No Federal Cause of Action against Inventor’s Attempt to Derrogate Patent in Violation of Assignor Estoppel Doctrine

By Dennis Crouch

Semiconductor Energy Labs v. Nagata (Fed. Cir. 2013)

SEL is a Japanese “research company” owned by mega-inventor Shunpei Yamazaki who is named as inventor of more than 750 U.S. patents. Dr. Nagata is a co-inventor on SEL’s U.S. Patent No. 6,900,463. When SEL sued Samsung for infringing the ‘463 patent the company learned that Samsung had hired Nagata. In that litigation Nagata testified on behalf of Samsung that his signature on the assignment and declaration was forged. The parties eventually settled that lawsuit, but SEL later argued that the settlement value was substantially decreased by Nagata’s testimony.

SEL then sued Dr. Nagata in the N.D. California federal court alleging several state law causes of action (breach of contract, slander, quiet title) as well as “violation of federal patent law.” The patent law claim was premised on the patent common law doctrine of assignor estoppel that, in certain circumstances, prevents an assignor from later challenging the validity of an assigned patent in court. In Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220 (Fed. Cir. 1988), the court wrote that the doctrine “embodies fundamental principles of federal patent law and policy” and imposes a “duty of fair dealing . . . on an inventor who assigns intellectual property rights that are protected by the Constitution.”

The district court dismissed the lawsuit against Nagata – finding that no federal cause of action is created by violation of the assignor estoppel doctrine and then declining to exercise supplementary jurisdiction over the state law claims.

On appeal, the Federal Circuit has affirmed – holding that assignor estoppel is an equitable shield that cannot be wielded as the basis for a declaratory judgment action.

[W]e are not inclined to transform the shield into a sword. The relief requested by SEL is akin to seeking a declaratory judgment of patent validity, which is not a viable cause of action. As the district court fittingly noted, “it simply makes no sense to use a doctrine intended to estop a party from advancing a particular claim or defense in a legal case as a way to sue a non-party who has made no claim or defense in a legal case.”

The conclusion here is that the only federal remedy available for SEL is to block certain testimony at trial. And, even then, assignor estoppel may well fail to block testimony. The court writes:

Moreover, we have routinely rejected the proposition that assignors should be prohibited from testifying as fact witnesses in cases where they are neither a party to a case nor in privity with the defendant, and we will not now devise a cause of action to preclude such testimony. See, e.g., Verizon Servs. Corp. v. Cox Fibernet Va., Inc., 602 F.3d 1325, 1339–40 (Fed. Cir. 2010) (holding no error by district court in allowing inventors to testify about patents they invented and declining to address argument that assignor estoppel barred such testimony); Checkpoint Sys., 412 F.3d at 1337 (rejecting argument that non-party assignor should be barred from submitting testimony regarding failure to name inventors under doctrine of assignor estoppel).

SEL argued in the alternative that its state law claims also raise substantial federal patent issues and thus “arise under” the patent laws. In Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988), the Supreme Court indicated that state law claims can create a federal law cause of action if “plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.” Although not directed at patent law, the Supreme Court muted Christianson’s power in Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005) by requiring a consideration of state interest in resolving the dispute. Here, SEL suggests that its state law causes of action all stem from violation of the federal common law doctrine of assignor estoppel – thus creating a substantial question of patent law. The appellate court rejected that notion – holding instead that “the asserted federal issue was insubstantial, implausible, and without merit.”

Dismissal affirmed.

This case would likely have been a Rule 36 affirmance without opinion but for the fact that the US Supreme Court is currently considering the case of Gunn v. Minton. That case focuses on whether a state law attorney malpractice case raises a Federal Cause of Action under 28 U.S.C. 1338(b). In Gunn, the Texas Supreme court dismissed the case for lack of subject matter jurisdiction – holding that Section 1338 preempted its usual power of general jurisdiction. See Minton v. Gunn, 55 Tex. Sup. Ct. J. 196 (2011).

The decision here along with DeRosa v. J.P. Walsh & J.L. Marmo Enterprises (Marmo) (Fed. Cir. 2013) (no jurisdiction over contract dispute) are likely intended as signals to the Supreme Court that the Federal Circuit is acting responsibly and carefully in this field.

3 thoughts on “No Federal Cause of Action against Inventor’s Attempt to Derrogate Patent in Violation of Assignor Estoppel Doctrine

  1. Did you notice that the court would permit the inventor testify that his signature was forged, and this had nothing to do with validity?

    Forged signature…

    Not related to validity?

    282? Sections 115 and 116 are not mentioned in 282.

    Perhaps the Feds should have mentioned that SELs litigators had missed an issue or two.

  2. The CAFC exercised some common sense and said that a falsified signature is still a falsified signature, even if the person whose signature was forged later assigns his putative rights in the patent to another. Too bad the USPTO doesn’t share this common-sense view, and doesn’t check to see that it has what appear to be actual inventors’ signatures on oaths filed in applications. Instead, the USPTO allows non-registered practitioners to file papers on behalf of applicants and to forge those applicants’ “S” signatures by typing the applicants’ names between slashes. See, for example, the papers originally filed in USSN 12/511,121 or USSN 12/865,129. In the former case the inventors eventually retained licensed counsel, although it doesn’t appear that a declaration with their signatures was ever filed. In the latter case the inventor continues to be represented by unlicensed counsel, and a declaration actually signed by the inventors has yet to be submitted.

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