hologic claimed an applicator head, that like as-filed claim 31 in the ‘072 Application, did not require a moisture-permeable applicator head. In August 2015 Hologic’s continuation application matured into U.S. Patent No. 9,095,348 (the ’348 Patent). Hologic then sued Minerva to enjoin it from selling the EAS.
The Lower Courts’ Decisions
Minerva argued that the ‘348 Patent is invalid because the specification describes only a permeable applicator head, not an impermeable applicator head. Hologic responded that the doctrine of Assignor Estoppel bars Minerva from asserting invalidity of the ’348 Patent.
Assignor Estoppel is a judge-made equitable doctrine that bars an assignor (typically the inventor) of patent rights to an invention from contesting validity of a patent on the invention. The logical underpinnings of the doctrine are that the assignor has implicitly represented to the assignee that patent rights that being assigned (presumably for value) are not worthless.
The district court agreed with Hologic that Assignor Estoppel bars Minerva from asserting invalidity. A jury subsequently awarded Hologic nearly $5 million in damages. Minerva appealed to the Court of Appeals for the Federal Circuit urging the court to abrogate the doctrine of Assignor Estoppel or at least limit its scope. The Federal Circuit affirmed the district court’s ruling that Assignor Estoppel completely bars Minerva from asserting any invalidity defense.
The question before the Supreme Court is the general viability of the Assignor Estoppel doctrine and, if it is still viable, are there any limitations on scope of the doctrine?
Minerva (Petitioner) Arguments
Minerva argues that Assignor Estoppel does not have a solid basis in the statute, Supreme Court precedent, or public policy. To the extent it does exist as a viable doctrine, it should be expressly abrogated.
Assignor Estoppel Doctrine Should Not Apply in This Case
Minerga argues that the reasons for applying Assignor Estoppel in this case are weak. For example, the invalidity arguments regarding the ‘348 Patent do not call into question any representation by Truckai as to what was assigned for value in 1998. At that time, Truckai assigned rights in a device that required a moisture permeable applicator head.
Hologic leveraged the ‘072 Application to obtain broad claims that read on a device that does not require a moisture permeable applicator head. Those the broader (and possibly invalid) claims later obtained by Hologic were not assigned or even invented by Truckai in 1998. Even as-filed claim 31 which did not require moisture permeability was cancelled precisely because Truckai determined it was too broad and not what he invented.
Supporters of the doctrine argue that Assignor Estoppel incentivizes innovation by protecting and promoting alienability and acquisitions of patent rights. However, it is unlikely that patents rights are bought or sold on the assumption that Assignor Estoppel applies. Assignor Estoppel applies only against the assignor, not the rest of the world. Therefore, assignees still must diligently investigate the validity of patents rights they purchase.
On the other hand, jettisoning Assignor Estoppel serves an important public interest. An assignor knows the relevant technology and can be the most important witness in a patent case. Therefore, the assignor is uniquely well situated to serve the public interest by confronting bad patents. If a patent is invalid, the assignor should be permitted to prevent the public from bearing costs associated with an undeserved patent monopoly. The only meaningful policy concern Assignor Estoppel serves—protection against fraud and misrepresentation in patent assignments—can be addressed through tort and contract law.
Supreme Court Precedent Has Effectively Abrogated Assignor Estoppel
More generally, Minerva argues that Supreme Court precedent has entirely abrogated the doctrine of Assignor Estoppel. In Scott Paper Co. v. Marcalus Manufacturing Co., 326 U.S. 249 (1945), the Court held that an assignor could argue that their allegedly infringing device is described in an expired patent. Allowing an assignor to defend an infringement action by showing their product is described in an expired patent is the same thing as arguing the asserted patent is invalid in view of the expired patent.
In Lear, Inc. v. Adkins, 395 U.S. 653 (1969), the Court unquestionably abrogated Licensee Estoppel. Licensee Estoppel is grounded in the common-law rule as Assignor Estoppel. Namely, that a party who benefits from a contract cannot argue that the contract is unenforceable. Yet, the Court abandoned Licensee Estoppel because it cuts against the public interest of weeding out invalid patents. For the same reason, abandoning Assignor Estoppel would also promote the important public interest of weeding out invalid patents.
