By Kevin E. Noonan —

Last week, the Federal Circuit "grappled," as the opinion put it, with the equitable doctrine of assignor estoppel in Hologic, Inc. v. Minerva Surgical, Inc.

The case arose in an infringement suit over U.S. Patent Nos. 6,782,183 and 9,095,348.  The patents were directed to "procedures and devices for endometrial ablation."  Claim 9 of the '183 patent and claim 1 of the '348 patent were considered by the Court to be representative:

'183 patent:

9.  A method of detecting a perforation in a uterus, comprising the steps of:
    passing an inflation medium into the uterus;
    monitoring for the presence of a perforation in the uterus using a pressure sensor;
    if no perforation is detected during the monitoring step, permitting ablation of the uterus using an ablation device; and
    if a perforation is detected during the monitoring step, preventing ablation of the uterus.

'348 patent:

1.  A device for treating a uterus comprising:
    an elongate member having a proximal portion and a distal portion, the elongate member comprising
    an outer sleeve and an inner sleeve slidably and co-axially disposed within the outer sleeve;
    an applicator head coupled to the distal portion, the applicator head defining an interior volume and having a contracted state and an expanded state, the contracted state being configured for transcervical insertion and the expanded state being configured to conform to the shape of the uterus, the applicator head including one or more electrodes for ablating endometrial lining tissue of the uterus;
    a handle coupled to the proximal portion of the elongate member, wherein the handle comprises a frame, a proximal grip and a distal grip pivotally attached to one another at a pivot point and operably coupled to the applicator head so that when the proximal grip and the distal grip are moved closer together, the applicator head transitions from the contracted state to the expanded state;
    a deflecting mechanism including flexures disposed within the applicator head, the flexures including first and second internal flexures and first and second external flexures, the first and second external flexures being coupled to the outer sleeve and the first and second internal flexures being coupled to the inner sleeve, wherein the deflecting mechanism is configured so that translating the inner sleeve relative to the frame causes the applicator head to transition from the contracted state to the expanded state; and
    an indicator mechanism operably coupled to the inner sleeve, the indicator mechanism configured to indicate a dimension of the uterus [emphases added to indicate disputed claim terms not further discussed herein].

The opinion set out the relationships between the parties in this dispute.  Inventor Truckai (named on both the '183 and '489 patents) founded Novocept, which developed a system for detecting perforations in a uterus that could cause serious side effects for women undergoing endometrial ablation; the system depends on introducing carbon dioxide into the uterus and monitoring gas escape.  It was undisputed that Novocept's ablation product uses the claimed technology, and that inventor Truckai assigned his right to these patents to Novocept.  Thereafter, Novocept was acquired by co-plaintiff Cytyc Corp., which was subsequently acquired by co-plaintiff Hologic.  Hologic now sells the Novocept system.

Meanwhile, Inventor Truckai founded accused infringer Minerva and developed the accused infringing article, termed the Endometrial Ablation System (EAS).  Hologic sued Minerva over sales of the EAS for infringing the '183 and '349 patents.  Hologic moved for summary judgment that Minerva was estopped under the doctrine of assignor estoppel for both the '183 and '348 patents, which motion the District Court granted.  Assignor estoppel has differences in both philosophy and patent policy than licensee estoppel, which was abolished by the Supreme Court in Lear, Inc. v. Adkins, 395 U.S. 653, 666 (1969).  Licensee estoppel, according to the Supreme Court, was against public policy because a licensee of an invalid patent, of all parties, has the most incentive to see such patents invalidated.  (Similar considerations motivated the Supreme Court in MedImmune, Inc. v. Genentech, Inc.)  Assignor estoppel, on the other hand, is a situation where a patent owner (frequently the inventor) has transferred ownership rights in their patent for consideration, and now wishes to challenge the transferred patent's validity.  This behavior smacks of "unclean hands" or at least sharp practices, and a court in applying equitable principles should avoid permitting the assignor from involving the power of the Court to support this seeming inequity.  Here, the District Court found that Inventor (and assignor) Truckai was intimately involved inter alia as founder, President, and CEO of Minerva in bringing the accused EAS product to market.  The Supreme Court has addressed (and, according to the opinion, "carved out some exceptions to") the doctrine in Westinghouse Electric & Manufacturing Co. v. Formica Insulation Co., 266 U.S. 342 (1924), and Scott Paper Co. v. Marcalus Manufacturing Co., 326 U.S. 249 (1945).

