Source: https://patentlyo.com/patent/2016/09/traditional-equitable-proceedings.html
Timestamp: 2019-04-26 09:45:06+00:00

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I take minor issue with the title of this blog post. The holding of this case is not that equitable defenses do not apply to IPRs. The holding was that the CAFC lacks jurisdiction to consider the question of whether equitable defenses apply to IPRs.
In other words, this CAFC decision does not compel the PTAB to refuse patent-owner arguments that sound in equity. Nor is any other PTAB panel bound by the decision of this particular PTAB panel. That is to say, the PTAB panel here did not designate their institution decision as precedential (or even informative). Therefore, subsequent PTAB panels are perfectly free to deny institution on the basis of assignor estoppel.
In other words, it is possible that the law is that the PTAB cannot touch petitions lodged by assignors and their privities. It is also possible that the law is that the PTAB is free to entertain such petitions. What this CAFC decision really means is that we will never know what the law is on this point, because the institution whose “province and duty [it is] to say what the law is” has decided that it is not allowed to touch this particular question.
Awkward, but there you have it. Cuozzo got the appellate review question wrong, and now we are stuck with the predictably unfortunate results.
They got it wrong because the right question was not asked.
Cuozzo did not get the appellate decision wrong because they narrowly confined their decision to institution decisions under “this section.” What the Federal Circuit does and has done is simply ignore this requirement of 314(d), and read it as if 314(d) simply barred appeals of institution decisions.
“This section” is 314. Institution decisions under section 314 are nonappealable – and that and so-called “mine run” essentially procedural issues involving the institution decision that do not involve completely collateral issues such as those arising in section 315. The Supreme Court simply did not address the situation of Achates, but the Federal Circuit believes that it did. At least one judge has now openly called for en banc review because it is clear that the Federal Circuit, not the Supreme Court, but the Federal Circuit, is both misreading the statute and not following the Supreme Court – once again.
It is amazing the gall of this court to defy the Supreme Court again and again and again. It gets everybody in the trouble because the Supreme Court is eventually going to reverse. We have in re Bernhart. We have Filmtec. We have State Street Bank. We have Aukerman (SCA Hygiene).
The defiance of this Federal Circuit of the Supreme Court is legendary and completely unacceptable.
I have to disagree, Ned. The SCotUS did not “narrowly confine their decision to institution decisions under… 314(d)… .” That was the dissent. The majority reads 314(d) to bar review of “the decision to institute inter partes review… [and] questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review,” (emphasis added). Cuozzo Speed Tech. v. Lee, 136 S. Ct. 2131, 2141 (2016).
What statutes are “closely tied” to 314(d)? Heck if I know, but I cannot say that the CAFC is crazy to suppose that 315 is one of those “closely tied” statutory provisions. It simply is not fair to call this a case of the CAFC defying the SCotUS. One must have been given a clear counter-order before one can be said to “defy” it. The Cuozzo opinion is as clear as mud.
The Cuozzo dissent got it right. Full stop. The Cuozzo majority could have gotten the statutory interpretation even more wrong. The majority did not arrive at the worst mistake possible. Still and all, the majority’s reading of the statute was at least partially wrong (although I suppose that their holding was correct, because Cuozzo Speed should have lost even under a correct reading of the statute). It is the majority’s error that it makes it possible for the Achates mistake to live on and cause further mistakes like Husky.
Ned, your reading is simply off.
I have told you this before. Why were you not listening?
Greg, I do not disagree that the decision to institute includes more than simply determining whether the challenged claims raise a reasonable likelihood of unpatentability. They also include issues necessarily included with making that decision which includes whether the petition particularly lays out the grounds for invalidity or unpatentability.
I really did not think the Cuozzo had a chance of winning its case because the references alleged against the dependent claim were equally as pertinent against the parent claim. It did not seem at all interesting whether it won on this issue because, as the Federal Circuit said, the remedy was for the petitioner simply to file again or to correct the petition in some way. There was no real harm to Cuozzo.
That is not the case if a company like Apple can still file an IPR petition more than one year after one of its privies is sued for infringement and it is actively involved in managing the case as Achates seems to have alleged or believed. The point of the bar is to protect the patent owner against harassment by having to defend validity in multiple forums. The Federal Circuit does not seem to understand this or even care to understand this. Its bias in favor of petitioners is remarkable.