Language of Statute Forecloses Application of Assignor Estoppel
Minerva also argues that the language of the statute supports its position. The Patent Act states that invalidity “shall” be available as a defense in “any” action asserting patent infringement. 35 U.S.C. § 282(b). The “any” language dictates that anybody accused of patent infringement may argue that the asserted patent is invalid. There are no exceptions in the statute for inventors or assignors.
Applying Assignor Estoppel requires reading a common-law gloss into the statute. Only “well-established” common-law rules should only be read into federal statutes. Other equitable estoppel rules have been firmly established for extraordinarily long periods of time. Therefore, those other estoppel principles have a historical pedigree that roots them deeply in the country’s jurisprudence. For example, res judicata and collateral estoppel date to at least the 1100s. Equitable estoppel dates to mid-1600s.
On the other hand, Assignor Estoppel is not a well-established common-law doctrine with respect to patent law. As discussed above, the doctrine had already been undermined in the Scott Paper decision. In fact, Justice Frankfurter, in a dissenting opinion in Scott Paper, advocated the Court repudiate Assignor Estoppel “explicitly, not by circumlocution.” In 1971, Congress considered an amendment that would have expressly created statutory Assignor and Licensee Estoppel. Congress declined to enact any such statutory amendments.
To Extent Assignor Estoppel Remains Viable, It Should Be Tightly Constrained
Alternatively, Minerva says, if this Court reads Assignor Estoppel into the Patent Act, it should make clear that the doctrine is tightly constrained in three ways.
First, Assignor Estoppel should not prevent invalidity challenges to patent claims issued after an assignment of patent rights. Second, Assignor Estoppel should not bar invalidity defenses based on the specification’s lack of written description and enablement. Such arguments depend on facts available to the assignee at the time of the assignment. The assignee cannot, and should not, have relied on the assignor’s representations regarding adequacy of the specification. Third, before applying Assignor Estoppel, an assignee must establish that it reasonably relied on some representation regarding validity. Narrowing the doctrine in these three ways promotes the fair dealing goals of the doctrine without imposing costs on the public associated with assertion of invalid patents.
Hologic (Respondent Arguments)
Hologic argues that eliminating Assignor Estoppel would require overriding Congressional intent and well-established Supreme Court precedent.
Congressional Approval of Assignor Estoppel
Hologic argues that Congress effectively incorporated Assignor Estoppel. The Patent Act was significantly revised in 1952, and at that time, Assignor Estoppel was already a well-established part of the patent laws. Between 1880 and 1952, at least 88 lower-court cases applied or recognized Assignor Estoppel. Congress is presumed to be aware of an administrative or judicial interpretation of a statute and adopts that interpretation when it reenacts a statute without change. In 1952, when Congress reenacted statutory language construed by courts to incorporate the Assignor Estoppel doctrine, Congress effectively incorporated the doctrine into the Patent Act.
That “any action” language in § 282(b) appeared in the 1870 patent statute, and similar language appeared in the 1793 patent statute as well. When Congress reenacted this language in the 1952 patent statute, there is no evidence it intended to abrogate Assignor Estoppel. Furthermore, if § 282(b) is incompatible with Assignor Estoppel because every defendant must be able to assert an invalidity defense in every case, then the “any” language is equally incompatible with other, well accepted doctrines like collateral estoppel, equitable estoppel, and judicial estoppel.
Holigica argues that in addition to Congressional approval of Assignor Estoppel, this Court’s decision in Westinghouse Elec. & Mfg. Co. v. Formica Insulation Co., 266 U.S. 342 (1924) unequivocally sanctioned the doctrine. In Westinghouse, the Court took pains to emphasize that assignors may use prior art only to avoid infringement, not to contest validity. From 1924 to 1952, almost twenty cases—including seven circuits—cited Westinghouse as upholding Assignor Estoppel.
In Scott Paper, Holigic notes, the Court carved out an exception to the Assignor Estoppel where the allegedly infringing device is exactly described in an expired patent. However, Scott Paper explicitly declined to disturb the general rule articulated in Westinghouse recognizing Assignor Estoppel. Despite Justice Frankfurter’s dissent in Scott Paper, courts and treatise-writers continued to recognize Assignor Estoppel as a viable doctrine.
