Chief Judge Sleet denies motion to dismiss based on doctrine of assignor estoppel.

Chief Judge Gregory M. Sleet recently rejected an argument that a defendant’s invalidity counterclaim should be dismissed (and an invalidity defense stricken) based on the doctrine of assignor estoppel. EMC Corp., et al. v. Zerto, Inc., C.A. No. 12-956-GMS (D. Del. Jan. 14, 2013). As the Court explained, assignor estoppel is “an equitable doctrine that prevents one who has assigned the rights to a patent (or patent application) from later contending that what was assigned is a nullity. The estoppel also operates to bar other parties in privity with the assignor, such as a corporation founded by the assignor.” Id. at n.1 (quoting Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1224 (Fed. Cir. 1988) (internal citation omitted)).

In this case, the plaintiffs argued that the defendant’s invalidity counterclaim should be dismissed because the two named inventors of the patents-in-suit (who now are affiliated with the defendant) had assigned away their rights in the patents. More specifically, the plaintiffs argued that the inventors “now hold controlling positions in the defendant corporation or its parent company . . .” and that, as a result, it would be inequitable to allow them to partipate in invalidating the patents. Id. The Court agreed with the defendant, though, that the motion was premature. Id.

The Court explained that the question whether assignor estoppel may be applied depends on a balancing of the equities—and “the court’s ‘primary consideration . . . is the measure of unfairness and injustice that would be suffered by the assignee if the assignor were allowed to raise defenses of patent invalidity.’” Id. (quoting Diamond Scientific, 848 F.2d at 1225). Among the factual issues the Court determined needed further development in this case were whether the assignors received consideration for the transfer of their rights in the patents, the extent of their role in the patent application process, and their relationship with the defendant company. The Court found that although it was undisputed that the inventors founded the defendant’s parent company, it was not clear “how much corporate control they presently exercise over either entity. Likewise, the level and structure of their compensation is unknown at this time.” Id. The Court therefore found the plaintiff’s motion premature, but left open the door to the plaintiff raising an assignor estoppel argument at a later date on a more fully developed record.

EMC Corp., et al. v. Zerto, Inc., C.A. No. 12-956-GMS (D. Del. Jan. 14, 2013). by

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