Federal Circuit Affirms PTAB Finding That Assignor Estoppel Does Not Apply To IPRs
11/20/2018On Friday, November 9, 2018, the Court of Appeals for the Federal Circuit (CAFC) issued an opinion affirming in part a final written decision by the Patent Trial and Appeal Board (PTAB). Arista Networks, Inc. v. Cisco Sys., Inc., —F.3d— (Fed. Cir. Nov. 9, 2018). The CAFC ruled that the PTAB had correctly decided that the equitable doctrine of assignor estoppel does not apply in inter partes review (“IPR”) proceedings.
An IPR is an administrative procedure by which one can challenge the validity of an issued patent. The patent challenger files a petition in the Patent Office, the patent owner may respond, and the PTAB decides whether to institute an IPR. If an IPR is instituted, the PTAB ultimately issues a written decision finding the challenged claims either unpatentable or not.
In this case, the patent challenger, Arista, was a company founded by a former employee of the patent owner. The former employee was the inventor of the challenged patent, and had assigned his rights in his invention to the patent owner. The inventor had 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.”
Assignor estoppel is an equitable doctrine of long standing under which those who assign patents (including their privies) are prevented from later challenging the validity of the assigned patent. Under this doctrine, the inventor/assignor in this case, and his privies, would generally be precluded from challenging the validity of the patent that he had assigned to his then-employer. Indeed, in a related investigation by the International Trade Commission (ITC), the ITC held that Arista, the patent challenger in the IPR, was barred from asserting patent invalidity in the ITC.
Arista filed a petition for IPR of the patent, and the patent owner argued to the PTAB that assignor estoppel barred the inventor’s company from obtaining a ruling of unpatentability by IPR. The PTAB ruled that assignor estoppel simply does not apply in the IPR context, and Arista appealed.
The CAFC first considered whether the issue is one subject to appellate review, and, citing its earlier en banc decision in Wi-Fi One, LLC v. Broadcom Corp., 878 F.3d 1364 (Fed. Cir. 2018), ruled that the issue could be appealed.
Then, on the merits, the CAFC agreed with the PTAB that assignor estoppel does not prevent an assignor from challenging a patent via IPR. The CAFC found that “there is some merit” to the patent owner’s argument that the doctrine should apply, given its “well settled” nature and long history. However, the CAFC ultimately concluded that the plain language of the IPR statute, 35 U.S.C. § 311(a) (“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 …”) unambiguously states that anyone who is not the owner of a patent may seek IPR, leaving no room for assignor estoppel.
The patent owner argued that this decision would lead to forum shopping. However, the CAFC found that this kind of forum shopping — that is, encouraging IPRs as an alternative to litigation in other forums — was exactly Congress’s intent in creating IPRs. The patent owner also argued that the PTAB’s decision not to apply assignor estoppel was arbitrary and capricious, “given that the Board applies other equitable and non-statutory doctrines (such as collateral estoppel, prosecution laches, and obviousness-type double patenting) in the IPR context”; however, the CAFC ruled that in view of the unambiguous language of the statute, “this argument is unavailing.”
One note: There was no discussion in the opinion of any potential contractual claim the patent owner might have against its former employee or his company.