Abrogation of Licensee Estoppel in Lear does not support abrogating Assignor Estoppel. Licensees are buyers of patent rights, while assignors are sellers. Sellers implicitly assume the validity and value of transferred patent rights. That is why sellers receive valuable consideration in exchange for their assigned rights. On the other hand, a licensee (or other buyer) may believe that a patent is invalid and nevertheless purchase a license to avoid risk of defending an expensive patent infringement action.
This Court Should Not Tweak Assignor Estoppel
Hologic warns that this Court should not accept an invitation to tweak the scope of Assignor Estoppel. Assignor Estoppel supports good faith and fair dealing in commercial transactions. Parties should not be allowed to profit from contradicting their earlier actions or representations. Minerva and several amici offer several proposals for amended or limiting the doctrine. Selecting among these competing policy proposals is a project better suited for Congress.
Any public interest concern about weeding out invalid patents is less significant than ever before. Revisions to the patent statue in 2013 provide a host of new procedures for the Patent Office to reconsider a patent’s validity. Even assignors can challenge a patent’s validity through these new Patent Officeprocedures. In fact, Minerva tried and failed to invalidate the ’348 Patent before the Patent Office, although it did successfully invalidate another Hologic patent.
The U.S. Government’s Argument
The US Government agrees that Assignor Estoppel should not be abolished because the doctrine was an established equitable principle when Congress enacted the Patent Act of 1952. The Government also agrees that statutory language in § 282(b) does not preclude application of Assignor Estoppel. The statute specifies which defenses could be raised in “any” patent actions. The statute says nothing about which particular defendants, such as assignors, may assert those defenses.
Assignor Estoppel promotes free and secure assignments of patents. Preventing an assignor from challenging validity of a patent promotes confidence in patent transactions by assuring that the assignor—the person who likely knows the most about the patent or the invention—will not attack conveyed patent rights. On the other hand, public policy also strongly favors weeding out invalid patents. The competing policy considerations favor limiting the doctrine to its “equitable core.” Courts should apply Assignor Estoppel only where:
(1) an inventor sells patent rights for valuable consideration in an arm’s length transaction, then later contends that a patent claim is invalid; and
(2) when the contested patent claim is:
(a) materially identical to a patent claim issued or pending at the time of the relevant assignment, or
(b) the assignor’s invalidity argument contradicts earlier representations made by the assignor.
Practically, Assignor Estoppel would not apply where an assignor questions validity of a patent claim that is broader than or otherwise different from the patent rights that were assigned. In this case, the parties disputed whether claims of the ’348 Patent were broadened beyond the scope of Truckai’s 1998 assignment of the ‘072 Application. Because the factual record is unclear and the lower courts have not applied the appropriate test for Assignor Estoppel, the Court should vacate and remand. On remand, the appeals court should determine whether the claims in the ‘348 Patent are materially identical to claims (e.g., #31) pending at the time of Truckai’s 1998 assignment, or whether the invalidity arguments asserted Truckai’s contradict some other express warranty.
The Court will hear oral argument – by teleconference – on April 21, 2021. The oral argument will be livestreamed on c-span.org.
On June 29, 2021, the Supreme Court decided Minerva Surgical, Inc. v. Hologic, Inc. and upheld viability of the Assignor Estoppel doctrine. However, the Court held the doctrine only applies when an assignor’s invalidity claim contradicts explicit or implicit representations previously made by the assignor.
In the 1990’s Csaba Truckai, a founder of the company Novacept, Inc. invented the NovaSure System for treating abnormal uterine bleeding. Truckai filed a patent application for the device and assigned his interest in the patent application as well as in any future “applications” to Novacept. The NovaSure System uses an applicator head to destroy cells in the uterine lining. The applicator head is “moisture permeable” to avoid unintended burning or ablation (tissue removal).
In 2004, Novacept sold its assets, Truckai’s patent application to another company. In a subsequent 2007 sale, respondent Hologic, Inc. acquired all patent rights in the NovaSure System. Today, Hologic sells the NovaSure System throughout the United States.
In 2008 Truckai founded petitioner Minerva Surgical, Inc. There, he developed another device to treat abnormal uterine bleeding. That device, called the Minerva Endometrial Ablation System also uses an applicator head to remove cells in the uterine lining. However, the Minerva device uses a different technique to avoid unwanted ablation and its applicator head is “moisture impermeable.”
