Payment of patent royalty beyond the life of a patent is illegal

Re, to the decision of the Supreme Court of United States of America in Brulotte v. Thys Co., 379 U.S. 29 (1964), an agreement mandating the payment of royalties beyond the expiry of the patent life is nothing but misuse of patent rights. Hence, such an agreement is not enforceable under the Supremacy Clause of the Constitution of the United States of America, which establishes that the federal laws made pursuant to the Constitution, and treaties made under its authority, constitute the supreme law of the land.

Though the decision was widely criticized by the academic community, the Supreme Court refused to accept such criticism and refused to overrule the Brulotte decision in Kimble v. Marvel Entertainment, LLC, 576 U.S. ___ (2015).

Kimble v. Marvel Entertainment, LLC

Facts:In the year 1997, the plaintiff Stephen Kimble sued the defendant Marvel Entertainment, LLC on an alleged infringement of the patent right of the plaintiff on the invention Toy web-shooting glove, allowing the children or interested parties to act like a Spider Man by shooting webs from the palm of his or her hand.

However, parties settled the dispute, where the defendant agreed to purchase the patent rights over the by paying a lump sum and a running patent royalty of 3% on all their future sale of products manufactured with similar features of that of Toy web-shooting glove.

On the other hand the parties failed to fix the end date for royalties, apparently contemplating that they would continue for as long as the products are available in the market. During the course of time, the defendant has come to know that, by virtue of the Brulotte decision, they are not obliged to pay royalties to the inventor upon the expiry of the patent.

Thus, they stopped payment of royalties after the expiry of the patent on the ground of the decision Brulotte decision. As a result, Stephen Kimble sued Marvel Entertainment, LLC for alleged breach of contract, and Marvel Entertainment, LLC counter claimed for a decree of the court exempting them to pay the patent royalty to Stephen Kimble beyond the expiry of patent life.

Opinion of the Court

While delivering the Opinion of the Court, JUSTICE KAGAN held that, adhering to principles of stare decisis, the court declined to overrule the decision in Brulotte case, where it restricted the patent holder from charging royalties for the use of his invention beyond the expiry of patent life. While declining to overrule the decision in Brulotte case,court observed that, once the statutory term of the patent monopoly ends, the right to make or use the article, free from all restriction, passes to the public.

By virtue of federal law, court reasoned that, “an article on which the patent has expired,” like a non-patentable article, which “is in the public domain and may be made and sold by whoever chooses to do so.” In a related line of decisions, court have deemed unenforceable private contract provisions limiting free use of such inventions.

However, while dissenting the Opinion of the Court, JUSTICESAMUEL ALITO asserted that, the court employs stare decisis, normally as a tool of judicial restraint, to reaffirm a clear case of judicial overreach. It was further observed by him that, Brulotte decision, 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 decision 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. Brulotte was thus a bald act of policy making. It was not simply a case of incorrect statutory interpretation. It was not really statutory interpretation at all.