In a certainly is not the case if the petitioner can never file at all because he is barred under principles of assign or estoppel.
Ned, you are over emphasizing the section of 314 which is the section called “Institution of Inter Partes Review” and at the same time you (continue) to fail to see how this is a distinct legal event (and what exactly happens AT that event).
As to your other comments, you are letting yourself get further distracted.
All true Greg. But as I noted below at 1, “[T]his answers an assignor estoppel issue reportedly raised at least five times in prior IPRs.” Hence we seem to have a consistent PTAB rejection of assignor estoppel as a bar to IPRs by alleged assignors.
While not directly relevant, it is interesting to note that in PTO interferences [in many ways the role model for IPRs] the equitable defense of inequitable conduct was originally not allowed to be considered, then briefly allowed to be raised in a few cases, then challenged as inappropriate for deciding PTO interferences. I am not aware of any interferences decided by the PTO on that basis since? SAPJ Judge McKelvey in about 2001 was reported to have said that the Board had no jurisdiction to consider inequitable conduct issues because those issues concern enforceablilty, not patentability.
Fair enough, but assignor estoppel has definitely been part of interferences, going way back. “It has been generally recognized that the principles of equitable estoppel are applicable in… proceedings in the United States Patent Office, and appeals therefrom…. It has been held, in many cases, and it must be accepted as the law on the subject, that a[n]… assignor will not be heard to question the validity of his patent as against his… assignee…” Trumbull v. Kirschbraun, 67 F.2d 974, 977 (C.C.P.A. 1933).
Is Trumbull still good law…?
Let’s put it this way: it gets a clean bill of health from both Shepard’s and Westlaw. I know that this does not prove that there is not countervailing authority out there, but I am not aware of any. There are not a lot of interferences in the first place, and there are not a lot of cases in which assignor estoppel is an issue, so the intersection of interferences and assignor estoppel cases are going to be fairly rare. That is to say, this issue does not come up much, so I am not inclined to draw an adverse conclusion from the fact that Trumbull issued in 1933 and there has not been much further law on this particular legal point since. One really should not expect a lot of cases on this point, given the rarity with which it arises.
So then,… limited to interferences?
Does this make it applicable to non-interfence (but “interference-like”) mechanisms?
Well, if you read the plain text of Trumbull, it does not say “limited to interferences.” It says that “equitable estoppel [is] applicable in… proceedings in the United States Patent Office, and appeals therefrom… .” At the time, the only contested proceeding in the PTO (that is to say, the only instance in which assignor estoppel issues could come up) was the interference, and Trumbull concerned an interference. I see no reason to read Trumbull as limited to interferences, however. Certainly Trumbull does not purport to be so limited.
That’s interesting, but given the facts that you present, easily distinguished, would you not say?
Sure, one can distinguish Trumbull. It is not clear to me that one should distinguish it, but certainly one can.
Of course, I suppose that the PTAB (which, to be fair, probably does not even know of the existence of Trumbull) regards Trumbull as superseded by statute. Certainly that is what they said in the present case—that the words “one who is not the patent owner” in the statute means that even assignors are permitted to petition for IPR. If you believe that, then distinguishing is simply beside the point.
One argument for “should” is that Congress itself decided to eliminate interference practice.
Wait a minute. Trumbull happened to involve an interference, but held that assignor estoppel applies to all proceedings—both Art. III and administrative proceedings. How, then, does the fact that Congress did away with interferences (not yet, of course, but at some murky and uncertain future date) constitute an argument to distinguish Trumbull? I do not even see an argument here, let alone a strong argument.
How does Trumbell “hold” something not before the court…?
There is something “weak” here alright – just not what you think.
Trumbull happened to hold that assignor estoppel applies to interferences, but to reach that holding it applied the rule (amply established from multiple authorities) that assignor estoppel applies to all proceedings—both Art. III and administrative proceedings.
How, then, does the fact that Congress did away with interferences (not yet, of course, but at some murky and uncertain future date) constitute an argument to distinguish Trumbull? As before, I still do not even see an argument here, let alone a strong argument.
Interferences are done away with – can you start a new one…?
As to any type of broadening “holding” I refer you to understanding the difference between holding and dicta.
