Santa Clara Superior Court Judge James Kleinberg.
Santa Clara Superior Court Judge James Kleinberg. (Jason Doiy)

SAN FRANCISCO — Palo Alto Networks’ unusual bid to drive its patent battle with rival Juniper Networks into state court has fallen short.

Last week, Santa Clara County Superior Court Judge James Kleinberg threw out the suit filed in September by lawyers at Morrison & Foerster under doctrines of federal supremacy and California’s anti-SLAPP law.

Palo Alto Networks, or PAN, had filed the state court case to challenge Juniper’s use of the so-called assignor estoppel doctrine in a pending patent suit in Delaware. The doctrine, a long-standing tenet of patent law, holds that a patent’s former owner cannot later challenge its validity. PAN’s lead lawyers, MoFo partners Michael Jacobs and Harold McElhinny, argued that assignor estoppel runs afoul of California’s broad non-compete laws.

However, Kleinberg sided with Juniper’s lawyers at Irell & Manella, granting an anti-SLAPP motion. In it Juniper argued that PAN’s claims targeted the company’s constitutionally protected speech in federal court and before the U.S. Patent and Trademark Office. Kleinberg dismissed the case, ruling that PAN’s claims in state court were also preempted by federal law.

“A finding of state law liability against Juniper based on the assertion of this estoppel defense would conflict with the fact that the defense is not only permissible in federal patent actions but was actually vindicated in a federal court,” Kleinberg wrote. Juniper lawyer Jonathan Kagan of Irell & Manella cheered the order.

“I think the court correctly saw that Palo Alto Networks was just trying to undo victories that we had achieved in the primary litigation, which is pending in Delaware,” he said in an interview.

PAN lawyer Michael Jacobs of Morrison & Foerster declined to comment.

Sunnyvale-based Juniper sued PAN for infringing half a dozen patents in Delaware federal court in 2011, kicking off what is now a bicoastal patent brawl. The companies are rivals in network security.

The assignor estoppel doctrine is a key prong of Juniper’s offensive. Founded by Nir Zuk, Juniper’s former chief security technologist, PAN launched products that compete with Juniper’s in 2007. Either Zuk or another executive with ties to Juniper are listed as inventors on each of the patents they are challenging in the Delaware litigation, and they are also assigned “the entire right, title and interest” for all but one, according to court papers.

U.S. District Judge Susan Robinson in Delaware ruled that one of Juniper’s patents was shielded by the assignor estoppel doctrine, and PAN withdrew its invalidity defense for another. Juniper moved to bar PAN from challenging the validity of other patents in a pending motion for summary judgment. The case is set for trial in late February.

Kagan said in an interview that Juniper is still considering whether to assert the assignor estoppel doctrine in another case filed by PAN in the Northern District of California in late September.

Kagan stressed in Juniper’s motion to strike the complaint that the assignor estoppel doctrine is settled law.

But Jacobs countered that it could have dangerous implications for both his client’s employment prospects and the marketplace.

“Because a patent gives its owner a monopoly for the inventions covered by the patent, the inability to raise legitimate challenges to a patent’s validity seriously harms competition,” Jacobs wrote in PAN’s opposition.

Jacobs argued that Juniper’s reading of the invention assignment agreement clashed with an “implied covenant” that barred the company from wielding the assignor estoppel doctrine in California. He urged Kleinberg to deny Juniper’s anti-SLAPP motion, stressing that the suit did not encroach on the company’s pleadings in other courts.

“At its heart, this is a contract action, and the existence of a prior suit is of interest solely for its evidentiary basis,” Jacobs wrote in PAN’s opposition to the motion.

But Kleinberg was not swayed.

“These arguments are not well-taken,” he wrote. “The complaint plainly states on its face that the causes of action are based on Juniper’s successful invocation of the assignor estoppel doctrine.”

He added that there was no evidence that Juniper had sought to stifle competition by asserting the doctrine.

Sasha Rao, an IP litigation partner at Bingham McCutchen, said the case was a rare example of a patent dispute spilling over into state court.

“It was an interesting use of California’s Business and Professional Code,” she said. “And now we all know the answer—it’s not going to work if it’s pleaded like this.”

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