Patent Challenge validity by the patent assignor or Proprietor!
Aug 16, 2021

Patent Challenge validity by the patent assignor or Proprietor!

 
Let’s start with a simple example: Imagine Joe, an engineer who works in Ali’s company as an engineer and he was able to invent some inventions there. After a few years, he assigned his patent rights to Ali [‘s company] and started working in his own small company. After three years, Ali notices that what Joe’s company is produced, is in fact, infringed his patent. Ali sues Joe over infringement of his patent. What does Joe do? He challenged the validation of Ali’s invention (his former inventions which was assigned to Ali). Joe argued those patents are invalid for lack of enablement and failure to provide an adequate written description.
How does patent law could act in this situation?
 
In the United States patent law, there is a doctrine based on the doctrine of legal estoppel which prohibits a patent’s seller (assignor) from attacking or challenging the patent validity in later patent infringement litigation.
The doctrine has been applied to assignors which could be included inventors, but also parties in privity with the original inventor, such as a corporation founded by the inventor.
The doctrine assignor estoppel comes into play when an inventor has to assign his or her rights in a patent application or patent, and then in a further situation, he or she wants to challenge the validity of the assigned patent. 
Therefore, in the above example, Joe is not allowed to challenge the patent's validity because he was the inventor or other word the assignor!

 

Background of the patent estoppel doctrine

The assignor estoppel doctrine is grounded in "centuries-old fairness principles" that prevent an assignor from attacking the validity of a right that they had formerly sold;

 
The history dates back to the 18th-century in England where English courts held that having assigned one's rights in a patent, the inventor could not consequently avoid infringement by arguing that the patent was invalid.
 The Supreme Court takes on this concept in the mid-nineteenth century in Kinsman v. Parkhurst, where the Court held that justice prevents one from avoiding one's obligations under an assignment contract by arguing that the subject of the contract-the patent was invalid[1].
 
 
Various reasons for applying assignor estoppel including:
·       to prevent unfairness and injustice; for instance, a patent assignor cannot later assert that what he conveyed was not, in fact, a patent!
·       to prevent one from benefiting from his own wrong; this relied on the principle that an assignor cannot escape charges of infringement by stating that the patent is invalid due to the assignor's own misdeeds!
·       by equivalence to estoppel by action in real estate; and this could for example prohibits a grantor of a deed of land from challenging the value of the land or title!
·       to preserve the fairness of contract; the courts have held an assignor should not be allowed to avoid the assignment contract by arguing that he in effect conveyed nothing.
 
Altogether, it can be concluded that the fundamental concept of all justifications is the same: all reasons are to promote fairness!
 
However, the doctrine has its own opponents who believe the doctrine could protect bad patents from challenge by the people who know the patent claims quality!  Moreover, companies that hired inventors who worked already in other companies, face a significant disadvantage if sued by that companies as it cannot raise patent invalidity as a defense. This can discourage competitors from hiring inventor-assignors or even former employees who worked with an inventor-assignor (who may be in privity with the assignor) for fear they are a responsibility if patent infringement litigation arises.
Another objection to this doctrine by the opponents is related to where the case is handled: an assignee can invoke assignor estoppel in district court, but not in an inter partes review (IPR) at the PTAB. Therefore, the destiny of a patent and its validity in an assignee/assignor infringement case depends heavily on the forum in which the case is heard since such discrepancy should be addressed in the courts. 
 
Moreover, imagine a case when the assignor has made neither explicit nor implicit representations in conflict with an invalidity defense, then there is no unfairness in its assertion. But, according to this doctrine, there is no ground for applying assignor estoppel”!
 
Since it was only an equitable doctrine, but not part of the U.S. Patent Laws, therefore, courts considering the issue used their decision in determining whether to allow assignor estoppel to block a party from struggling to invalidate a patent once owned.

·      On June 29, 2021, in Minerva Surgical, Inc. v. Hologic, Inc., et al., (June 29, 2021),  the court re-affirm the principle of assignor estoppel as long as the assignor contradicts "explicit or implicit representations he made in assigning the patent."

In this case, the US Supreme Court outlined three scenarios where assignor estoppel might not apply. These could help employers to better protection of their patents from subsequent inventor challenges. These three scenarios are discussed below, but for better understanding, those scenarios are better to know what has happened in this case where the court decided patent estoppel could not be applied. 