Finally, at the District Court on the issue of apportionment of damages, the jury found a total award of $4,787,668 on infringement of the '183 and '348 patents without any differential apportionment to either patent.  In a parallel inter partes review proceeding, the Patent Trial and Appeal Board found the asserted claims of the '183 patent to be invalid for obviousness (a decision affirmed on appeal by the Federal Circuit).  Both parties appealed; this decision is significant regarding Minerva's appeal of the assignor estoppel and apportionment issues.

The Federal Circuit affirmed with regard to both the assignor estoppel issue and the apportionment of damages issue, in an opinion by Judge Stoll joined by Judges Wallach and Clevenger; Judge Stoll offered additional views separately.  The opinion also vacated and remanded on other factors involved in the damages calculations not germane to the other issues in the case.

The panel rejected Hologic's argument that assignor estoppel precluded application of the PTAB's invalidity judgment in the IPR.  On the other hand, the panel affirmed the District Court's grant of summary judgment based on assignor estoppel with regard to Minerva's invalidity defenses in this litigation regarding the '348 patent.  The opinion notes that the Federal Circuit first had occasion to consider (and "affirm the vitality of") assignor estoppel in Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220 (Fed. Cir. 1988), which also held that the estoppel extends to those in privity with the estopped assignor (relevant here, to Minerva).  The opinion provides the following basis for the continued vitality of the assignor estoppel doctrine, citing Diamond Scientific:

The public policy favoring allowing a licensee to contest the validity of the patent is not present in the assignment situation.  Unlike the licensee, who, without Lear might be forced to continue to pay for a potentially invalid patent, the assignor who would challenge the patent has already been fully paid for the patent rights.

The opinion recited four commonly recited justifications for the doctrine:

"(1) to prevent unfairness and injustice; (2) to prevent one [from] benefiting from his own wrong; (3) by analogy to estoppel by deed in real estate; and (4) by analogy to a landlord-tenant relationship." [Diamond Scientific] at 1224 (alteration in original) (quoting Cooper, Estoppel to Challenge Patent Validity: The Case of Private Good Faith vs. Public Policy, 18 Case W. Res. L. Rev. 1122 (1967)).

The Court recognizes that the assignor is in a unique position because of the imputed earlier representation (express or implied) that the patent had value and that it would be an injustice to permit the assignor to repudiate that earlier representation.  The opinion then sets forth a litany of its case law consistent with the continued vitality of the doctrine, including Shamrock Techs., Inc. v. Med. Sterilization, Inc., 903 F.2d 789, 793–96 (Fed. Cir. 1990); Mentor Graphics Corp. v. Quickturn Design Sys., Inc., 150 F.3d 1374, 1377–80 (Fed. Cir. 1998); Pandrol USA, LP v. Airboss Ry. Prods., Inc., 424 F.3d 1161, 1166–67 (Fed. Cir. 2005); and Mentor Graphics Corp. v. EVE-USA, Inc., 851 F.3d 1275, 1280–83 (Fed. Cir. 2017), as well as instances where the scope of the estoppel can be narrowed, see, Mentor Graphics Corp. v. Quickturn Design Sys.

Applying this case law, the panel concluded that assignor estoppel did not preclude Minerva from relying on the PTAB's decision that the '183 patent was invalid.  The panel notes that case law had determined that assignor estoppel does not preclude filing an IPR.  In Arista Networks, Inc. v. Cisco Sys., Inc., 908 F.3d 792, 804 (Fed. Cir. 2018), the Court concluded that the language of the statute, 35 U.S.C. § 311(a), which precludes a patent owner from filing an IPR did not so preclude an assignor (i.e., a former owner).

However, the Court also affirmed the District Court's decision that assignor estoppel prevented Minerva from asserting invalidity defenses against the '348 patent (specifically rejecting Minerva's call for the Court to "abandon the doctrine" as being contrary to Lear (for at least the reasons discussed above).  While also recognizing that the doctrine should not be applied automatically it should be applied consistent with the facts and equities before the Court.  Here, the facts are "analogous to" the facts in Diamond Shamrock, wherein "an inventor executes broad assignments to his employer, leaves his employer, founds or takes on a controlling role at a competing company, and is directly involved in the alleged infringement."  The Court was unpersuaded that the distinction here, that Hologic had prosecuted the '348 patent claims after Inventor Truckai left Novocept, made a difference.  However, nothing in the assignor estoppel doctrine prevented Minerva from introducing evidence to the Court that would, for example, narrow the scope of the claims.

