Federal Circuit says Assignor Estoppel Has “No Place” in IPR Proceedings

The Federal Circuit recently found that assignor estoppel has “no place in IPR proceedings,” affirming a holding of the Patent Trials and Appeal Board (“Board”) that assignor estoppel did not bar Arista Networks (“Arista”) from attempting to invalidate a patent belonging to Cisco Systems (“Cisco”).  Arista’s founder, Dr. David Cheriton, was the inventor on the patent Arista wanted to invalidate and had previously assigned the patent to Cisco while employed by Cisco. See Arista Networks, Inc. v. Cisco Sys., Nos. 2017-1525, 2017-1577, 2018  (Fed. Cir. Nov. 9, 2018) (Before Prost, Schall, and Chen, J.) (Opinion for the court, Prost, J.).

The patent at issue—US Patent No. 7,340,597 (“the ‘597 patent”)—relates to securing network devices from external attacks by detecting and logging configuration changes in the network devices. The ‘597 patent was invented by Dr. Cheriton while he was employed by Cisco. Dr. Cheriton assigned the ‘597 patent to Cisco, but later left Cisco and founded Arista.

Arista petitioned for an inter partes review (“IPR”) of the ‘597 patent. After instituting an IPR, the Board upheld some challenged claims as patentable, but invalidated others. In reaching its decision, the Board declined to apply the doctrine of assignor estoppel to Arista, which Cisco believed should have prevented Arista from challenging the validity of the ‘597 patent. Assignor estoppel prevents a party who assigns a patent to another from later challenging the validity of the assigned patent. Arista and Cisco both appealed aspects of the Board’s decision.

On appeal, Arista argued that the Board erred in its construction of the term “broadcast,” which further caused the Board to improperly reject Arista’s obviousness arguments with respect to various claims. Cisco argued on appeal that the Board’s refusal to apply assignor estoppel to Arista was in error. The Federal Circuit affirmed Cisco’s cross-appeal but reversed and remanded with respect to Arista.

With respect to the term “broadcast,” the Board declined to adopt either party’s proposed definition, and instead defined “broadcast” based on the “ordinary and customary meaning to one of skill in the art.” However, the Court found that the Board ignored how “broadcast” was used by the patentee in the specification, and therefore reached a construction that excluded the embodiment of “broadcast” that was actually disclosed in the specification. The Federal Circuit then construed the term based on the specification and remanded for the Board to consider the patentability of the claims Arista raised on appeal based on the Court’s new construction.

The Federal Circuit addressed Cisco’s arguments regarding assignor estoppel. The Court first evaluated whether the issue was reviewable. Applying Cuozzo Speed Technologies v. Lee, 136 S. Ct. 2131 (2016) and Wi-Fi One, LLC v. Broadcom Corp., 878 F.3d 1364 (Fed. Cir. 2018), the court explained that the precedential cases “strongly point[] toward unreviewability being limited to the Director’s determinations closely related to the preliminary patentability determination or the exercise of discretion not to institute.” Since the issue of assignor estoppel is “unrelated to the Director’s preliminary patentability assessment or the Director’s discretion not to initiate an IPR,” the Court could review the issue.

Accordingly, the Court then considered whether assignor estoppel should apply in IPR proceedings. Cisco argued that assignor estoppel is a well-established common-law doctrine that should be presumed to apply unless a statute says otherwise. The Court then turned to 35 U.S.C. § 311(a), a statutory code provision addressing who may institute an IPR. The Court found that Section 311(a) “govern[ed] the question of whether Congress intended assignor estoppel to apply in the IPR context.” Section 311(a) states 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 . . . .”

Arista argued that “§ 311(a) unambiguously leaves no room for assignor estoppel in the IPR context, given that the statute allows any person ‘who is not the owner of a patent’ to file an IPR.” The Court agreed and found that the plain statutory language unambiguously demonstrated that an assignor, who is no longer the owner of a patent, may file an IPR petition with respect to that patent. The Court concluded by stating:

In sum, we conclude that § 311(a), by allowing “a person who is not the owner of a patent” to file an IPR, unambiguously dictates that assignor estoppel has no place in IPR proceedings.

Take Away

35 U.S.C. § 311(a) allows “a person who is not the owner of a patent” to file an IPR, and therefore unambiguously dictates that assignor estoppel has no place in IPR proceedings.


Image Source: Gene Quinn.


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Join the Discussion

2 comments so far.

  • [Avatar for Anon]
    November 16, 2018 02:46 pm

    One word, Joachim: “privy.”

    The doctrine has long “pierced” any corporate veil.

  • [Avatar for Joachim Martillo]
    Joachim Martillo
    November 16, 2018 12:27 pm

    Because IANAL, I have to ask how Arista Networks, Inc., which is a legal person separate from Dr. Cheriton, could possibly be estopped from challenging the ‘597 patent. The assignor is Dr. Cheriton, who is a natural person. While Dr. Cheriton was founder, he may at this point just work for salary and have only negligible or no interest in Arista Networks.