Supreme Court Retains Ban on Royalties for Expired Patents
On June 22, in Kimble v. Marvel Entertainment, the Supreme Court upheld a rule set forth more than 50 years ago in Brulotte v. Thys Co., which held that a patentee cannot continue to receive patent royalties for sales made after the patent expires. The majority opinion was authored by Justice Kagan and joined by Justices Scalia, Kennedy, Ginsburg, Breyer, and Sotomayor. Justice Alito filed a dissenting opinion joined by Chief Justice Roberts and Justice Thomas.
This case emerged from an agreement that settled litigation involving a patent held by Stephen Kimble. Under the agreement, Marvel purchased the patent from Kimble in exchange for a lump sum and an ongoing royalty on future sales of related products. Eventually, Marvel sought a declaratory judgment that under the rule set forth in Brulotte, Marvel could stop paying royalties when the patent expired, despite the fact that no end date for the royalty payments was set forth in the agreement.
Kimble argued that Brulotte was wrongly decided, as have other observers in the intervening years. Justice Kagan acknowledged that “[t]he Brulotte rule, like others making contract provisions unenforceable, prevents some parties from entering into deals they desire.” Yet, the Court declined to overrule Brulotte, finding no “special justification” to depart from the traditional course of stare decisis. In a strongly worded dissent, Justice Alito wrote that Brulotte was “a clear case of judicial overreach” based on an “economic theory . . . that has been debunked,” concluding that “[s]tare decisis does not require us to retain this baseless and damaging precedent.”
