Fair Enough Says SCOTUS: The High Court Keeps Assignor Estoppel on Life Support but May as Well Have Pulled the Plug

Fair Enough Says SCOTUS: The High Court Keeps Assignor Estoppel on Life Support but May as Well Have Pulled the Plug

“Dad: The world isn’t fair, Calvin.

Calvin: I know Dad, but why isn’t it ever unfair in my favor?”^[1]

The medical device company Hologic, respondent in last June’s landmark Supreme Court case, Minerva Surgical, Inc v. Hologic, Inc.^[2], might well agree with Calvin. Hologic was relying on the longstanding equitable doctrine of assignor estoppel to prevent challenges to its patent, but the Court ruled that fairness demanded otherwise.^[3] The doctrine, fully realized, prevents an assignor from “attack[ing] the utility, novelty, or validity” of a patent that he previously assigned.^[4] The purpose of the doctrine is to preclude bad-faith dealing and injustice, as “an assignor should not be permitted to sell something and later to assert that what was sold is worthless, all to the detriment of the assignee.”^[5]

But, despite its seemingly straightforward wisdom, the doctrine was, in the words of Justice Barrett, “on life support,”^[6] and had been for half a century before the Federal Circuit resuscitated it in 1988.^[7] Indeed, assignor estoppel has come under increased fire for the expanded coverage the Federal Circuit has granted assignees, which detractors say goes well beyond what the doctrine originally encompassed or was intended to protect.^[8]

Thus, the Court seemed primed to discard assignor estoppel entirely and, in fact, Minerva spent twenty of twenty-two pages in its reply brief arguing for the doctrine’s total elimination.^[9] But only Justices Barrett, Thomas, and Gorsuch, relying on textual principles, found that position persuasive.^[10] The majority, instead, maintained assignor estoppel but held for Minerva because the Federal Circuit had “failed to recognize the doctrine’s proper limits.”^[11]

But reports of estoppel’s persistence may be greatly exaggerated. In limiting the doctrine, the Court gave three examples where it would be proper to curtail assignor estoppel.^[12] One example—where an assignee significantly broadens the claims post-assignment—is both the most reasonable and the most relevant to Minerva’s circumstance.^[13] (Respondent Hologic was found to have done exactly that—filed a continuation application with broader claims after the assignor had left the company.)^[14] Another of the Court’s exceptions—where an assignment occurs before the assignor has begun inventing and cannot make any warranty of validity—is logically and functionally similar.^[15]

Much more concerning, however, is the Court’s final example, which allows assignor challenges when “a later legal development renders irrelevant the warranty given at the time of assignment.”^[16] The Court did not specify whether this exception applies only to congressional lawmaking or is also subject to judicial developments.^[17] If the latter is true, the survival of assignor estoppel may be short-lived indeed. Patent law has always, and especially recently, “swung like a pendulum,”^[18] but the Court’s ruling might turn the pendulum into a wrecking ball that destroys the continued utility of assigner estoppel.

The Supreme Court and Federal Circuit have issued multiple opinions in the last two decades representing sea changes to many fundamental patent doctrines.^[19] But, in particular, jurisprudence surrounding patent-eligible subject matter since landmark Supreme Court cases Mayo^[20] in 2012 and Alice^[21] in 2014 has been especially volatile,^[22] with noted patent law professor Mark Lemley recently remarking that “[t]he law of patentable subject matter is a mess.”^[23]  The Federal Circuit, rather than drawing a bright-line eligibility rule, has instead employed “the classic common law methodology for creating law,”^[24] comparing “earlier cases in which a similar or parallel descriptive nature can be seen”^[25] to determine the eligibility of every new patent that arrives before it.^[26] Each new case, therefore, conceivably creates a small but perceptible new law by which to judge future eligibility challenges—in essence, a new “legal development.”^[27] And, since Alice, the vast majority of these challenges result in successfully invalidating some or all of a patent’s claims,^[28] creating new avenues for assignors to argue invalidity.

Given the Court’s instruction in Minerva that, if “the governing law then changes so that previously valid patents become invalid . . . no principle of consistency prevents the assignor from saying so,”^[29] hardly any patent is safe.^[30] The Court nominally maintains assignor estoppel, but, in reality, this may amount to only the thinnest veil of protection to assignees, who instead may find themselves at the mercy of ever-changing judge-made law.^[31]

While lower courts might, in the future, treat the Court’s three factors as dicta and maintain estoppel for all but the most egregious claim-changing cases, that seems unlikely in both the district courts and in the Federal Circuit. In the only case that has taken up the issue of assignor estoppel since Minerva, the Maryland District Court, which had upheld estoppel in a separate prior memorandum, refused to review its earlier decision because “[n]othing in Minerva appears to undermine [the assignor’s] concession or the court’s prior determination.”^[32] The court implied though, that if the assignee in question had engaged in any of the three Minerva examples, it would have allowed the parties to brief the issue.^[33] This is an incomplete but telling insight into how district courts might interpret and apply Minerva in the future.

The Federal Circuit, meanwhile, has had an irregular history in applying Supreme Court reversals of its patent rulings.^[34] The court has often applied decisions broadly, perhaps hesitant to engage in nuanced line drawing for fear of getting reversed again on appeal.^[35] Moreover, the court has, on occasion, refused to take on controversial issues, understandably unwilling to work out the “mess”^[36] the high Court has laid at its feet.^[37] Finally, the individual judges differ  in how to apply Supreme Court decisions, especially the Alice/Mayo standard, generating results that often depend on the panel one draws.^[38] Even former Chief Judge of the Federal Circuit, Paul Michel, recently chastised the court for its overbroad and unpredictable jurisprudence.^[39] However the Federal Circuit plans to apply Minerva, the only thing that seems certain is that unpredictability will reign.

In the face of this uncertainty, some experts have suggested making patent assignments exceptionally clear, asserting a desire to circumvent or apply estoppel abundantly obvious.^[40] But, historically, attempts to contract around assignor estoppel have fared poorly in the Federal Circuit and may fall on similarly deaf ears now.^[41] We will have to wait to see where the limits of assignor estoppel are now drawn, but, as with many legal doctrinesthat rest on notions of fundamental fairness, parties will surely feel like it is never unfair in their favor.