Why Can't Cisco Stop An Arista Founder From Attacking His Own Patents?

Gaston Kroub

As high-tech patent cases go, perhaps none have been as hard-fought as the long-running battle between bitter competitors Cisco and Arista Network. The latter’s market success forced Cisco into launching a multi-front patent assault, even at the risk of damaging its own reputation as a vehement opponent of patent assertion activity. That risk aside, Cisco took its shot at asserting a host of patents — including at least one where an Arista founder, David Cheriton, was a named inventor who has assigned his patents while employed at Cisco to the company — against Arista in both the ITC and court. In a de rigueur response, Arista filed a host of IPR’s, including against the ‘597 patent that Cheriton had assigned to Cisco.

In the ‘597 patent’s IPR (and in the ITC case,) Cisco argued that the doctrine of assignor estoppel should have given it the win. What is assignor estoppel? It is a legal doctrine that precludes inventors from challenging the validity of patents that they had assigned to another entity. When does it come up? In situations where a former employee leaves a company after assigning that company his or her patents, and joins a competitor that is later sued by the original employer for patent infringement based on patents naming the former employee as an inventor.

While Cisco was successful with its assignor estoppel defense in the ITC, the PTAB was a less pliant forum when it came to this issue. In fact, the PTAB found that assignor estoppel was not an available patent owner defense in IPRs. Cisco appealed, and on November 9 the Federal Circuit issued its decision. There, the Federal Circuit saw its role as interpreting Congress’ intent when it created the IPR system: “did Congress intend for assignor estoppel to apply in IPR proceedings?”

Even though the Federal Circuit found “some merit to Cisco’s argument” that assignor estoppel should apply — especially where the IPR statute was silent on barring it as a defense — Cisco lost. According to the Federal Circuit panel, because Section 311(a) of the IPR statute was written broadly to allow any non-owner of a patent to file an IPR, assignor estoppel does not apply to IPRs. And even though Cisco highlighted the potential for different results in IPRs and other proceedings — like the ITC proceeding where it won on this issue for the same patent — the Federal Circuit said that any such inconsistency reflected Congressional choice that must be respected by the courts. Accordingly, even a former employee like Arista’s David Cheriton is later able to challenge the validity of a patent they assigned away in an IPR.

While this decision hurts Cisco’s enforcement efforts, it also suggests that companies that own patents that have been assigned to them by former employees must be careful going forward. Because the inventors of those patents could file IPR petitions to invalidate their own patents. Sophisticated companies should research whether they can contract with departing employees for non-aggression clauses that would preclude filing IPRs against patents owned by the company. As the Federal Circuit has reminded us, with IPRs almost no patent owner is safe…