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Supreme Court Case Pits Inventors Against Their Former Employers

April 19, 2021, 6:02 PM

The U.S. Supreme Court will consider how to balance the rights of companies to protect patent rights created with their resources against the ability of inventors to move freely between employers in a case to be argued Wednesday.

The high court is reviewing a U.S. Court of Appeals for the Federal Circuit decision holding that the inventor of a surgical device and his current company, Minerva Surgical Inc., can’t argue two patents on the device are invalid to defeat infringement claims by his former employer Hologic Inc., which now owns the rights to the inventions.

The appeals court applied the doctrine of assignor estoppel, which is intended to block an inventor from selling his patent and later saying in court that what he sold was worthless. Minerva is asking the Supreme Court to abolish or severely limit the doctrine to protect inventors’ rights.

Abolishing the doctrine could create uncertainty for companies acquiring intellectual property, attorneys say.

Tech companies see the attack on assignor estoppel as an erosion of their rights to enforce their intellectual property, Baker Botts partner G. Hopkins Guy III said. “Suddenly allowing the inventors to come back and say anything they want to—to assert prior art of any kind against the patent—could be a disaster,” he said.

But the Federal Circuit’s current approach of blocking former employees from challenging even patents that are broader than what the employee assigned is unfair, Kramer Levin Naftalis & Frankel partner Irena Royzman said. “It chills mobility in terms of employees moving from company to company or starting a new company,” she said.

Middle Ground

Several amicus briefs, filed by the New York Intellectual Property Law Association, the U.S. solicitor general, and others, are urging the court to find a middle ground.

“The Federal Circuit is applying a complete per se approach which is, if you assigned a patent or a patent application, that’s it, that essentially ends the inquiry,” Royzman, who filed the NYIPLA brief, said. Instead the doctrine should be applied on a case-by-case basis depending on the facts to be fair to both sides, she said.

“Assignor estoppel is a very useful doctrine, and if it’s eliminated completely I don’t think that’s good for the patent law,” said Knobbe Martens partner Joseph R. Re, who filed an amicus brief in his capacity as president of the American Intellectual Property Law Association. “This case it might be one of those circumstances where the doctrine should not apply,” he said. “But that’s no reason to throw the baby out with the bathwater.”

But Snell & Wilmer partner Jeffrey D. Morton thinks the court will “go hard one way or the other.” It’s tough to imagine how the court could craft a workable rule in the middle, he said.

If Abolished

The Supreme Court doesn’t usually take cases to “rubber stamp them and suggest everything’s fine,” Guy said, so it’s reasonable to assume assignor estoppel may be on the chopping block.

Getting rid of the doctrine could create higher costs associated with patent transactions, Morton said.

There will be a greater emphasis on due diligence by the company buying or acquiring intellectual property to make sure the patents are sound and the inventor was thorough during the prosecution, he said.

Parties might turn to contract law and trade secrets litigation if the court does away with assignor estoppel, Re said. “When the patent law fails, contract law comes in and fills the gap,” he said.

Status Quo

Inventors won’t be totally out of luck if the court maintains the status quo, Morton said. Assignor estoppel doesn’t apply at the patent office to bar inventors from challenging their own patents in inter partes review or ex parte reexamination.

“If they maintain assignor estoppel, I think that there could be a bump in IPRs because that will then be the sole venue for an assignor to challenge patent validity,” Morton said.

The statutes that govern patent office appeals allow a challenge from “any person at any time,” Guy said. “Clearly the inventor qualifies as ‘any person.’”

Guy is concerned about “having the Supreme Court looking through a keyhole at a little problem and being told, ‘Oh my gosh, these poor inventors are just dying to invent and the world won’t let them.’” With the availability of agency reviews to challenge patents, “I don’t see it as being a particularly onerous burden that inventors are suffering under, to be honest,” he said.

Why This Case?

The Supreme Court takes very few cases, and has repeatedly declined to step into areas of patent law where parties constantly complain about confusion, like patent eligible subject matter.

The justices may see this as a discrete issue that they can rectify more easily than something like eligibility, Royzman said.

“This is accessible to them: They’ve heard of equitable doctrines, they’ve heard of estoppel, fair dealing sounds familiar,” she said.

The case could have more impact than an eligibility case. “Once you learn what is and is not patentable you sort of learn to adapt accordingly,” Morton said. “But regardless of your patentable subject matter, there are a lot of intellectual property transactions going on, and this could have a fairly significant effect, especially if they do away with the doctrine.”

Robert N. Hochman of Sidley Austin LLP in Chicago will argue for Minerva. Morgan L. Ratner, assistant to the U.S. solicitor general, will argue for the government as amicus curiae in support of neither party. Matthew M. Wolf of Arnold & Porter LLP in Washington will argue for Hologic.

The case is Minerva Surgical, Inc. v. Hologic, Inc., U.S., No. 20-440, argument 4/21/21.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com

To contact the editors responsible for this story: Renee Schoof at rschoof@bloomberglaw.com, Keith Perine at kperine@bloomberglaw.com

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