Assignor Estoppel Doctrine Is Not a Federal Cause of Action, Federal Circuit Affirms

Semiconductor Energy Laboratory Co. v. Nagata By Erica Larson – Edited by Suzanne Van Arsdale Semiconductor Energy Laboratory Co. v. Nagata, No. 2012-1245 (Fed. Cir. Feb. 11, 2013) Slip opinion [caption id="attachment_3049" align="alignleft" width="150"] Photo By: Derek Gavey - CC BY 2.0[/caption] The Court of Appeals for the Federal Circuit affirmed the judgment of the Northern District of California, which ruled that plaintiff Semiconductor Energy Laboratory Co. (“SEL”) could not establish federal jurisdiction over defendant Dr. Yujiro Nagata. The courts rejected a novel offensive application of assignor estoppel, traditionally a defense, which bars the previous holder of a patent from attacking the patent’s validity when sued for infringement by the assignee. SEL asserted the doctrine offensively, arguing that Nagata had violated assignor estoppel in a previous lawsuit by testifying against SEL, giving rise to a federal cause of action under 28 U.S.C. § 1338(a). Like the district court before it, the Federal Circuit did not reward plaintiff’s legal creativity. Instead the court held that the argument lacked precedent or strong supporting authority and declined to extend the doctrine. Semiconductor Energy Laboratory at 6–7. Property, intangible provides an overview of the decision and prior events. Dennis Crouch, writing for Patently-O, speculates that the Federal Circuit would have affirmed without opinion were the Supreme Court not presently considering Gunn v. Minton, a case which questions the extent of federal jurisdiction under 28 U.S.C. § 1338(b). Minton v. Gunn, 355 S.W.3d 634 (Tex. 2011) cert. granted, 133 S.Ct. 420 (2012) (focusing on whether the state law attorney malpractice case raises a federal cause of action under 28 U.S.C. § 1338(b)). In 2009, SEL, a Japanese R&D company, sued Samsung for infringement of U.S. Patent No. 6,900,463, which claims a semiconductor device. SEL contacted Nagata, one of the device’s inventors, about testifying on their behalf, as he had done in previous suits; however, Nagata had already agreed to be a defense witness for Samsung. His testimony repudiated his signature on the patent assignment documents. Samsung claimed that the forgery constituted inequitable conduct, and thus the patent was unenforceable. The suit was eventually settled, but SEL claimed that the settlement would have been more favorable to them but for Nagata’s testimony. The Federal Circuit questioned whether the doctrine of assignor estoppel would have prohibited Nagata’s testimony to impeach the validity of the patent in the Samsung suit, Semiconductor Energy Laboratory at 10, but held that, even if the doctrine could have been appropriately applied in that defensive context, it could not now be used offensively, id. at 8. Because the Federal Circuit rejected the offensive use of assignor estoppel, and thus found no federal cause of action, it also affirmed the district court decision to decline supplemental jurisdiction over the state law claims for damages (slander of title, quiet title and unjust enrichment). Id. at 10. The Federal Circuit also rejected SEL’s alternate argument that the claims implicated a substantial issue of federal law, holding that “the asserted federal issue was insubstantial, implausible, and without merit.” Id. at 9. This ruling reinforces that assignor estoppel is an affirmative defense, not a claim for relief on its own, and that it will remain so in light of the court’s reluctance to “transform the shield into a sword.” Id. at 7. Patently-O notes that this reluctance to expand patent law’s jurisdictional reach, likely spurred by the Supreme Court’s upcoming review of Federal Circuit jurisdiction, was also evident in the Federal Circuit’s DeRosa order from earlier this year. DeRosa v. J.P. Walsh & J.L. Marmo Enterprises No. 2012-1401 (Fed. Cir. Jan. 3, 2013) (nonprecedential) (refusing to hear a contract dispute over patent assignment and royalty). Erica Larson is a 1L at Harvard Law School.