Friday, December 12, 2014

Breaking News: U.S. Supreme Court to Hear Case on Post-Expiration Royalties

Here is the order granting certiorari in Kimble v. Marvel Enterprises, Inc.  The petition for certiorari poses the following question:
Petitioners are individuals who assigned a patent and conveyed other intellectual property rights to Respondent. The court of appeals “reluctantly” held that Respondent, a large business concern, was absolved of its remaining financial obligations to Petitioners because of “a technical detail that both parties regarded as insignificant at the time of the agreement.” App. 2-3; 23. Specifically, because royalty payments under the parties’ contract extended undiminished beyond the expiration date of the assigned patent, Respondent’s obligation to pay was excused under Brulotte v. Thys Co., 379 U.S. 29, 32 (1964), which had held that “a patentee’s use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se.”
A product of a bygone era, Brulotte is the most widely criticized of this Court’s intellectual property and competition law decisions. Three panels of the courts of appeals (including the panel below), the Justice Department, the Federal Trade Commission, and virtually every treatise and article in the field have called on this Court to reconsider Brulotte, and to replace its rigid per se prohibition on postexpiration patent royalties with a contextualized rule of reason analysis.
The question presented is: Whether this Court should overrule Brulotte v. Thys Co., 379 U.S. 29 (1964).
I don't want to appear overconfident about the outcome, since only four votes are required to grant cert; but I think it is reasonable to assume that the Court wouldn't have done so (against the wishes of the Solicitor General, no less) unless there was a very good chance of reversal.  As I've noted before (here and here), economic analysis suggests that Brulotte v. Thys was wrongly decided.  It looks to me like Brulotte's days are now numbered.

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