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Be Aware: Patent Royalties for post-expiration use of a Patent are Prohibited!

Posted by John M. Burke, Esq. | Jul 06, 2015 | 0 Comments

The United States Supreme has been busy over the last few years in patent related cases. On June 22, 2015, the Court re-affirmed the decision in Brulotte v. Thys Co., 379 U. S. 29 (1964), which held that royalties for post-expiration use of a patent are prohibited. Kimble et al. v. Marvel Entertainment, LLC, 576 U.S. ____ (2015).

For some background – Mr. Kimble had a patent in a Spider-Man related toy, U.S. Patent No. 5,072,856. Please find below drawings of the invention covered by Mr. Kimble's patent

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After suing Marvel for patent infringement, Mr. Kimble and Marvel reached a settlement agreement that in addition to a lump sum payment, Mr. Kimble was to receive 3% royalties on all future sales of the Spider-Man related toy. There was no end date for the payment of royalties.

Neither Kimble nor Marvel was aware of Brulotte. Once Marvel became aware of Brulotte, Marvel filed for declaratory judgment against Kimble in an attempt to stop paying royalties as soon as his patent expired. The lower courts agreed with Marvel's position, which led to Mr. Kimble's appeal.

In an amusing opinion, Justice Elena Kagan, delivering the majority opinion stated that “[p]atents endow their holders with certain superpowers, but only for a limited time. . . when the patent expires, the patentee's prerogatives expire too, and all the right to make or use the article, free from all restriction, passes to the public.”  Despite Mr. Kimble's best efforts, the Court was not persuaded to overturn Brulotte nor was the Court persuaded by Mr. Kimble's argument that Brulotte attacks innovation by preventing parties from reaching agreements to commercialize patents. Justice Kagan points out that there are ways around Brulotte. For example, Brulotte allows a licensee to defer payments for pre-expiration use of a patent into the post-expiration period. This decision only prohibits the licensee from obtaining royalties for sales made after the patent has expired.

In the dissent, Justice Alito stated that Brulotte is “baseless and damaging precedent.” Justice Alito pointed out that 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.”

Licensing intellectual property is complicated; especially setting up royalty payments. As Mr. Kimble found out the hard way, just because you agree to something does not mean it is enforceable. In this case, the patent term established by Congress supersedes an agreement by private parties that effectively extends that term.

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John M. Burke is a trademark attorney who assists clients in selection, screening, registration, licensing and enforcement of trademarks and service marks. In addition to trademark prosecution and enforcement, John works with clients to identify, manage and license their intellectual property. Through Caseiro Burke's Litigation Practice, John also provides intellectual property litigation service.

Caseiro Burke is an intellectual property law firm providing legal services to individuals and businesses around the world. We offer clients creative, cost-effective and reliable legal solutions in all intellectual property matters. Our dedication to the practice of intellectual property law provides our clients with the focus of attention necessary to establish, protect and commercialize their innovations. Whether you are a sole inventor looking for patent protection for your invention, a distillery protecting its brand or a manufacturing company asserting or defending a patent infringement claim, Caseiro Burke will work with you to achieve effective results.

About the Author

John M. Burke, Esq.

John M. Burke manages the firm’s Maine Cannabis Law practice. Mr. Burke advises and represents the firm’s clients throughout Maine in both the Medical and Adult Use cannabis programs in a wide range of Maine cannabis law matters. In addition to Mr. Burke’s Maine cannabis law practice, Mr. Burke advises and assists the firm’s clients in a variety of industries on various intellectual property matters throughout the United States.


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