With regard to damages apportionment, the panel noted that the general rule is that in instances where a jury relies on "any of two or more independent legal theories" and one of them is defective, such "a general verdict must be set aside," citing WesternGeco L.L.C. v. ION Geophysical Corp., 913 F.3d 1067, 1073 (Fed. Cir. 2019).  In accord are Verizon Servs. Corp. v. Vonage Holdings Corp., 503 F.3d 1295, 1310 (Fed. Cir. 2007); Memphis Cmty. Sch. Dist. v. Sta-chura, 477 U.S. 299, 312 (1986); and DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1262 (Fed. Cir. 2014), that the "normal" rule requires a new trial on damages "where the jury rendered a single verdict on damages, without breaking down the damages attributable to each patent" and one of the patents is found invalid.  The exception of the rule is that a single award can be maintained if there is undisputed evidence that the sustained patent was "necessarily infringed" by "all of the accused activity on which the damages award was based."  In those instances, the Court properly applies a "harmlessness" standard analogous to that applied regarding erroneous jury instructions.

That is the case here.  The Federal Circuit based its decision on there being "undisputed evidence" before the District Court that the damages found by the jury were adequately supported by defendant's infringement of claim 1 of the '348 patent.  Hologic presented expert testimony (subject to cross-examination) to the effect that "the same royalty rate he used in his damages calculation would apply to either the '183 patent or '348 patent, 'individually or the two patents collectively,' since they 'both cover the entire procedure and device respectively.'"  And Minerva proffered no persuasive evidence to the contrary, according to the opinion.

Judge Stoll's additional views concerned exclusively the assignor estoppel issue.  The Judge characterized the legal circumstances in this case as being "peculiar" and the Court's decision as being mandated by precedent.  The Judge identifies as one reason for her judicial displeasure for this outcome to be the Court's decision in Arista that an assignor was not estopped from petitioning for inter partes review.  On the other hand, assignors remain barred from pursuing litigation against patents they have assigned to others (and later get into litigation against their assignee).  The paradox for the Judge is that "[o]ur precedent . . . presents an odd situation where an assignor can circumvent the doctrine of assignor estoppel by attacking the validity of a patent claim in the Patent Office, but cannot do the same in district court."  This dichotomy, which the Judge believes to be "odd and seemingly illogical") prompts her here to suggest that the Court sit en banc to "clarify" this aspect of the patent law.

Hologic, Inc. v. Minerva Surgical, Inc. (Fed. Cir. 2020)
Panel: Circuit Judges Wallach, Clevenger, and Stoll
Opinion by Circuit Judge Stoll; additional views by Circuit Judge Stoll

By Kevin E. Noonan —

The Federal Circuit continued its explication of the standing issue for unsuccessful petitioners in inter partes review (see "Argentum Pharmaceuticals LLC v. Novartis Pharmaceuticals Corp. (Fed. Cir. 2020)") in Pfizer Inc. v. Chugai Pharmaceuticals Co.

The case arose over IPRs initiated by Pfizer against Chugai's U.S. Patent Nos. 7,332,289 and 7,927,815.  The patents were directed to protein purification methods that removed nucleic acid (DNA) contaminants.  Pfizer successfully petitioned, but the Patent Trial and Appeal Board (PTAB) in a Final Written Decision held that the challenger had not proved any of the '289 (1-8 and 13) or '815 (1-7, 12, and 13) claims had been improvidently granted.

The Federal Circuit dismissed Pfizer's appeal based on lack of Article III standing, in an opinion by Judge Bryson, joined by Chief Judge Prost and Judge Dyk.  The opinion sets forth the uneven playing field in IPRs, where anyone (but the patent holder) has standing to file a petition to initiate an IPR (even if the challenger fails to have Article III standing), citing JTEKT Corp. v. GKN Auto. LTD., 898 F.3d 1217, 1219 (Fed. Cir. 2018), and Fisher & Paykel Healthcare Ltd. v. ResMed Ltd., 789 F. App'x 877, 878 (Fed. Cir. 2019).  However, an unsuccessful challenger, as Pfizer here, must satisfy the requirements for Article III standing in order to be able to bring an appeal, the court relying on JTEKT Corp. and Consumer Watchdog v. Wisconsin Alumni Research Foundation.

The opinion sets forth the requirements for standing:  that the putative appellant has "(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision," citing Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016).  The panel notes, however, that Congress can accord a procedural right to appeal an administrative agency decision, and in those cases "certain requirements of standing—namely immediacy and redressability, as well as prudential aspects that are not part of Article III—may be relaxed," citing, via Consumer Watchdog,  Massachusetts v. EPA, 549 U.S. 497, 517–18 (2007).

