09/17/2015

Stephen Kimble, et al. v. Marvel Enterprises (SCOTUS)


Category: Licensing 

Written By: Justin Blaufeld

In  Brulotte v. Thys Co., 379 U.S. 29 (1964), the Supreme Court held that a patent holder cannot charge royalties for the use of his invention after its patent term has expired.  Over time, some have come to criticize this rule as an undue restraint on the right to contract.  For example, a patent holder may want to cover a portfolio of patents with one contract, or structure a royalty deal to provide for larger payments in the future in exchange for smaller payments today. The Supreme Court revisits Brulotte to decide whether or not the rulings of the past still hold true today.

Stephen Kimble was the patent holder of a toy that allows children "and young-at-heart adults," Kimble, 135 S. Ct. at 2401, to pretend to be Spider-Man by shooting foam from a canister mounted to their wrists.  After Marvel began selling their own version of the toy, Kimble sued the comic-book maker for patent infringement.  The parties ultimately settled with an agreement that provided for a 3% royalty on all sales of the toy with no end-date.  Apparently, neither side was aware of the rule in Brulotte.

After discovering Brulotte, Marvel sought a declaratory judgment confirming that the company could cease paying royalties at the end of the patent's term in 2010.  Both the district court and the 9th circuit sided with Marvel, and Kimble appealed to the Supreme Court.

In an opinion authored by Justice Kagan (Alito, Roberts, and Thomas dissenting), the Court voted 6-3 to uphold Brulotte.  Whether or not the Brulotte rule is correct, the principle of stare decisis requires a strong justification for overruling earlier precedent.  This is especially true when property or contract rights are involved, because parties are especially likely to rely on settled law when ordering their affairs (and here, both property and contract rights are at stake).  Moreover, Congress has revised the Patent Act several times since Brulotte without bothering to overrule the Court.

In light of those considerations, Kimble's argument that Brulotte suppresses technological innovation and harms the economy by preventing parties from reaching agreements to commercialize patents, true or not, was not sufficient to overcome stare decisis.

 

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