 

What were the issues behind the Minerva Surgical case that led the court to re-affirm the principle of Assignor estoppel doctrine?

 

In this case, an inventor (Mr. Truckai), having assigned patent rights to his employer, subsequently leaves that position. He starts a competing company (Minerva) that eventually is charged with infringement of his assigned patents (U.S. Patent Nos. 6,872,183 and 9,095,348).

The defendant ((Mr. Truckai) challenged the validity of the patent. In response, the patent holder invoked the doctrine of assignor estoppel, arguing that the defendant was in privity with the original inventor of the subject patent. The defendant argued that the doctrine of assignor estoppel should be abandoned.

The Critical point to the Court’s decision in the Minerva case was the fact that the patents at issue were granted after the inventor had assigned his rights. It is also interesting that one of the patents stems from a continuation application that was filed and granted after he had left and started the competing company!

The patent and assigning history is as follow:

In August 1998, Truckai and his co-inventors assigned the invention described in U.S. Patent Application No. 09/103,072, the application, and all continuation applications thereof (etc.).
After a series of divisional and continuation applications, the application that was granted as U.S. Patent No. 9,095,348 was filed in 2013, and the patent was granted in 2015.
In February 2001, Truckai and his co-inventors assigned the invention described in U.S. Patent Application No. 09/710,102, the application, and all continuation applications thereof (etc.).
After a series of continuation applications, the application that was granted as U.S. Patent No. 6,872,183 was filed in 2004, and the patent was granted in 2005.
 

According to the Supreme Court's ruling, assignor estoppel applies only when its main principle of fair dealing is in play. Fair dealing is concerned when the assignor has a kind of representation regarding the validity of a patent claim. Regarding the fact and evidence collected, curt resulted  that  Mr. Truckai has made neither explicit nor implicit representations in conflict with an invalidity defense, then fairness is not an issue, and assignor estoppel will not apply

The three scenarios that court decided the patent estoppel doctrine  would not apply according to the Minerva opinion includes:

·       Employment agreement-type assignments

In this example, the assignment occurs before an inventor can possibly make a warranty of validity as to specific patent claims.  Consider a usual employment procedure. An employee assigns to his employer patent rights in any future inventions he develops during his employment. Then the employer decides which (if any), of those inventions to be patented.

In that scenario, the assignment doesn’t mean that a patent is valid. The invention itself has not come into being. And so the employee’s transfer of rights cannot stop him from alleging a patent’s invalidity in later litigation.

·       A change in the law

In this example, a later legal development renders irrelevant the warranty is given at the time of assignment; such as a change in the law. “So that previously valid patents become invalid”.

Suppose an inventor transfers a patent for value, with the warranty of validity that act implies. But the governing law then changes, so that previously valid patents become invalid. The inventor may claim that the patent is invalid in light of that change in the law without challenging his earlier representation.

 

·       The claims at issue are materially broader than the claims assigned.

 Assuming that the new claims are materially broader than the old claims, the assignor did not warrant the new claims’ validity. And if he made no such representation, then he can challenge the new claims in litigation: Because there is no inconsistency in his positions and there is no estoppel.

 

How is challenging validity by assignors in other jurisdictions? Do the other jurisdictions apply the same rule as the patent estoppel?

We research three exemplary jurisdictions' patent laws or act (Europe, Japan, and India) to determine whether they apply the same acts as the patent estoppel in their jurisdiction. How is the opposition or revocation process and if an assignor or proprietor could challenge the validity? The relating patent laws in these three jurisdictions will be discussed below:

 

Europe

Under the European Patent Convention (EPC), opposition to any European patent granted by the EPO may be filed by any member of the public except for the proprietor himself.  

Article 99 EPC explicitly specifies that “any person” may give notice of opposition to a granted European patent. In this regard, the opponent is not required to demonstrate any legal interest in a revocation of the opposed patent.

 According to the related case law, the identity of the opponent is primarily of importance. Therefore, where an opponent does not want to reveal his identity to the patent proprietor, there is the possibility to be a straw man who acts as the opponent.

 In Europe, the issue of whether a straw man may file a revocation petition has been decided by the board of appeals[3]:  The EPC does not require that the opponent must have a personal interest in the outcome of the opposition proceedings.

