Assignor Estoppel And IPRs: Possible Impact Of Arista v. Cisco On Employment Or Assignment Agreements

The Federal Circuit ruled that the doctrine of assignor estoppel does NOT apply to IPR proceedings, based on the plain language of the statute, which states that any person "who is not the owner of a patent" can file an IPR (even though the doctrine would apply if the issue was before the ITC or district court).

In a November 9, 2018 decision, the U.S. Court of Appeals for the Federal Circuit ruled that the doctrine of assignor estoppel does not apply in the inter partes review (IPR) context (see Arista Networks, Inc. v. Cisco Systems, Inc., (Fed. Cir. 2018).

Assignor Estoppel: Background

The doctrine of assignor estoppel has been around for over a century and most often applied in the U.S. International Trade Commission (ITC) and U.S. district courts to prevent a first party assigning a patent to a second party from then challenging the validity of the patent they had just assigned. ("Assignor estoppel prevents a party who assigns a patent to another from later challenging the validity of the assigned patent." Mentor Graphics Corp. v. Quickturn Design Sys., Inc., 150 F.3d 1374, 1377 (Fed. Cir. 1998); see also Westinghouse Elec. & Mfg. Co. v. Formica Insulation Co., 266 U.S. 342, 349 (1924) ("[A]n assignor of a patent right is estopped to attack the utility, novelty or validity of a patented invention which he has assigned or granted as against any one claiming the right under his assignment or grant.") (Arista v. Cisco at p. 17)).

The doctrine frequently arises in situations where an employee invents something during his or her employment with a company, assigns the rights to that invention to their employer, then leaves the company to join or found a competing company. See, e.g., Westinghouse, 266 U.S. at 345-46; Shamrock Techs., Inc. v. Med. Sterilization, Inc., 903 F.2d 789, 790 (Fed. Cir. 1990); Diamond Sci. Co. v. Ambico, Inc., 848 F.2d 1220, 1222 (Fed. Cir. 1988). In these situations, the employee's new company may also be estopped because "[a]ssignor estoppel also prevents parties in privity with an estopped assignor from challenging the validity of the patent." Mentor Graphics, 150 F.3d at 1379; see also Diamond Sci., 848 F.2d at 1224 ("The estoppel also operates to bar other parties in privity with the assignor, such as a corporation founded by the assignor.") (see Arista v. Cisco, pp. 17-18).

Arista v. Cisco

In the Arista v. Cisco case, the primary inventor, Dr. David Cheriton, originally worked at Cisco, and had assigned "the...