Hint: it is NOT a “pedantic” difference.
Thanks Greg. Assignor estoppel would seem make a lot more sense in an interference [that gets to a priority-contest stage], or even in an AIA derivation proceeding, since the respective alleged inventors testimony is far more likely and could be relevant.
If any assignee ever succeeds in getting a full blown derivation proceeding will we find out if old Trumbull v. Kirschbraun, 67 F.2d 974, 977 (C.C.P.A. 1933) is still good law?
But is not their another hurdle to both? The refusal of the PTO to even declare interferences between commonly owned applications or commonly owned applications and patents? Many patent assignments are not just to one application or patent, but rather encompass all related applications and patents, or all applications or patents that could read on a given product or product line.
In case it was not clear, my point was that assignor estoppel should also apply in IPRs. The PTAB does not agree, but it seems to me that they are ignoring binding law, and the CAFC is letting them get away with it because of the Achates mistake. I am much more concerned with the applicability of the doctrine in IPR/PGRs (of which there are a lot), than in interferences/derivations, which are rare as hen’s teeth.
Incidentally, I suppose that I should refine my answer and say that I believe that Trumbull is still good law with regard to assignor estoppel. Trumbull also asserts that licensee estoppel applies in interferences, and obviously licensee estoppel was effaced from the law in Lear, so Trumbull is no longer good law on that particular point.
Oops responded above before seeing this.
Thanks for the points Greg!
anon, CCPA cases are en banc and therefore remain binding unless overturned by the Federal Circuit en banc.
I am sure that anon knew this already, but it is a worthy point you raise, Ned. I am continually surprised at how few people realize that a CCPA holding has all the same precedential value as an en banc CAFC holding.
In theory the CAFC en banc could overturn a CCPA precedent, but so far they have never done so (except in instances like In re Bilski, in which the CAFC was itself subsequently overturned).
BTW, is this not about the third? time that the Fed. Cir. has reversed a PTAB IPR decision for not rejecting ENOUGH of the patent owners claims, rather than for rejecting TOO MANY claims? I.e., if IPR APJ panels are a “death squads” the Fed. Cir. is sure not very often “playing doctor” to resuscitate the patient patent, and is even administering coup de grace. These IPR appeal decision statistics are not being helped by all the cases in which the patent owner puts up technical/legal arguments but had no good arguments to make against the cited prior art itself. Fed. Cir. panels are not blind to seeing that claims clearly invalid over the cited prior art not deserve a lot of sympathy for being sent back for reconsideration.
Their hands are tied when facts be facts brosefus. They can’t magically change the facts and tinker with the patent system as easily as they can tinker with issues of lawl.
…except when “convenient” to do so, like “Gisting” away physical claim elements.
Argh. The PTO truly has no shame.
If Schad now thinks his patent is invalid, perhaps he should be prosecuted by the DOJ for making willful false statements to the PTO during prosecution.
I also wonder if the buyer (Husky) has recourse in state court against Schad.
Just one more clause to put in the sales contract, I guess: something estopping the seller, people in privity thereto, and entities that come into privity with those parties from challenging the patents acquired, in any forum.
Interesting but I don’t know how enforceable that would be.
You mean, like, as a contract term?
I don’t see it violating anti-trust laws (incidental to a bona fide business deal).
And, I don’t think most state contract law would declare it contrary to public policy.
So, enforceable as in, someone has breached a contract and can get sued for that breach.
It won’t be enforceable before the PTAB though.
This answers an assignor estoppel issue reportedly raised at least five times in prior IPRs.
There are some academic arguments that the Fed. Cir. continued retention of assignor estoppel to preclude assignor validity challenges even in patent litigation is inconsistent with the basis of the Sup. Ct. Lear elimination of licensee estoppel. Also note the 1946? Sup. Ct. Scott Paper decision.
This Fed. Cir. confirmation that an effective “incorporation by reference” in one patent of another patent can turn a combination of the two references from just 103 prior art into a single 102 reference would seem to have significance far beyond IPRs?
“Incorporation by reference” may be done in applications for 112 enablement purposes, but this demonstrates its prior art effectiveness as well.
There is also useful extensive guidance in this decision as to when an IPR institution decision COULD be challenged, interpreting Cuozzo.
