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Saturday, January 09, 2021

SCOTUS takes up Assignor Estoppel - MINERVA SURGICAL, INC. V. HOLOGIC, INC.

MINERVA SURGICAL, INC. V. HOLOGIC, INC. - this is an exciting development - the assignor estoppel doctrine is an equity court developed rule that bars an inventor who sells his patent rights from later claiming the patent was wrongly granted. A few years ago I wrote that this rule is problematic in general, and in particular in the realities of corporate innovation which mean that most individuals pre-assign their future innovation, without knowing whether/when/for what their employer will apply for an invention. In The New Cognitive Property, Texas Law Review, I write:

The assignor estoppel doctrine, a recently developed doctrine in patent law, constitutes a post-employment restriction over the cognitive abilities of employees. The assignor estoppel doctrine is a rule of equity that prevents the assignor of a patent from raising the defense of invalidity in case of a suit of patent infringement. The doctrine of assignor estoppel was originally developed by courts to prevent unfairness in circumstances in which an owner of a patent right sells the right to her patent and later denies the value of the very thing from which she profited. The logic is analogous to landlord-tenant situations and estoppel by deed of real estate. The courts viewed an “intrinsic unfairness in allowing an assignor to challenge the validity of the patent it assigned” because of “the implicit representation of validity contained in an assignment of a patent for value.” This logic however is flipped on its head when we shift our inquiry from patent law to human capital law and examine the application of the doctrine in the context of pre-invention assignment in the employment relationship. As we saw, assignment clauses refer to future innovation rather than a patent-in-suit. The invention can be very different than what had been assigned. Indeed, the United States Patent and Trademark Office (USPTO) often determines that a filed patent application must be divided into two or more patents, expanded, or modified. Thus, assignment of future innovation is always done under conditions of uncertainty. Put differently, in the context of human capital, the representation of the assignment in contracts assigning future innovation is made by the employer rather than the employee. Thus, the landlord parallels the employer and the tenant parallels the employee. The analogies that served as the basis for the development of the assignor estoppel doctrine do not simply fail, but are reversed.  In practice, the assignor estoppel doctrine operates to place a former employee and his new employer at a great disadvantage compared to all other competitors because their legal defenses are dramatically diminished. Because invalidity is a major defense in patent litigation, in essence, assignor estoppel penalizes a former employee and thus creates a powerful disincentive for competitors to hire an employee who has experience in the field. Essentially, anyone who already has human capital in the hiring company’s field becomes a liability for the new company. The following has become a prevalent scenario: an employee, as part of his employment agreement, assigns an invention to the firm (Firm A). The employee moves to a competing firm, Firm B. After the employee leaves Firm A, Firm A files for a patent on the former employee’s inventions. This can happen without the employee’s knowledge or consent regarding the claims issued and the scope of the filed patents. Frequently, claims are filed post-employment and without the former employee’s control over the filed claims. During this period after the employee began working at Firm B, she works on innovation for Firm B. If Firm A sues Firm B for patent infringement, Firm B is estopped from attacking the validity of the patent because it has hired a former Firm A employee and used her skills to continue innovating in her field of expertise. The perverse result is that the most productive and experienced employees, who are already engaged in inventive activities in their industry, become untouchables. The hiring of these employees who are already in the field creates an immense risk. Aberrantly, the more experienced an employee, the less employable they become. The assignment agreement coupled with the assignor estoppel doctrine becomes a de facto trailer clause, both tantamount to a post-employment non-compete.

In fact, I also served as an expert witness in a patent case on the topic, where I opined about the harms of assignor estoppel on regional talent pools and post-employment mobility in Juniper v. Palo Alto Networks -- you can find my expert report on Westlaw. Mark Lemley has led an amicus on this case and has also written an important paper on the doctrine here


Posted by Orly Lobel on January 9, 2021 at 02:49 PM | Permalink


I haven't given any thought to the pros and cons of assignor estoppel from this particular perspective, although in general it does strike me as a silly doctrine. SCOTUS would do well to jettison it altogether, but who knows how the case will turn out.

Posted by: hardreaders | Jan 9, 2021 6:06:05 PM

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