Supreme Court Limits Assignor Estoppel in Minerva Surgical v. Hologic

The Supreme Court, in Minerva Surgical, Inc., v. Hologic, Inc., et al., Case No. 20-440, recently upheld the doctrine of assignor estoppel, but severely limited its reach. The Court limited assignor estoppel to not apply in the cases of a “common employment arrangement” with an employer and employee, when there is a change in law, and when the issued patent has “materially broader” claims than the assigned invention.

The traditional doctrine of assignor estoppel prevents an inventor who assigns his patent from later challenging its validity. In Minerva the court considered whether to preserve, limit, or abolish this doctrine.

The majority chose to limit the doctrine, holding 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.”[1]

In so holding, the majority agreed with Hologic that the Supreme Court’s prior holding in Westinghouse Elec. & Mfg. Co. v. Formica Insulation Co., 266 U.S. 342 (1924), “endors[ed] the doctrine.”[2] It further found that its decisions in Scott Paper Co. v. Marcalus Manufacturing Co., 326 U.S. 249 (1945), and Lear, Inc. v. Adkins, 395 U.S. 653 (1969), “retained the doctrine” while “polic[ing] the doctrine’s boundaries.”[3]

Finding the doctrine sprung from principles of good faith, the Court reasoned that “[w]hen a person sells his patent rights, he makes an (at least) implicit representation to the buyer that the patent at issue is valid[.]”[4] The Court recognized at least three situations, however, in which the doctrine would not apply, because changes to the patent occur post-assignment and the assignor makes no representations (explicit or implicit) about after-arising changes:

1. An inventor who assigns all future patent rights to his employer. “In that scenario, the assignment contains no representation that a patent is valid. How could it? The invention itself has not come into being.”[5]
2. “[W]hen a later legal development renders irrelevant the warranty given at the time of assignment.”[6]
3. When the claims of the patent change after assignment.[7] This “arises most often when an inventor assigns a patent application, rather than an issued patent.”[8]

Justice Alito dissented because—in his view—both the majority and dissent refused to decide whether to overrule Westinghouse. He would have “dismiss[ed] the writ as improvidently granted.”[9]

Justice Barrett, joined by Justices Thomas and Gorsuch, also dissented. She argued that Congress, in adopting the Patent Act of 1952, did not endorse Westinghouse’s construction of the assignment provision of the Patent Act’s processor statute (which the Patent Act of 1952 reenacted).[10] She argued this because Westinghouse’s construction of the assignment provision of the then-relevant patent statute “was far from well settled in 1952.”[11] She further argued that Congress did not adopt Westinghouse because the Patent Act of 1952 contained wording not found in the patent statute that Westinghouse had interpreted.[12] The dissent reasoned that since the change in wording was a “material change” to the statute, Congress cannot be considered to have adopted Westinghouse.[13]

She concluded that Westinghouse was not part of the common law that forms the backdrop against which Congress legislates, because the doctrine of assignor estoppel simply does not have the “impeccable historic pedigree” associated with such common-law principles.[14]

Conclusion

The doctrine of assignor estoppel has been preserved for the time being and is an important check on fraudulent assignments and encourages innovation. As the government’s brief notes, “At bottom, assignor estoppel ensures fair dealing in arm’s-length commercial transactions involving patents.[15] When one party voluntarily sells a patent to another party for value, basic notions of equity should prevent him from later contending that the patent was valueless and the rights he sold do not exist. The assignability of patents, see 35 U.S.C. 261, increases their value and encourages innovation.”[16]

It is important that companies recognize where the doctrine applies and drafts agreements with employees accordingly. This can include express and implicit representations that the patent is valid after issuance.

If you have any questions, please contact the authors of this article or your Dinsmore attorney.