Assignor Estoppel Has No Place in IPR
Addressing the applicability of assignor estoppel to inter partes review (IPR) proceedings, the US Court of Appeals for the Federal Circuit found that Congress’ intent was clear: assignor estoppel does not apply. Arista Networks, Inc. v. Cisco Systems, Inc., Case Nos. 17-1525, -1577 (Fed. Cir. Nov. 9, 2018) (Prost, CJ).
The common law doctrine of assignor estoppel prevents a party that assigns a patent from later challenging the validity of the assigned patent. The doctrine typically arises when an employee assigns a patent to his or her current employer and subsequently leaves the company to work for a competitor. The competitor is typically estopped from challenging the validity of the patent based on its privity with the employee.
David Cheriton assigned a patent on which he was a named inventor to Cisco. After assigning the patent, Cheriton left Cisco and founded Arista Networks. Arista then sought to challenge the validity of the patent in an IPR review proceeding. The Patent Trial and Appeal Board (PTAB) instituted the proceeding, finding that assignor estoppel did not apply to IPR proceedings. Cisco appealed.
The Federal Circuit affirmed the PTAB’s assignor estoppel decision, finding that the language of 35 USC § 311(a) “unambiguously dictates that assignor estoppel has no place in IPR proceedings.” In making this finding, the Court first considered whether the lower court’s decision was reviewable in light of 35 USC § 314(d). Under § 314(d), “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” Despite this language, the Court relied on its recent en banc decision in Wi-Fi One, LLC v. Broadcom Corp. (IP Update, Vol. 21, No. 2), ruling that the lower court’s decision was reviewable because “assignor estoppel is not focused on particular claims, whereas § 314(a)’s threshold determination is.” The Court noted that assignor estoppel is not “closely related to the preliminary patentability determination or the exercise of discretion not to institute,” and thus the PTAB’s decision was reviewable.
Turning to the merits, the Federal Circuit stated that “as is often the case, [the question before us] is one of congressional intent.” Cisco argued that assignor estoppel is a common-law doctrine that should be presumed to apply to IPR proceedings. While noting that “Congress is understood to legislate against a background of common-law adjudicatory principles,” the Court found that the language of § 311(a) indicates that “a statutory purpose to the contrary is evident” since it indicates that “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.” The Court found that “the plain language of this statutory provision is unambiguous” and that anyone other than the current patent owner may file a petition to institute an IPR.
Practice Note: The Court’s decision effectively makes the PTAB the only jurisdiction where an assignor can challenge the validity of its assigned patent, since both the US International Trade Commission and district courts enforce assignor estoppel.