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Federal Circuit Holds that Assignor Estoppel is not Available in Inter Partes Review (IPR) Proceedings

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In Arista Networks, Inc. v. Cisco Systems, Inc., Nos. 2017-1525 and 2017-1577 (November 9, 2018), the Federal Circuit held that assignor estoppel is not available in inter partes review (IPR) proceedings. Assignor estoppel is a common-law doctrine that prevents an assignor of a patent from later seeking to invalidate the same patent. The Federal Circuit found that a former employee who is an inventor on a patent assigned to his previous employer can later seek to invalidate that patent through an IPR. The Court cited the plain language of 35 U.S.C. § 311(a), which makes IPRs available to any “person who is not the owner of a patent.”

Arista petitioned for an IPR of U.S. Patent No. 7,340,597 (“the ‘597 patent”) owned by Cisco and relating to computer network security. After instituting review of the ‘597 patent, the PTAB invalidated some of the patent’s claims, and both Cisco and Arista appealed the decision to the Federal Circuit. The sole named inventor on the ‘597 patent, Dr. Cheriton, was a Cisco employee who had assigned the patent to Cisco. Shortly thereafter, Dr. Cheriton left Cisco, along with at least 13 other Cisco employees, to found Arista. Dr. Cheriton served as Arista’s Chief Scientist but left the company in 2014, prior to the filing of the IPR. Cisco argued that assignor estoppel should be invoked against Arista because the ‘597 patent had been developed by one of Arista’s founders.

The Court first considered whether it had the authority to review this issue. Although the PTAB’s decision to institute an IPR is generally “final and nonappealable” under 35 U.S.C. § 314(d), review is permitted when the patent owner challenges the decision based on a statute not “closely related to the preliminary patentability determination or the exercise of discretion not to institute.” Slip. op. at 16. Here, the Court determined that assignor estoppel was not closely related to the decision to institute the IPR, and therefore found that the issue was reviewable. Id.

Next, the Federal Circuit considered whether assignor estoppel prevents invalidity challenges in the context of IPR proceedings. The Court’s reasoning centered around the issue of whether Congress intended for assignor estoppel to apply in IPR proceedings. Slip op. at 18. The Court considered Cisco’s argument that assignor estoppel is established common law that should be applied even if it is not specifically enumerated in a statute. Id. at 19. Arista countered that 35 U.S.C. § 311(a) states that any “person who is not the owner of a patent” may petition to institute an IPR and that, by this plain language, assignor estoppel should not apply to IPR proceedings. Id. at 21.

The Federal Circuit agreed with Arista, stating that the language of 35 U.S.C. § 311(a) allows an assignor who is not the current owner of the patent to file an IPR.

What This Means for You

This decision means that although assignor estoppel may be an effective defense to invalidity in district courts and the ITC, it is not available in IPR proceedings. To the extent not prohibited by public policy or state law, patent assignees may want to consider contractual prohibitions on the filing of IPRs with respect to the assigned patents. In contrast, this decision may lead patent assignors to avoid assignor estoppel by seeking to invalidate a patent through an IPR rather than in district court litigation.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.