Aware of Truckai’s activities, Hologic amended one of the claims in a patent application originally acquired from Truckai to encompass applicator heads generally, regardless of whether they are moisture permeable. Hologic then sued Truckai and Minerva for patent infringement. In defense, Minerva asserted that the Hologic patent is not valid because the new claim drafted by Hologic does not fit with the patent application’s description of water permeable applicator heads. Hologic argued that because Truckai assigned the original patent application, under the doctrine of Assignor Estoppel he and Minerva (essentially, his alter-ego) cannot contest the patent’s validity.
The District Court agreed that Assignor Estoppel bars Minerva’s invalidity defense, and ruled that Minerva infringed Hologic’s patent. On appeal, the Court of Appeals for the Federal Circuit agreed that Assignor Estoppel bars Minerva’s invalidity defense and upheld damages awarded to Hologic.
Before the Supreme Court, Minerva argued that Assignor Estoppel does not have a solid basis in the statute, precedent or public policy. To the extent it does exist as a viable doctrine, it should be expressly abrogated. Hologic argued that eliminating Assignor Estoppel would require overriding Congressional intent and well-established Supreme Court precedent. The US Government intervened and agreed that Assignor Estoppel is viable but should be only applied in limited circumstances.
Majority Opinion – Holding that Assignor Estoppel remains a viable but limited doctrine
(Justices Kagan, Roberts, Breyer, Sotomayor, Kavanaugh – 5/9 Justices)
The majority held that Assignor Estoppel is well grounded in centuries-old principles of fairness. However, the majority also held the doctrine only applies when an inventor says one thing (explicitly or implicitly) when assigning a patent and then says the opposite when litigating against the patent’s owner.
Courts have long applied the doctrine of assignor estoppel to prevent an inventor from making inconsistent representations about a patent’s validity. The classic case involves an inventor who applies for a patent, obtains the patent and then assigns it to a company for value. Later, the inventor/assignor joins a competing business, where he develops a similar and possibly infringing product. When the assignee company sues for patent infringement, the inventor/assignor argues that the invention he previously assigned was never patentable, and the patent invalid. That kind of about-face is what Assignor Estoppel operates to prevent (“estop” in legalese).
The earliest American decision applying the doctrine dates from 1880. By 1893 the doctrine was considered so well established and generally accepted that at least one court decision stated that no citation of authority is even to support application of the doctrine. Because the doctrine of Assignor Estoppel has existed for many years, the Court accepted the fairness principle at its core. However, the Court held that the Federal Circuit applied the doctrine too expansively.
The Court rejected Minerva’s arguments that the Patent Act of 1952 abrogated assignor estoppel. The Patent Act of 1952 states that invalidity of a patent “shall be a defense in any action involving” infringement. Minerva argued this language requires that invalidity must be available as a defense in every infringement action – even when the inventor or assignor is the defendant. The Court rejected this view because it would foreclose applying a host of other well established common-law preclusion doctrines (equitable estoppel, collateral estoppel, res judicata) in patent cases, clearly not something intended by the statute.
The majority acknowledged that there have been Supreme Court cases such as Scott Paper and Lear where the Court did not apply Assignor Estoppel. However, those cases do not abrogate the doctrine. To the contrary, they confirm that the doctrine has limits, and may not apply in all fact patterns.
The Court also rejected the policy consideration that a need to weed out bad patents supports overthrowing Assignor Estoppel and allowing inventors to assert invalidity. Assignor Estoppel reflects a demand for consistency in dealing with others. When an inventor sells patent rights, the inventor is making (at least) an implicit representation to the buyer that the patent at issue is valid and will give the buyer the sought-for monopoly. By saying one thing and then saying another, the inventor wants to profit doubly—by gaining both the price of the assigned patent rights and the right to continue to use the invention covered by the assigned patent. That course of conduct by the inventor/assignor is unfair dealing. The need to prevent this unfairness outweighs any loss to the public by preventing in the inventor/assignor from asserting an invalidity defense. Anybody else, besides for the inventor/assignor is still free to assert the invalidity defense.
The majority therefor held Assignor Estoppel only applies when its underlying principle of fair dealing are in play. But when the assignor has not made any explicit nor implicit representations in conflict with an invalidity defense, there is no unfairness concern. An example of where there is no unfairness concern arises in post-assignment change to patent claims. If the newly amended claims are materially broader than the old claims, the assignor did not warrant the validity of the new claims at the time of assignment. If the assignor did not make any representations of validity, Assignor Estoppel does not bar the assignor from challenging validity of the new claims in litigation. Assignor Estoppel does not extend beyond what the assignor represented when assigning the patent rights.