To your last point, tell me Paul, what is one of those ways the court (again) says is a way to challenge the initiation decision point?
Here’s a hint: I have long presented this way, and you have as equally long avoided any discussion of that way.
My large friend in Vegas is long past irritated with you (and the fact that he has to keep paying me every time the topic comes up and you decline to talk about the subject).
Paul, but is in their little bit more involved in assignor estoppel than in licensee estoppel? The principal of allowing the licensee to assert invalidity was because licensee was the single party with most interest in asserting invalidity. Not so with an inventor/assignor. This is the single party whose dishonesty in obtaining a patent should not be rewarded.
Whether or not you consider “his dishonesty being rewarded,” is not the baseline of the rationale : whether or not the patent is valid – controlling though Ned?
Sure, he may benefit now by wrecking the patent, but should he not then be liable (separately) for the initial subterfuge?
If no subterfuge (perhaps he just now came across prior art), it would NOT be adversely “rewarding, but more in line with someone who is likely to know, eh?
I take your point, and I agree with Ned that it is a good point. Your argument, however, speaks to the moral and policy considerations of the issue. It does not really speak to the question of “what is the law on this point?”.
The early case law on assignor estoppel (e.g., Faulks v. Kamp, 3 Fed. 898, 901 (C.C.S.D.N.Y. 1880)) grounds the doctrine in the older doctrine of estoppel by deed. In an estoppel by deed context, it is simply irrelevant whether the transferor did or did not know about the defect in his title.
In other words, imagine that I grant you a deed to Blackacre in fee simply absolute. Unbeknownst to me, there was a reversionary interest to A if anyone sells alcohol on the property. You open a tavern on the Blackacre grounds, and thus trigger the reversion. Only at this point in the story do I discover the defect. I buy Blackacre from A and try to have you evicted. I cannot, because of estoppel by deed, and the court is not even going to spend a second trying to figure out whether I did or did not know about the reversion at the time of grant, because estoppel by deed makes that point irrelevant. I am not permitted to back down from my warranty to you that you own the absolute fee (even though I was wrong about that when I warrantied it).
This is the law that the SCotUS purported to apply in Westinghouse Co. v. Formica Co., 266 U.S. 342, 349 (1924). Therefore, it seems to me that the law is that the assignor’s innocent ignorance of a defect in the patent is simply beside the point. That is to say, unless and until the SCotUS says otherwise, it seems that the original patent applicant’s knowledge or ignorance of the allegedly invalidating art is irrelevant to the issue of assignor estoppel.
Your counter point is a good one: what is the law?
Is this one of those areas (of equity) that Congress has left open to the courts?
If not, then your question is only (slightly) improved by asking: What is the statutory law?
There is no statute on point, but that is not the same as to say that there is no law on point. There is law here, as shown in Westinghouse.
Estoppel by deed is not constrained by statutory law, now is it?
If that is where you are going to trace it, then the courts can update “the law” through the t001 of common law evolution.
Tell me Greg, is that your final answer? Non-statutory law?
Estoppel by deed (or assignment, in this case) can be constrained by statutory law (Congress is free to speak on the issue of whether it wants equitable estoppel to have any continued place in the patent system). If Congress does not trouble itself to speak to the issue, however, then judge-made law continues in place. That is what is going on here.
Thanks Greg – so the answer is common law – which opens itself up to be changed by this court writing new common law.
Your explanation is excellent, but it does more to support my view than to support your counter point.
When you say “this court,” whom do you mean?
I definitely agree that the SCotUS can change the law on this point, as can Congress if it chooses. I do not see that the CAFC can chage the law, however, in a way that contradicts existing SCotUS precedent.
No one said anything about “contradicting precedent,” as the evolution of common law occurs without so doing all the time.
I don’t think you have “SCOTUS precedent” so on point to be contradicted.
Has this exact issue already been decided by SCOTUS?
If the CAFC were to allow assignors to petition for IPR, that would be allowing an “assignor to be heard to question the right of his assignee to exclude him from its use.” The SCotUS has said that this is not allowed, so the CAFC cannot allow it, unless and until Congress or the SCotUS changes the law on this point.
Like I asked – do you have an actual case directly on point that would be, as you say, setting the precedent to be contradicted?
