A Shield, But Not a Sword – Patent Assignor Estoppel

In Semiconductor Energy Laboratory Co., Ltd. v. Yujiro Nagata, — F.3d —, 2013 WL 490991 (Fed.Cir. 2013), the Federal Circuit Court of Appeal upheld the dismissal of SEL’s lawsuit for lack of subject matter jurisdiction. 

Nagata, a co-inventor on a patent owned by SEL, had assisted SEL in a patent infringement suit against another party in 2002-2003, and was paid for his cooperation and services.  In SEL’s 2009 suit against Samsung, however, Nagata did not cooperate with SEL as SEL had assumed.  Instead, Nagata assisted Samsung and gave testimony repudiating his signature on the declarations and assignments he had signed during patent prosecution in 1991.  SEL claims it settled the Samsung case for less money because Nagata’s testimony impugned the enforceability of the patent. 

SEL then sued Nagata, seeking to use the doctrine of assignor estoppel (whereby “an assignor sued for infringement may not defend or counterclaim that the patent he assigned is invalid or unenforceable”) offensively in a Declaratory Relief claim against Nagata, arguing that assignor estoppel imposed a “duty of fair dealing … on an inventor who assigns intellectual property rights that are protected by the Constitution.”  SEL argued this established subject matter jurisdiction because SEL’s right to relief “necessarily depends on resolution of a substantial question of federal patent law.” 

The Federal Circuit held, “our jurisprudence does not create a federal cause of action for assignor estoppel,” explaining it 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.”  Importantly, the court noted, “The relief requested by SEL is akin to seeking a declaratory judgment of patent validity, which is not a viable cause of action.” 

Accordingly, because SEL’s claim of assignor estoppel did not create a cause of action, SEL’s case (other state law claims) lacked a basis for subject matter jurisdiction in federal court.

Echoing the district court, the Federal Circuit noted, “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 [against Samsung], not to bring collateral litigation against him under a nonexistent independent cause of action.”  Interestingly, however, the district court’s dismissal order reveals that Nagata had agreed to assist Samsung in the litigation “as a paid consultant for the U.S. law firm defending Samsung,” and that Nagata “was to receive $52,500 from Samsung, regardless of the hours he worked, with additional compensation at the rate of $350 an hour.” (emph. addedSemiconductor Energy Laboratory Co., Ltd. v. Yujiro Nagata, 2012 WL 177557 (N.D.Cal. 2012).  Other than its mention of the “crucible of cross-examination,” the Federal Circuit did not address the Samsung-Nagata compensation arrangement, which the district court called, “arguably troublesome.” 

The Take Away: 

1.         Assignor estoppel is an affirmative defense (i.e., a shield), and may not be used offensively as the basis for a federal cause of action (i.e., a sword). 

2.         Times change, and so do witnesses. 


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