Regardless, however, "[a] party invoking federal jurisdiction must have 'a personal stake in the outcome'" in order to meet the injury in fact requirement, the opinion citing (again via Consumer Watchdog), City of Los Angeles v. Lyons, 461 U.S. 95, 101 (1983).  Important to the panel's decision, this personal interest must exist "at all stages of review," inter alia at the time an appeal is brought and an adjudication commences under Vanda Pharm. Inc. v. W. Ward Pharm. Int'l Ltd., 887 F.3d 1117, 1125 (Fed. Cir. 2018), and Momenta Pharm., Inc. v. Bristol-Myers Squibb Co., 915 F.3d 764, 770 (Fed. Cir. 2019).  And where an appellant is not currently practicing activities that could raise infringement liability, standing can still be had if the party shows "that it has concrete plans for future activity that creates a substantial risk of future infringement or would likely cause the patentee to assert a claim of infringement," citing JTEKT.  Finally, with regard to the legal requirements for establishing standing, the party seeking judicial review bears the burden, citing Phigenix, Inc. v. Immunogen, Inc.

In this case, the Court held that Pfizer had not met this burden.  Pfizer argued that its required "concrete and particularized injury-in-fact" was its "purported" launch of the rituximab biosimilar Ruxience®.  Relevant to this appeal, Pfizer asserted that Genentech, owner of the rituximab biologic drug, was a wholly-owned subsidiary of the Roche Group and F. Hoffman LaRoche Ltd. was the majority owner of patent holder Chugai.  Pfizer had obtained a license from Genentech to sell its biosimilar to rituximab from Genentech in a settlement agreement, to which Chugai was not a party; accordingly, Pfizer did not get a license to Chugai's '289 or '815 patents as part of the settlement agreement.

The panel was satisfied that Pfizer had raised the possibility of litigation under the challenged patents, but the Court notes that Pfizer had not included in any of its pleadings when the risk of infringement liability had arisen.  Pfizer filed a notice of appeal on January 30, 2019, according to the Court, but "the only evidence of standing that Pfizer has provided to this court relates to events that occurred much later in 2019" (citing specifically FDA approval of the biosimilar in July 2019 and an announcement by Pfizer in October that it would begin selling the drug in January 2020).  Because, inter alia, Pfizer could not have begun selling its product before FDA approval in July, it could not have established (because it did not yet exist) an injury-in-fact when the appeal was filed in January.  Moreover, the panel faults Pfizer for failing to "offer[] evidence that would allow us to evaluate whether it practices or intends to practice the patented methods in the course of making its biosimilar product."

Assertions at oral argument by Pfizer's counsel that it was "self-evident to the parties" which product was at issue were unavailing, the opinion stating that "[i]t is not self-evident to the court, however, that there was standing at the outset of the appeal, or even later."  It being Pfizer's burden to establish standing, this bald assertion did not pass muster.  Pfizer relied on the e-mail address (rituximabIPR@win-ston.com), somewhat incredibly, for it quantum of self-evidence and on Chugai's use of Genentech's e-mail address on its IPR papers that its rituximab biosimilar was at issue.  Whatever significance this may have had for the parties, the Court states that it does not "tell the court anything useful about Pfizer's plans for its biosimilar, Ruxience®, as of the beginning of 2019, when this appeal began."  Almost as an aside, the opinion also states that these e-mail addresses do not "establish with sufficient likelihood that the processes used to prepare Pfizer's product would infringe Chugai's patents."

Finally, the opinion addresses Pfizer's alleged harm by application of the IPR estoppel provisions of 35 U.S.C. § 315(e).  The Court rejected these on the grounds that the provisions cannot amount to injury-in-fact when the Court has no evidence that Pfizer "was or is engaged in any activity that would give rise to a possible infringement suit," citing AVX Corp. v. Presidio Components, Inc., 923 F.3d 1357, 1362–63 (Fed. Cir. 2019); Gen. Elec. Co. v. United Techs. Corp., 928 F.3d 1349, 1355 (Fed. Cir. 2019); and Argentum Pharm. v. Novartis Pharm. Corp., Case No. 2018-2273 (Fed. Cir. 2020).

The Court having found no standing, it dismissed the appeal.

Pfizer Inc. v. Chugai Pharmaceuticals Co. (Fed. Cir. 2020)
Nonprecedential disposition
Panel: Chief Judge Prost and Circuit Judges Bryson and Dyk
Opinion by Circuit Judge Bryson