• Assignor Estoppel is Only a Shield

    by  • February 13, 2013 • patent

    Here’s a bit of an odd case — too much of a stretch for the court’s taste, but I suppose a hat tip for the try, and the plaintiff got out of it without being sanctioned.

    The case involves “assignor estoppel.” Assignor estoppel is an equitable doctrine that prevents an assignor of a patent from later claiming that the patent is invalid when sued for infringement of the patent. In Semiconductor Energy Laboratory Co. v. Nagata, Nagata was the assignor, having assigned his patent rights to plaintiff Semiconductor Energy (SEL). Things went swimmingly; SEL successfully asserted the patent and Nagata cooperated. Six years later SEL brought suit against Samsung in Wisconsin, but this time Nagata had became a fact witness for Samsung. He repudiated his signature on the assignments, Samsung alleged inequitable conduct, and the case settled. SEL claimed the case settled at a lower amount because of Nagata’s testimony.

    So SEL sued Nagata in federal court in California. There was one federal cause of action, for “Declaratory Judgment — Violation of Federal Patent Law,” plus state law claims for declaratory judgment for anticipatory breach of contract, slander of title, quiet title and unjust enrichment.

    The patent-based theory was an attempt to use assignor estoppel offensively, that is, SEL claimed that assignor estoppel barred Nagata from conduct that attacks the patent’s validity. But the Court of Appeals for the Federal Circuit didn’t see it the same way, taking its clue from the word “estoppel”:

    SEL relies on Diamond Scientific for the proposition that the doctrine of assignor estoppel is “not merely a defense,” but that it “embodies fundamental principles of federal patent law and policy” by imposing a “duty of fair dealing . . . on an inventor who assigns intellectual property rights that are protected by the Constitution.” … But SEL cites no precedent or statute establishing assignor estoppel as a federal cause of action. SEL thus effectively invites us to create a new federal cause of action recognizing a supposed violation of the assignor estoppel doctrine under the Declaratory Judgment Act….

    Despite SEL’s contentions, assignor estoppel is a form of estoppel, and with rare exception, estoppel is a shield; it is an affirmative defense, not a claim for relief on its own…. [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.”

    In the Federal Circuit’s opinion, “The appropriate remedy, if any, for SEL to foreclose Nagata’s relevant, factual testimony might have been to challenge his credibility in the crucible of cross-examination during the Wisconsin case, not to bring collateral litigation against him under a nonexistent independent cause of action.” The lower court also properly declined to exercise supplemental jurisdiction over the state law claims.

    Semiconductor Energy Lab. Co. v. Nagata, No. 2012-1245 (Fed. Cir. Feb. 11, 2013).
    Semiconductor Energy Lab. Co. v. Nagata, No. No. C 11-02793 CRB (N.D. Calif. Jan. 23, 2012) (district court opinion).
    Semiconductor Energy Lab. Co. v. Nagata, No. No. C 11-02793 CRB (N.D. Calif. Oct. 21, 2011) (First Amended Complaint).

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