wednesday, 24 june of 2015

Supreme Court rules patent expiration ends licensing fees

The US Supreme Court on Monday ruled 6-3 in Kimble v. Marvel Entertainment that patent holders still cannot charge royalties after the expiration of a patent. The decision, written by Justice Elena Kagan, reaffirmed the court's holding in Brulotte v. Thys. The petitioner in the case had argued that the reasoning of the earlier case was flawed because it unjustifiably limited the kind of contracts parties could engage in. The court disagreed, setting a high bar for overruling precedent and saying parties could achieve similar ends with different means:

To start, Brulotte allows a licensee to defer payments for pre-expiration use of a patent into the post-expiration period; all the decision bars are royalties for using an invention after it has moved into the public domain.... A licensee could agree, for example, to pay the licensor a sum equal to 10% of sales during the 20-year patent term, but to amortize that amount over 40 years.

The court noted that the legislature has had several opportunities to reverse Brulotte but has repeatedly failed to do so. There also have not been any significant legal developments in patent law that would seemingly justify a reversal and ultimately the court found no reason to "unsettle stable law." Justices Alito and Thomas dissented stating that the reasoning espoused in Brulotte "was not based on anything that can plausibly be regarded as an interpretation of the terms of the Patent Act. It was based instead on an economic theory—and one that has been debunked."

The patented object in this case was a Spider-Man toy which allowed an individual to shoot foam string from the toy in a way that the Marvel character might have shot his web. Petitioner Stephen Kimble received the patent in 1990 and subsequently met with the president of Marvel's predecessor. Marvel then began to make a toy named the "Web Blaster" which bore significant similarity to Kimble's product. He filed suit in 1997 alleging patent infringement but the parties later settled agreeing that in exchange for a lump sum of approximately $500,000 USD and 3% percent royalty on Marvel's profits from the "Web Blaster", Kimble would end the litigation. No date was set by the parties as to the official end of the royalty agreement and in 2010, when Kimble's patent expired, Marvel alleged that they no longer owed him the 3% royalty following the precedent in Brulotte and refused to pay him.

(Published by Jurist – June 23, 2015)

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