Supreme Court Scales Back Equity Doctrine in Patent Cases

United States Supreme Court Building. / Image courtesy Wikimedia; Photo By Carol M. Highsmith - Library of Congress Catalog.

A recent Supreme Court decision reaffirmed a long-standing intellectual property doctrine that bars inventors who turn over their patents to others from later claiming the patent is invalid. The ruling also potentially gives creators some room to profit by extensions of their original idea by limiting the century plus-old assignor estoppel rule.

The June 29 ruling clarified that, while courts will continue to presume that inventors surrender a patent they believe to be valid in commercial transactions, the recipient of the patent cannot use the postulate as a defense in an infringement lawsuit after expanding the appenage’s reach. The court’s holding means the precept is “not absolute,” said Justin Krieger, the managing partner at Kilpatrick Townsend and a veteran patent lawyer. “You do have to weigh the equities.”

Justice Elena Kagan, the author of the 5-4 majority opinion, found support for that approach in the tenet’s fundamental underpinning. “The equitable basis of assignor estoppel defines its scope: The 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,” she wrote.

At issue in the case were gadgets used to treat abnormal uterine bleeding. One device, called the NovaSure System, involved the use of an applicator head to ablate the endometrium, which in turn reduces excessive transuding. Novacept, Inc., which the inventor founded, received an assignment of the patent application relating to the device, which was eventually patented. The asset was eventually transferred to Hologic, Inc., a Massachusetts-based medical technology company. Meanwhile, the inventor launched another company – Minerva Surgical, Inc. – and proceeded to develop another mechanism to remedy AUB called the Minerva Endometrial Ablation System, which was also patented.

Hologic obtained an expanded patent on the NovaSure System to generally cover applicator heads and then sued Minerva for patent infringement. A federal district court in Delaware awarded damages of about $5 million, which the U.S. Court of Appeals for the Federal Circuit upheld. The appeals court rejected Minerva’s argument that the new Hologic patent did not match the invention by the NovaSure System creator and held that Minerva could not challenge the patent’s validity.

Justice Kagan’s opinion highlighted the history of the obscure maxim about which the parties were fighting in the multi-million dollar dispute. She explained that, as early as 1880, American law first recognized it and that, by 1924, the Supreme Court ratified it in a decision called Westinghouse Electric & Manufacturing Co. v. Formica Insulation Co.

The rule, Krieger said, aims to assure that parties to patent transactions are treated in a just manner. “If you’re selling me your patent, you are at least implicitly representing to me that you believe your patent to be valid,” he said. “And it’s not fair for you, years later when you’re trying to stay in the market and you’re infringing the patent you sold me, to assert that this patent that you sold me was really a ball of yarn.”

Krieger said the court’s decision in the Minerva-Hologic fight represents a “reigning in” of the century-plus old rule, needed because of a problem with the application of the principle that develops when the patent or patent right that is sold or assigned does not match the patent eventually issued by the U.S. Patent and Trademark Office. “There are lots of situations where there isn’t an affirmative representation or the patent rights haven’t been firmly established at the time of the assignment,” he said.

One common scenario, Krieger said, is the departure of an inventor from a company that paid them for their creation that is followed by a change in the claims presented to the PTO. “If you’re being paid to invent, you’ll file an assignment document assigning your rights as an inventor to the company,” he explained. “At that point, you just have a patent application and that patent application has claims at the end that define the invention. Those claims are a nose of wax and they can be shaped during prosecution such that they can be broadened or they can be narrowed, depending on what type of arguments the examiner makes and what type of prior art the examiner cites against you.” If the claims change, “then at the time of the assignment, there was no representation made by the inventor that those broader claims were patentable.”

That, he explained, was the crux of the situation in the case decided by the Supreme Court. 

Although Minerva had a “different invention” and Hologic saw that it was “doing something different,” Minerva was prevented from arguing that Hologic’s enlarged patent scope was void even though the inventor of the NovaSure System was not even aware of the expanded patent claim. 

Justice Kagan pointed out that the Westinghouse decision had not addressed whether the assignor estoppel doctrine applies to patent applications. “In a patent application, the Court began, the inventor swore to a particular specification,” she wrote. “But the exact rights at issue were at that point inchoate – not certainly defined. And afterward, the Court (presciently) observed, the claims might be enlarged at the instance of the assignee beyond what the inventor had put forward. That might weaken the case for estoppel.”

Kagan, who was joined by Chief Justice John Roberts and by Justices Stephen Breyer, Sonia Sotomayor, and Brett Kavanaugh, then found Minerva could challenge Hologic’s patent in the dispute. The equitable principle at the core of the case, she said, “demands consistency in representations about a patent’s validity: What creates the unfairness is contradiction.” If “the assignor has made neither explicit nor implicit representations in conflict with an invalidity defense, then there is no unfairness in its assertion,” she continued.

In the patent fight before the court, Kagan concluded, Hologic’s patent claim did not match that it obtained as a result of the NovaSure System inventor’s assignment. “Assuming that the new claims are materially broader than the old claims, the assignor did not warrant . . . the new claims’ validity,” she wrote. “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.”

The majority rejected Minerva’s argument that Congress eliminated the equitable rule preventing an assignor of a patent from later arguing its invalidity in an infringement lawsuit and that, even if it hadn’t, the Supreme Court did. “Assignor estoppel was by 1952 just such a background principle of patent adjudication, and Congress gave no indication of wanting to terminate it or disturb its development,” Kagan wrote. “Nor has Congress done so since that time.” She explained that the high court cases cited to support the argument amounted to the justices acting to “police the doctrine’s boundaries.”

Two dissenting justices said they would reject the assignor estoppel rule in its entirety on grounds that Congress repudiated it by enacting a 69-year-old statute. “Not one word in the patent statutes supports assignor estoppel, and the majority does not claim otherwise,” wrote Justice Samuel Alito, while Justice Amy Coney Barrett cited the 1952 law’s “comprehensive scheme for the creation and protection of patent rights.” “[W]here the Act does address invalidity defenses, it states that invalidity shall be a defense in any action involving the validity or infringement of a patent,” the court’s junior justice wrote. “The text includes no exception for actions in which the inventor is the defendant.”

Krieger said he did not find Justice Samuel Alito’s and Justice Amy Coney Barrett’s arguments to be compelling. “Frankly speaking, I don’t think the assignor estoppel doctrine was anywhere in Congress’ mindset when they enacted the Patent Act of 1952,” he said.

The case is Minerva Surgical, Inc. v. Hologic, Inc., No. 20-440.

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