Inventors and Others In Privity With Them May Challenge Validity of Their Own Previously Assigned Patents in PTAB Proceedings

By Peter Schechter


“Assignor estoppel prevents a party who assigns a patent to another from later challenging the validity of the assigned patent.”   This equitable doctrine has been applied by U.S. district courts and the U.S. International Trade Commission (“ITC”) for over a hundred years to protect companies from the basic unfairness that would result if inventors could challenge validity of the patents that they previously assigned to their employers and other assignors, all presumably for good value.  The U.S. Court of Appeals for the Federal Circuit (“CAFC”) has now ruled, however, that the doctrine of assignor estoppel does not apply to inter partes review (“IPR”) proceedings in the Patent Trial and Appeal Board (“PTAB”).  See Arista Networks, Inc. v. Cisco Systems, Inc., No. 17-1525, ___ F.3d ____ (Fed. Cir. Nov. 9, 2018).  This decision will likely provide additional support for the often-heard argument that the IPR process is unfairly skewed against patent owners.

Although it is a relatively rare occurrence, assignor estoppel arises in a number of different situations.  In the most common circumstance, an engineering, scientific, or research & development employee makes an invention during his or her employment with Company P, assigns the rights to the invention to Company P, Patent 12345678 is granted on the invention, and the employee then quits Company P to join or even start Company I, a competitor of Company P.  When Company P sues Company I for infringement of Patent 12345678 in either a U.S. district court or in the ITC, Company I is “estopped,” that is prevented, from challenging validity of Patent 12345678, as a matter of basic fairness to Company P.

This is precisely how the issue of assignor estoppel arose in Arista Networks.  Dr. David Cheriton was an employee of Cisco.  During his employment, he made and assigned his rights in a patentable, and eventually patented, invention, to Cisco.  Later, Dr. Cheriton and others quit Cisco and started Arista to compete with Cisco.  When Cisco sued Arista for infringement of its patent on Dr. Cheriton’s invention, Arista filed a petition for IPR in the PTAB.  Cisco asserted that the equitable doctrine of assignor estoppel should bar Arista’s IPR validity challenge.

The America Invents Act, 35 U.S.C. § 311(a), states: “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.”  No other provision of the law restricts assignors or those in privity with them from filing a petition for IPR on the basis of a prior assignment of the challenged patent.  According to the CAFC, the plain language of Section 311(a) “demonstrates that an assignor, who is no longer the owner of a patent, may file an IPR petition as to that patent.”

The CAFC found that the plain and unambiguous language of § 311(a) was a clear indication that Congress did not intend the doctrine of assignor estoppel to apply to IPR proceedings. Federal Circuit rejected Cisco’s arguments on cross-appeal that assignor estoppel should apply to IPRs.  Similarly, the Court also found that, by its silence, Congress specifically addressed assignor estoppel in the context of PTAB IPR proceedings, in contrast to statutes specifically allowing the doctrine in both district court and ITC proceedings.  The CAFC explained that any resultant “discrepancy between forums—one that follows from the language of the respective statutes—is consistent with the overarching goals of the IPR process that extend beyond the particular parties in a given patent dispute.”

The CAFC properly declined to consider the wisdom or effect of any policy choices that are evidenced by the plain and unambiguous language of the AIA, stating that such choices “are better left to Congress than to this court.”  Simply put, patent assignees suffering from the clearly understood unfairness of the unavailability of assignor estoppel in PTAB proceedings should take their complaints to the U.S. Senate and House of Representatives.