No Judicial Estoppel in the Case of the On-Again, Off-Again Patent Inventor

The case of Egenera, Inc. v. Cisco Systems, Inc. raised the question of whether inventors named on a patent can be repeatedly changed as litigation strategy changes. Because of judicial estoppel, the district court said no way.  But, on appeal, the Court of Appeals for the Federal Circuit said no problem—at least no problem in this case.

Mr. Shulter was listed as an inventor on Egenera, Inc.’s (“Egenera”) patent application and the resulting patent, U.S. Patent No. 7,231,430 (the “’430 Patent”).  The ‘430 patent relates to “a platform for automatically deploying a scalable and reconfigurable virtual network” of processors.  The claimed approach alleviates the need for physical reconfiguration of processors by allowing “processing resources [to] be deployed rapidly and easily through software.”

In 2016, Egenera sued Cisco Systems, Inc. (“Cisco) alleging Cisco’s enterprise server systems infringed the ‘430 patent.  In response, Cisco challenged the validity of the patent’s claims in a petition for inter partes review (“IPR”).   Cisco’s IPR petition included the “Grosner” prior art.   In an attempt to overcome “Grosner,” Egenera claimed an earlier conception date for invention in its response to the IPR.  However, that earlier conception date predated Egenera’s hiring of Mr. Shulter, who had been listed as an inventor.  Egenera attempted to reconcile this dilemma, explaining that after reviewing the IPR petition, it realized “all claims had been conceived before … Mr. Shulter, had started working there,” so he could not be an inventor. Then Egenera asked the United States Patent and Trademark Office (“USPTO”) to remove Mr. Shulter from the patent.  The USPTO granted the request.

After Mr. Shulter was removed as an inventor, the district court construed the ‘430 claims.  The district court “issued an order construing the patent’s ‘logic’ terms as means-plus-function elements.” Means-plus-function elements are limited to the structure disclosed in the specification.  In this case, that structure was a “tripartite structure.”  Cisco argued that Mr. Shulter invented the tripartite structure, and therefore, the patent was invalid because it did not correctly list all of the inventors. The district court agreed.  In response, Egenera changed its strategy and tried to add Mr. Shulter back as an inventor of the ‘430 Patent.  The district court ruled that judicial estoppel prevented “’resurrecting Mr. Shulter’s inventorship.”  Egenera appealed.

Under 35 U.S.C. § 256, errors in the list of inventors of a patent can be corrected either through a petition to the Director of the USPTO or by order of a court.  The Federal Circuit stated that “error” in this context “is simply an incorrect listing of inventors” irrespective of whether the list is incorrect due to honest or dishonest mistakes.  In other words, omitted inventors can be added and wrongly included inventors can be removed.  The statute further states that the error “shall not invalidate the patent in which such error occurred if it can be corrected.”  On appeal, the Federal Circuit determined that “Egenera’s assertion in its inventorship petition [to the USPTO] was incorrect:  Mr. Schulter was an inventor.  According, we conclude that Mr. Schulter’s omission was ‘error.’”

The Federal Circuit then turned to the question of whether judicial estoppel prevented correction of the inventorship error.  “Judicial estoppel prevents a party from taking a position in litigation that is inconsistent with a position successfully taken in a prior legal proceeding.  The purpose behind this doctrine is to preserve the integrity of legal proceedings.  The applicable standard here is that applied by the First Circuit, which evaluates three factors:

(1) whether a party’s earlier and later positions are “clearly inconsistent,” — that is, “mutually exclusive”;

(2) whether the party “succeeded in persuading a court to accept” the earlier position; and

(3) whether the party would “derive an unfair advantage or impose an unfair detriment” on the other side if not estopped.

While the district court found all three factors had been met, the Federal Circuit disagreed.

Addressing the first factor, the Federal Circuit stated that “[t]o be ‘clearly inconsistent,” positions must be ‘mutually exclusive’ and ‘directly inconsistent.”  Considering the present facts, the Federal Circuit stated “[w]e do not think that multiple corrections under § 256 are per se ‘mutually exclusive.’  In any event, the district court’s intervening claim-construction and inventorship determinations further justify any seeming inconsistency.” Egenera’s request to remove Mr. Shulter as an inventor was consistent with its preferred claim construction.  Once Egenera lost its claim construction position, “it was entirely consistent for Egenera to request an accompanying formal correction of inventorship” to add Mr. Shulter back as an inventor.  Therefore, because of the “intervening claim construction,” Egenera had not taken “clearly inconsistent” or “mutually exclusive” positions.

Evaluating the second factor, the Federal Circuit analyzed whether Egenera had “succeeded in persuading a court to accept” its earlier position.  Egenera’s petition to the USPTO to delete Mr. Shulter did not contain any statement of facts, but rather just a statements that it was an error to list Mr. Shulter and that all the other inventors agreed.  The USPTO does not perform a substantive examination of such petitions, but just checks “for the presence of supporting statements and the required fee.”  Therefore, the Federal Circuit stated that such a petition to the USPTO for change of inventorship is not sufficient to serve as “’persuasion’ of a ‘court’ for judicial estoppel purposes.”

As to the third judicial estoppel factor, the Federal Circuit determined Egenera did not gain unfair advantage nor would Cisco suffer unfair prejudice as the result of Egenera’s earlier position that Mr. Shulter was not an inventor.  Although Egenera had taken the position that Mr. Shulter was not an inventor to gain an advantage in the IPR, the IPR petition was denied before the change in inventorship was approved by the USPTO.  Further, the IPR petition was denied without addressing Egenera’s arguments relating to the priority date of the ‘430 patent.  Notably, the Federal Circuit stated that “[t]hings might be different had Egenera succeeded in swearing behind the prior art….But that is not this case.”

As a result, Federal Circuit found “the district court abused its discretion by applying judicial estoppel, vacated the invalidity judgement, and remanded the case for further proceedings.