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IP Alert: Supreme Court Rules for Marvel in Patent Royalties Dispute

June 22, 2015

Today the U.S. Supreme Court issued its decision in Kimble et al. v. Marvel Entertainment, LLC. This Court concluded, in a 6–3 vote, that an agreement to continue royalty patent payments after the expiration of the underlying patent was unlawful. 

Marvel agreed to purchase petitioner Kimble’s patent in exchange for a lump sum plus a 3% royalty on future sales. The agreement contained no set end date for the royalty payments. A 1964 Supreme Court decision, Brulotte v. Thys Co., held that a patentee cannot receive further royalties once the patent has expired. Relying on this decision, Marvel hoped to stop paying royalties to Kimble. Kimble, on the other hand, sought to have the Court overrule Brulotte.

The Court held that Brulotte ruling should stand, holding that any change to the Brulotte rule must come from Congress and not via judicial ruling. Observing that the law provides many ways to accomplish a similar financial result, such as deferring payments for pre-expiration use of a patent into the post-expiration period, the Court decided that adherence to Brulotte was warranted. The Court further observed that Congress had not altered the Brulotte result despite having made many changes to patent law since 1964.

The Kimble case is significant for parties who engage in patent licensing agreements, especially agreements that are intended to retain some effect after the expiration of the patent. For more information concerning today’s decision, please contact any Fitch Even partner.

 

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