Federal Circuit — Inventors Not Estopped from Challenging Assigned Patents in IPR

December 13, 2018
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The Doctrine of Assignor Estoppel does not Apply in Inter Partes Review (IPR) Proceedings Under the America Invents Act (AIA)

The doctrine of assignor estoppel does not apply in inter partes review (IPR) proceedings under the America Invents Act (AIA), according to the Federal Circuit Court of Appeals. The court’s decision in Arista Networks, Inc. v. Cisco Sys., Inc. means that inventors can challenge their own patents, at least in IPR proceedings.

The Doctrine of Assignor Estoppel does not Apply in Inter Partes Review (IPR) Proceedings Under the America Invents Act (AIA)

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Doctrine of Assignor Estoppel

The doctrine of assignor estoppel prevents a party who assigns a patent to another from later challenging the validity of the assigned patent. The rationale is that a seller should not be allowed to represent to a buyer that the subject of their agreement is valuable and then subsequently assert that same item is worthless. 

As noted by the Federal Circuit, the doctrine often arises where an employee invents something during his or her tenure with a company, assigns the rights to that invention to his or her employer, then leaves the company to join or found a competing company. In such situations, the employee’s new company may be estopped because assignor estoppel also prohibits parties in privity with an estopped assignor from challenging the validity of a patent.

Facts of Arista Networks, Inc. v. Cisco Sys., Inc.

In this case, Dr. David Cheriton invented the subject matter of U.S. Patent No. 7,340,597 (the ’597 patent) while employed by Cisco Systems Inc. (Cisco). He subsequently assigned his rights to that invention to Cisco as a condition of his employment. In the assignment document, Dr. Cheriton also agreed “generally to do everything possible to aid said assignee, their successors, assigns and nominees, at their request and expense, in obtaining and enforcing patents for said invention in all countries.” Cheriton left Cisco to co-found Arista Networks, Inc. (Arista), a competitor to Cisco.

After Dr. Cherition and several other key employees left to found Arista, Cisco sued the company for patent infringement. In 2015, Arista petitioned for an inter partes review of certain claims of the ’597 patent. However, Cisco argued that Arista should be barred from pursuing IPR proceedings, citing assignor estoppel grounds. The Patent Trial and Appeal Board (PTAB) determined that assignor estoppel did not preclude inter partes review of the challenged claims.

Federal Circuit’s Decision

The Federal Circuit affirmed the PTAB’s refusal to apply assignor estoppel to the IPR proceedings. In reaching its decision, the court acknowledged that Cisco’s argument that assignor estoppel is “a well-established common-law doctrine that should be presumed to apply absent a statutory indication to the contrary” had “some merit.” However, it also noted that intervening decisions, such as Lear, Inc. v. Adkins, 395 U.S. 653 (1969) in which the Court struck down the doctrine of licensee estoppel, called the continued viability of assignor estoppel into question. 

In ruling against Cisco, the court largely relied on statutory interpretation, specifically Section 311(a) of the AIA. It states, in relevant part: “(a) In General.—Subject to the provisions of this chapter, a person who is not the owner of a patent may file with the Office a petition to institute an inter partes review of the patent. . . .”

The Federal Circuit agreed with Arista that § 311(a) unambiguously leaves no room for assignor estoppel in the IPR context, given that the statute allows any person “who is not the owner of a patent” to file an IPR. As the court further explained:

The plain language of § 311(a) demonstrates that an assignor, who is no longer the owner of a patent, may file an IPR petition as to that patent. This conclusion is consistent with Congress’s express incorporation of equitable doctrines in other related contexts. For example, a statute governing International Trade Commission investigations states that “[a]ll legal and equitable defenses may be presented in all cases.” 19 U.S.C. § 1337(c); cf. 15 U.S.C. § 1069 (providing in the Lanham Act context that “[i]n all inter partes proceedings equitable principles of laches, estoppel, and acquiescence, where applicable may be considered and applied”). And although such express inclusion of equitable defenses in other contexts is not dispositive of the issue presented in this case, it is further evidence of congressional intent.

Finally, the Federal Circuit rejected Cisco’s argument that allowing assignor estoppel in other forums, such as district court, while not allowing it in the IPR context would create an inconsistency that encourages forum shopping. “We, however, do not view this as an inconsistency, but rather as an intentional congressional choice,” the panel wrote. “Such a discrepancy between forums—one that follows from the language of the respective statutes—is consistent with the overarching goals of the IPR process that extend beyond the particular parties in a given patent dispute.”

Key Takeaway

The doctrine of assignor estoppel frequently arises in patent infringement litigation. The Federal Circuit’s decision is important because it clarifies how and when it applies, particularly with respect to IPR proceedings.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, David A. Einhorn, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.