In this case, the Federal Circuit has failed to recognize these limits. Minerva argued that Assignor Estoppel should not apply because it was challenging a claim that was materially broader than the ones Truckai assigned. The Federal Circuit incorrectly applied Assignor Estoppel broadly to prevent Minerva from asserting that argument. The Court remanded to the Federal Circuit to address what it thought irrelevant (and the parties vigorously disputed) – whether Hologic’s new claim is materially different than the claims Truckai assigned.
Principal Dissenting Opinion – Arguing Assignor Estoppel has been repudiated
(Justices Barrett, Thomas and Gorsuch – 3/9 Justices)
The principal dissent held Congress repudiated the doctrine of Assignor Estoppel in the Patent Act of 1952 and regardless, this Court’s precedents leave no room for the doctrine.
Support for the common law doctrine of Assignor Estoppel is grounded in Westinghouse Elec. & Mfg. Co. v. Formica Insulation Co., 266 U. S. 342 (1924). At least as of 1924, this Court expressly recognized existence of the Assignor Estoppel doctrine. However, Westinghouse was interpreting a predecessor statute, the Patent Act of 1870. For Assignor Estoppel to have been carried over into the Patent Act of 1952 requires (1) Congressional ratification of the Westinghouse decision in the 1952 Patent Act, or (2) that Assignor Estoppel was a “well-settled” common-law doctrine. The principal dissent argues that Assignor Estoppel does not meet either of these two requirements.
Westinghouse supported application of Assignor Estoppel by analogy to principles of estoppel by deed in the context of real property. Westinghouse reasoned that “it was manifestly intended by Congress to surround the conveyance of patent property with safeguards resembling those usually attaching to that of land.”
However, the 1952 Patent Act contains a significant sentence that the 1870 Act did not. The 1952 states that “subject to the provisions of this title, patents shall have the attributes of personal property. This language is inconsistent with the premise on which Westinghouse based Assignor Estoppel, undercutting the argument that Congress ratified the Westinghouse analogy to real property in the 1952 Patent Act.
Furthermore, it is logical that patents rights are more analogous to personal property. A tract of land is easily determined by survey. However, the scope of patent rights is not as clear. The scope of patent rights involves factual and legal inquiries “predicated on factors as to which reasonable men can differ widely.” Therefore, unlike the grantor of a deed of real property who guarantees the quality of title, an assignor of a patent cannot be assumed to warrant the patent’s validity.
Finally, the Patent Act of 1952 states that invalidity “shall” be a defense “in any action involving the validity or infringement of a patent.” The “any action” language includes actions in which the inventor is the defendant. In other words, even an inventor/assignor shall be allowed to assert invalidity of an assigned patent. Accordingly, the statutory language seems to repudiate the Assignor Estoppel doctrine.
It cannot be said at the time of enactment of the 1952 Patent Act the doctrine of Assignor Estoppel was a “well-settled” common-law background principle that qualifies for assumed incorporation into the statute. The principal dissent therefore held the Patent Act of 1952 (effectively our current statute) does not incorporate the doctrine of Assignor Estoppel.
Dissenting Opinion – Arguing certiorari in this case has been improvidently granted
(Justice Alito– 1/9 Justices)
This Court first considered and approved of Assignor Estoppel in Westinghouse and grounded the doctrine in an analogy to the common law rules governing conveyances of real property. Westinghouse explained that just as a grantor of a deed of land cannot “impeach the effect of his solemn act” by later claiming that the title granted is no good the same principle applies to the assignment of a patent right.
However, the Patent Act of 1952 included statutory language stating that patents have the attributes of personal not real property. That change has a bearing on whether Westinghouse should be overruled because it undermines Westinghouse’s analogy to estoppel by deed. Justice Alito argues the Court cannot not decide whether Assignor Estoppel remains a viable doctrine unless it agrees to decide whether Westinghouse should be overruled in view of the language in Patent Act of 1952 comparing patent rights to personal property. Because the majority and the principal dissent refuse to address whether Westinghouse should be overruled, Justice Alito would have dismissed the writ certiorari in this case as having been improvidently granted.