The Supreme Court today granted certiorari in a case asking whether its prior decision in Brulotte v. Thys Co., 379 U.S. 29 (1964) should be overruled, which previously held that a licensee’s obligations are absolved after the expiration of a patent, and that royalty payments for a patent cannot continue beyond the life of that patent.
The present case, Kimble v. Marvel Ent. Inc., U.S. No. 13-720, cert. granted 12/12/2014, arose out of the 9th Circuit and involved a patent on a glove that allows its wearer to shoot pressurized foam string from the palm (Patent No. 5,072,856). In this case, Kimble had met with the predecessor of Marvel to discuss the glove invention, but did not arrive at an agreement. When Marvel later began manufacturing a similar toy called the “Web Blaster”, Kimble sued for patent infringement and for breach of contract based on an alleged oral agreement.
The district court granted summary judgment to Marvel on patent-infringement, but a jury found that Marvel had breached the oral contract with Kimble to reimburse him for the idea. Both parties appealed but eventually settled, and as part of the settlement agreement, Marvel had agreed to purchase the referenced patent involving both a lump sum payment and running royalties on all Marvel’s future sales of the product. The settlement agreement specified no expiration date and was read to require the continuation of royalties for sales that ocurred after the patent’s expiration on May 25, 2010.
However, when a dispute under the settlement agreement again arose later, Kimble filed a new suit for breach of contract. Marvel responded to this suit by filing a declaratory judgment counterclaim under Brulotte, which held that royalties for a patent may not continue past the expiration of that patent. The district court agreed with Marvel that, under Brulotte, Kimble was precluded from recovering royalties for post-patent-expiration sales. The 9th Circuit affirmed this finding, but acknowledged the criticism of Brulotte which blanketly prevents willing parties from entering royalty agreements that outlast a patent’s life.