Common Sense Wins on Expired Patent Royalties at Supreme Court

The US Supreme court just issued its opinion in Kimble v Marvel Entertainment affirming its 1964 decision which applied common sense to the question of whether patent royalties can still be owed after the patent expires. The answer is still No.

Kimble had a patent on a toy called the ‘Web Blaster” which sprays foam strings like Spider-Man sprays webs in the comics. Marvel brings us the comics and licensed the “Web Blaster” to sell as another item of Spidey gear for kids, Halloween, and general silliness.

Patents usually last 20 years from date of their application date. The patent laws are exclusively federal. They give a 20 year monopoly to the owner of the patent, but the owner gives something in exchange for the monopoly. The patent goes into the public domain the date it expires. It then belongs to anyone and everyone who wants to use it.

But people grow fond of the patent royalties they receive every year and want it to never end. The 1964 Supreme Court decision was Brulotte v. Thys and it involved a hop-picking machine invention with either a flat royalty or one based on every 200 pounds of hops picked, whichever was greater. Like the Web Blaster contract, the hop picker royalties agreement had no end date. The inventors wanted to keep those royalties coming in both cases after the patents expired.

Justice Kagan writing for a majority of 6 relies in the decision on the ancient legal principle we call stare decisis. “Stare decisis—in English, the idea that today’s Court should stand by yesterday’s decisions—is ‘a foundation stone of the rule of law.’’ Yesterday’s decisions do get reversed from time to time, but it takes powerful reasons to do so. Based on the majority opinion, Kimble didn’t even come close.

Justice Kagan was careful to unravel the antitrust arguments from the patent arguments in her decision. Federal antitrust law is based on a handful of broad provisions in the statutes which the courts are constantly interpreting and applying to specific situations. Patent law is different and has many bright line boundaries, like the end of the patent’s life.

The common sense in ending patent royalties when the patent expires is seen in one simple example. Imagine Company A having a license requiring it to pay royalties after a patent expires and having to compete against Company B which can use the expired patent for free because it’s in the public domain. Which company do you want to run?

About Craig Pinkus

Craig Pinkus is a partner in the Intellectual Property Group. He also is a member of the Litigation and the Sports, Entertainment and Media Groups. He assists clients with a broad range of disputes and transactions involving all areas of intellectual property, entertainment, and other complex business arrangements. He has conducted trials and arbitrations throughout the United States and has argued appeals before the Seventh, Sixth and Federal Circuit Courts of Appeal, the Indiana appellate courts, and United States Supreme Court.
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