I do not understand your response, Anon. The Westinghouse holding dealt with assignees, and the present case deals with assignees. The Westinghouse holding is, therefore, directly on point.
Are you talking about something other that assignees? If so, then I am afraid that I have misunderstood your previous argument, and would be obliged if you could clarify.
Ned, the academic argument, as I understand it, is that if the patent purchaser was actually misled or defrauded they can sue to get their money back, and perhaps other damages [and their later testimony inconsistent with their application oath may not be credible except as admissions against interest] but that private wrong should not be confused with the strong PUBLIC interest in not supporting invalid patents that the Sup. Ct. stressed in Lear.
But assignor estoppel is apparently still alive and well in patent litigation, at least until it gets to the Supremes?
If you are going to fight the patent and have not as yet signed any contract to license, you remain free to NOT contract.
But don’t you make the act of contracting into a sham if you take away the freedom to contract on what is still presumed to be a valid patent?
Paul, of course it does.
But an inventor is different from a licensee. He first asserts he is an inventor to get a patent then asserts that he is not an inventor to infringe it.
It is more subtle than that Ned.
He is not saying “I am not an inventor” to infringe, but he is saying that (for whatever reason- good or bad), there is NO infringement because (oops) there should never been a patent.
As I posted above, if “bad,” then other laws should come into play, if “good,” then the same animus that drives the licensee drives here too.
Listen anon, I see no vice in paying a royalty even while challenging the validity. I do see a problem however when a purported inventor is allowed to play fast and loose with the American patent system.
You are imposing your own “value” on the law.
My points stand: if the (original) inventor has done something bad, there are other laws that apply, and if not, then you are not following the rationale for the law. The other laws capture what you “don’t like,” and thus, the impetus here remains a “proper” one.
You have not distinguished your desire to overcome that impetus. I do not find your position compelling.
I think that it goes too far to say that the Court eliminated licensee and assignor estoppel together in Lear. I think that the right way to understand licensee estoppel is as an overextension of assignor estoppel. That is to say, the courts created assignor estoppel as the patent law analogue to the common-law doctrine of estoppel by deed. This is altogether sane and salutary, and no one would say that the SCotUS has ever abrogated estoppel by deed.
Somewhere along the line, however, the Court lost sight of the original logic of assignor estoppel, and began applying the doctrine to licensees, where it really makes no sense. So Lear merely represents the Court coming to its sense and drawing the original doctrine back to its original boundaries (yes for assignors, no for licensees). There is no where that Lear purports to rescind assignor estoppel, and it over-reads the case to understand it as so doing.
I am not so sure that your version here is not itself an over-reading. I like that you have traced the law, but the “sounding in policy” for why that law can so be traced still applies to both assignor and licensees (the driver being those that are more likely than the gen eral public to know whether or not the patent is indeed valid). Once you leave behind the actual land cases and start using the “law” in the patent sphere, you cannot return fully to the land cases and the “law” will (must?) continue to evolve in its common law approach within the patent sphere. Thus, the “sounding in policy” for patent concerns cannot be put to the side.
I like that you have traced the law, but the “sounding in policy” for why that law can so be traced still applies to both assignor and licensees (the driver being those that are more likely than the gen eral public to know whether or not the patent is indeed valid).
That exchange never happens with the licensee, so there is no injustice in a licensee’s challenging a patent.
So aside from the “misbegotten” aspect, do you have anything else in common law within the patent sphere to support your position?
Since you are depending on common law, the evolution of that law is what controls (not it’s start).
As you said, and it was a good point, what is the law here (it’s not the original starting point of the common law). Those “policy drivers” of mine that you have noted – they are very much in play given the type of law we are discussing, eh?
I am not at all clear as to what you mean here. My only point is that right now the law is that an assignor is not allowed to attack the validity of a patent that the assignor assigned. If you are arguing that the SCotUS might change the law in future, I really do not disagree. The lower courts, however, are supposed to apply the law as it presently stands, not guess at how the Court might evolve in future cases. Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484 (1989).
Common law is not only the domain of the Supreme Court.
Of course not, but the SCotUS is the final word on the common law in the United States federal courts, and the lower courts are obliged to give effect to the SCotUS’s view of the common law.
Sure – no problem with that.

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