Supreme Court May Overrule Its Own 1967 Patent Royalties Decision

The Supreme Court is expected to hear oral arguments in the spring for a case regarding whether a royalty obligation to the inventors ceases once the patent expires. In a 1964 ruling in Brulotte v. Thys Co., 379 U.S. 29 (1964), the Supreme Court held that royalty provisions in patent licensing agreements are not enforceable beyond a patent’s expiration. The Supreme Court’s willingness to take on this present case involving the same issue means that the Court may overrule its previous holding under the principle of stare decisis.

The present case involves a patent for a device that shoots foam “from the palm of a hand to give the impression that a spider web is being formed.” Marvel Enterprises (now owned by Walt Disney Co.) bought the patent from Stephen Kimble, the inventor, after he sued the company in 1997. The settlement stated that Kimble would be receiving a running royalty of 3% on product sales, which amounted to more than $6 million during the term of the patent.

After the patent expired, Kimble sued in 2008 for breach of settlement when the parties disagreed on the royalty calculations. After the lower courts ruled for Marvel, Kimble asked the Supreme Court to overrule its earlier decision. Such a request is rarely considered but the Court must have found the issue worth revisiting. Mr. Kimble’s lawyer said that Brulotte’s automatic prohibition on post-expiration patent royalties has been widely criticized and is economically unsound. Marvel, joined by U.S. Solicitor General Donald Verrilli, states that the old ruling did not prohibit “the vast majority” of licensing practices that allow parties to spread to costs over time and should not be overruled.

The decision is set to be issued by the end of June.