Mag Aerospace v. B/E Aerospace: Assignor Estoppel

By Jason Rantanen

Mag Aerospace Industries, Inc. v. B/E Aerospace, Inc. (Fed. Cir. 2016)  Download Opinion
Panel: Prost (author), Mayer, Reyna

This case involves an advanced patent–but ancient property–law concept: assignor estoppel.  The basic idea is that when an inventor or patent owner assigns a patent to another party, the original owner cannot challenge the validity of that patent.  In Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1224 (Fed. Cir. 1988), the Federal Circuit explained the rationale for the doctrine: “Courts that have expressed the estoppel doctrine in terms of unfairness and injustice have reasoned that an assignor should not be permitted to sell something and later to assert that what was sold is worthless, all to the detriment of the assignee.” 

Here, the accused infringer (B/E) was not itself a former owner of the patents-in-suit, but had hired the original inventor after that inventor had assigned the patents to a third party (who subsequently assigned them to plaintiff Mag Aerospace).  Thus, the question for determining whether assignor estoppel applied to bar B/E from challenging the validity of the patents was whether B/E should be placed in the same shoes as the inventor–a question that boils down to the issue of privity. “Privity, like the doctrine of assignor estoppel itself, is  determined upon a balance of the equities.” Slip Op. at 10, quoting Shamrock Techs., Inc. v. Med. Sterilization, Inc., 903 F.2d 789, 793 (Fed. Cir. 1990).  In determining whether B/E was in privity with the inventor, the district court considered an array of factors from Shamrock:

1. the assignor’s leadership role at the new employer;
2. the assignor’s ownership stake in the defendant company;
3. whether the defendant company changed course from manufacturing
   non-infringing goods to infringing activity after the inventor was hired;
4. the assignor’s role in the infringing activities;
5. whether the inventor was hired to start the infringing operations;
6. whether the decision to manufacture the infringing product was made partly by the inventor;
7. whether the defendant company began manufacturing the accused product shortly after  hiring the assignor; and
8. whether the inventor was in charge of the infringing operation.

On review, the Federal Circuit concluded that the district court did not abuse its discretion in concluding that assign estoppel applied.  In reaching this conclusion, the court rejected B/E’s argument that it hired the employee specifically to avoid infringement.  Instead, the court focused on the fact that B/E used his knowledge “to conduct the activities that are now alleged to be infringing.”  The court thus focused the inquiry on the initiation the acts themselves as opposed to some sort of intent to infringe the patent.

Although it lost on the issue of assignor estoppel, and thus could not challenge the validity of the patents-in-suit, B/E nonetheless prevailed as the Federal Circuit also affirmed the district court’s grant of summary judgment of noninfringement.