So far, the process of the opposition and invalidity process seems to be quite different from what it is in the United States since the US does not allow for straw man actions. However, such opposition by a straw man would only be prohibited if it amounted to an avoidance of the law by abuse of due process.

Specific examples of such abuse would be the opponent acting on behalf of the patent proprietor as a proprietor cannot oppose his own patent, or the opponent basically acting as a professional representative without possessing the necessary qualifications. However, professional representatives who do possess the necessary qualifications may typically in actual fact act as a straw men.

 

Japan

In Japan, the former Opposition system was ended in 2003, in order to unify the patent validity dispute-settlement system to the invalidation trial system in front of a Board of Appeal of the Japan Patent Office (JPO). However, the number of invalidation trials did not increase, because the invalidation trial process was a lawsuit-like proceeding and impose a heavy burden on the parties. In addition, there was a need for the proprietor to set a stable right as early as possible. Therefore, an Opposition system in which anyone can argue the patentability in a simpler and faster way was (re-)introduced in Japan, on 1 April 2015.

Article 113 of Japanese Patent Law paid attention to the qualification of the opponent.  With this regard, “any person” may file an opposition. Therefore, similar to European practice, it is possible to file an opposition under the name of a straw man when the opponent does not wish to reveal his identity to the patent proprietor.

The aim of the Opposition system is to give a third party an opportunity to demand re-examining the patentability of a patent. In accordance with such a purpose, it is interpreted that the patent proprietor cannot be an opponent.

 

India

The Indian Patent Act provides for post-grant opposition proceedings (similar to the European and United States substantive patent legislations).

These provisions are of two types:

·       the first provision is under Section 25(2) of the Act and is called a post-grant opposition proceeding and can be filed within one year of the date of grant of a patent; and

·        the second provision is provided under Section 64 of the Act and is called a revocation proceeding and can be filed any time after one year of the date of grant of patent.

Who can file a revocation petition/post-grant opposition: Under the Act, only a person interested can file a revocation petition or a post-grant opposition proceeding. But who is an interested person? Acceding to the court decision in one case law[4] “[A] person interested within the meaning of Section 64 must be a person who has a direct, present and tangible commercial interest or public interest which is injured or affected by the continuance of the patent on the register.

According to another court decision, “A person interested" would include a person who has a direct, present and tangible interest with a patent, and the grant of the patent adversely affects his above rights.

 A person interested would include any individual who desires to make independent use of either the invention itself (which has been patented) or desires to exploit the process (which has been patented) in his individual production activity. Therefore, the term “any person interested” is not static.

However, it has expanded definition in this way: “The same person", may not be a “person interested” when the grant of the concerned patent was published, and yet on account of his activities at a later point in time, he may assume such a character or disposition. It is, therefore, that Section 64 of the Patents Act additionally vests in “any person interested”, the liberty to assail the grant of a patent, by seeking its revocation.

The IPAB held that as the Act includes “a person doing research” in the definition of “person interested”, an interest that is an academic one and not necessarily commercial, and when the Act only uses the word “includes”, which is a word that is not restrictive.

With this background, we can conclude that a straw man might be able to file a patent revocation/opposition in India. However, there is no clear definition of the capability of the proprietor and inventor or assignor in the patent law in India.

 

Conclusion

In this article, the conditions for patent invalidation, revocation, and opposition, with a focus on whether an assignor (proprietor) would be able to challenge the validity of the patent, were discussed. 

The U.S. patent law prohibited a patent assignor (a person who transferred his right) from challenging the validity according to the assignor estoppel doctrine.  However, since this doctrine resulted in a kind of unfairness, for example, it discouraged companies to employ former assignors (inventors) from other companies, there was a need to be justified. According to the recent Minerva case decision, the estoppel would not apply on all grounds which would be beneficial for assignors who unfairly were not able to challenge the patent's validity.

In other Jurisdiction patent laws, (EPO, Japan, and India), this issue is not explicitly addressed while it seems none of these countries have the same doctrine or similar acts. Instead, the proprietor according to the patent law of this jurisdiction is not allowed to challenge the validity by opposition or revocation. If you have any information about this, please inform us to update this article.



[1] 59 U.S. 289, 293 (1856)
[3] G03/97 
[4] Ajay Industrial Corp. v. Shiro Kanao of Ibraki City,  MANU/DE/0464/1983 

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