Patent Rights: Assignors Transferring Rights and Infringing on Assigned Patents

In June 2021’s Minerva Surgical Inc. v Hologic case, the US Supreme Court (“SCOTUS”) ruled that assignor estoppel is limited and may allow a previous assignor, under specific circumstances, to challenge the validity of patents they have subsequently reassigned.

This article will explore the SCOTUS ruling and potential solutions that can be used as tools based on common scenarios.

This particular case can be framed with the following question:

Can an assignor 1) transfer their patent rights to an assignee, 2) go on to infringe the assigned patents, and 3) then challenge the validity of the assigned patent as a defense against patent infringement?

To give context to the decision, here are some scenarios to consider:

An inventor (assignor) can go on to work for a competitor and help the competitor infringe the very same patent rights that the inventor helped their prior employer (assignee) secure.  

A company founder (assignor) can sell their company to an acquirer (assignee), only to start a new company that infringes the patents that they sold along with their company.

These scenarios actually happen more often than one would anticipate – and the common defense the inventor or assignor uses is, generally, as follows: 

“Those patents I sold/assigned to you are invalid and, therefore, unenforceable against me.”

The Doctrine of Assignor Estoppel serves to block the Assignor from challenging the validity of the patent they have assigned. The reasoning for this doctrine follows from the notion that the Assignor would have “sold” (or otherwise transferred) a right to the buyer, only later to challenge the validity of the right they sold to the buyer.  

In Minerva ruling, the Court finds several ‘exceptions’ where Assignor Estoppel should not apply.

There are many scenarios in which this becomes the case (e.g., a long chain of assignments), but here are two main scenarios discussed in this article:

• Scenario One: an Inventor (Assignor) assigns their rights to their Employer (Assignee); and
• Scenario Two: Company A (Assignor) sells/assigns their patents to Company B (Assignee).

Exception One: Employment Agreements

Let’s take scenario (1): the inventor is an employee of an organization that requires them to sign an employment agreement, including a patent assignment clause. This obligates the employee to transfer their rights to any IP they develop during their employment.  The employer then decides which of the contributions will be encompassed in patent filings.  Here, at the time of signing, the employee/potential inventor doesn’t know what the inventions even are yet, or which ones will go on to become patents. Therefore, the court finds that the inventor cannot provide a warranty of validity when they do not yet have any material understanding of the actual patent rights that will come into play.

Exception Two: Changes in the Law

Let’s take scenario (2): the assignor transfers what it believes are valid patents under the current laws.  However, a few supreme court cases later, the scope of patent validity has changed, thereby making the assigned patent claims invalid.  Here, the court finds that the assignor may challenge the validity of the assigned patents under the new law.

Exception Three:  Changes in Claim Scope

Let’s take scenario (1): the inventor initially transfers their rights before the patent filing.  Having transferred the rights before the patent filing, the inventor does not know what patent claims will eventually become granted.  The claims can materially change after the inventor assigned their rights during patent prosecution (they can become broader, or varied in scope).  Therefore, the court finds that the inventor cannot provide a warranty of validity when they do not know what the patent claims granted will look like.

Potential Solutions and Considerations

When acting as the Buyer

Obtaining a second or “quitclaim”-type of assignment may not be sufficient to overcome the exceptions listed above. Instead, it may prove beneficial to get the original inventors and the company to sign off on a warranty that they believe all patent rights/claims associated therewith are valid at the time of transfer (not just at the time of patent filing).  This requires them to specifically consider all granted and amended versions of pending claims.

When acting as the Seller

Add a clause that assignor estoppel shall not apply.  Only agree to the use of a quitclaim assignment or language expressly denying any warranty of validity.  Ask for a larger sum if a warranty of validity is requested.

When representing the Applicant

Make sure the inventors assign the rights to broad claims initially, which would encompass any narrower form thereof. In other words, do not have the inventors assigned until the claims, as they will be filed, have been presented.

In addition, the inventor should consider filing new assignments for each continuation and divisional application.

Citations:
Decarlo, Kean. Assignor Estoppel Post Minerva and Strategies for Finding Solutions. January 2022. PowerPoint Presentation.