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22 June 2015Patents

Kimble v Marvel: US Supreme Court says no to post-patent royalties

The US Supreme Court has reaffirmed that a patent owner cannot demand royalties for a patent after it has expired, ending the long-running dispute between inventor Stephen Kimble and Marvel Enterprises over payments related to a web blaster toy.

Today, June 22, the court ruled against Kimble, who received a US patent protecting his toy in 1990.

The aim of the web blaster was that children could behave like comic-book hero Spider-Man by shooting web strings from a canister of foam inside a polyester glove.

After a dispute between the two in 1997, Marvel agreed to pay royalties worth 3% of sales of its own web blaster toy, which used Kimble’s patented technology, as well as a $500,000 fee.

But in 2010, Marvel invoked the Supreme Court’s decision in Brulotte v Thys in asking the US District Court for the District of Arizona to rule that it no longer owed Kimble royalties because the patent had expired—in 2010.

The district court granted Marvel’s motion for summary judgment and ruled against Kimble.

Kimble appealed against the decision, but the US Court of Appeals for the Ninth Circuit affirmed the decision in 2013. This, however, came with a statement that the Brulotte decision was “counterintuitive and its rationale is arguably unconvincing”.

In the dispute, the US Supreme Court had to decide whether to standby its decision issued in the 1964 Brulotte case, where it said a right owner cannot demand royalties for an expired patent. The court ruled that a licensing agreement covering a hop-picking machine was “unenforceable” because the patent had expired.

Kimble argued that the Supreme Court should abandon its doctrine of stare decisis—precedent—and overrule Brulotte.

But in a 6-3 decision, the US Supreme Court opted to reaffirm Brulotte and rule against Kimble.

Judge Elena Kagan, writing the decision, said that Kimble offered no convincing argument to overturn the 1964 decision.

Brulotte leaves parties free to enter alternative arrangements that may suffice to accomplish parties’ payment deferral and risk-spreading goals. And neither Kimble nor his amici offer any empirical evidence connecting Brulotte to decreased innovation.”

Kagan went on to state that Congress has had opportunities to amend US patent law so it can overrule Brulotte, but has failed to do so.

“What we decide, we can undecide. But stare decisis teaches that we should exercise that authority sparingly,” she concluded.

Kimble, however, found sympathy from Judge Samuel Alito. Writing the dissenting opinion, he said that allowing patent owners to obtain royalties after their patent has expired does not necessarily “enlarge the patentee’s monopoly or extend the term of the patent”.

“The decision [Brulotte] interferes with the ability of parties to negotiate licensing agreements that reflect the true value of a patent, and it disrupts contractual expectations. Stare decisis does not require us to retain this baseless and damaging precedent,” he added.

A spokesperson for Marvel said the company is "pleased with the Supreme Court's decision, which upholds the court’s legal precedent from half a century ago".

Case Collard, partner at law firm Dorsey & Whitney, said the ruling means it is business as usual for licensing agreements.

“This means Marvel doesn’t have to pay any more royalties. The rule that you cannot contract for royalties for a patent after its expiration remains in place.”

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Patents
23 June 2015   Only Congress should amend legislation governing post-patent royalties, not the courts, was the reaction of lawyers to yesterday’s decision in the Kimble v Marvel case.