Kimble v. Marvel Entm't, LLC
| Decision Date | 22 June 2015 |
| Docket Number | No. 13–720.,13–720. |
| Citation | 576 U.S. 446,135 S.Ct. 2401,192 L.Ed.2d 463 |
| Parties | Stephen KIMBLE et al., Petitioners v. MARVEL ENTERTAINMENT, LLC, successor to Marvel Enterprises, Inc. |
| Court | U.S. Supreme Court |
Roman Melnik, Los Angeles, CA, for Petitioners.
Thomas G. Saunders, Washington, DC, for Respondent.
Malcolm L. Stewart for the United States as amicus curiae, by special leave of the Court, supporting the respondent.
Antonio R. Durando, Tucson, AZ, Roman Melnik, Counsel of Record, Kenneth Weatherwax, Nathan N. Lowenstein, Flavio M. Rose, Goldberg, Lowenstein & Weatherwax LLP, Los Angeles, CA, for Petitioners.
Seth P. Waxman, Counsel of Record, Paul R.Q. Wolfson, Thomas G. Saunders, Matthew Guarnieri, Daniel Aguilar, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, for Respondents.
In Brulotte v. Thys Co., 379 U.S. 29, 85 S.Ct. 176, 13 L.Ed.2d 99 (1964), this Court held that a patent holder cannot charge royalties for the use of his invention after its patent term has expired. The sole question presented here is whether we should overrule Brulotte . Adhering to principles of stare decisis, we decline to do so. Critics of the Brulotte rule must seek relief not from this Court but from Congress.
In 1990, petitioner Stephen Kimble obtained a patent on a toy that allows children (and young-at-heart adults) to role-play as "a spider person" by shooting webs—really, pressurized foam string—"from the palm of [the] hand." U.S. Patent No. 5,072,856, Abstract (filed May 25, 1990).1 Respondent Marvel Entertainment, LLC (Marvel) makes and markets products featuring Spider–Man, among other comic-book characters. Seeking to sell or license his patent, Kimble met with the president of Marvel's corporate predecessor to discuss his idea for web-slinging fun. Soon afterward, but without remunerating Kimble, that company began marketing the " Web Blaster"—a toy that, like Kimble's patented invention, enables would-be action heroes to mimic Spider–Man through the use of a polyester glove and a canister of foam.
Kimble sued Marvel in 1997 alleging, among other things, patent infringement. The parties ultimately settled that litigation. Their agreement provided that Marvel would purchase Kimble's patent in exchange for a lump sum (of about a half-million dollars) and a 3% royalty on Marvel's future sales of the Web Blaster and similar products. The parties set no end date for royalties, apparently contemplating that they would continue for as long as kids want to imitate Spider–Man (by doing whatever a spider can).
And then Marvel stumbled across Brulotte, the case at the heart of this dispute. In negotiating the settlement, neither side was aware of Brulotte . But Marvel must have been pleased to learn of it. Brulotte had read the patent laws to prevent a patentee from receiving royalties for sales made after his patent's expiration. See 379 U.S., at 32, 85 S.Ct. 176. So the decision's effect was to sunset the settlement's royalty clause.2 On making that discovery, Marvel sought a declaratory judgment in federal district court confirming that the company could cease paying royalties come 2010—the end of Kimble's patent term. The court approved that relief, holding that Brulotte made "the royalty provision ... unenforceable after the expiration of the Kimble patent." 692 F.Supp.2d 1156, 1161 (D.Ariz.2010). The Court of Appeals for the Ninth Circuit affirmed, though making clear that it was none too happy about doing so. "[T]he Brulotte rule," the court complained, "is counterintuitive and its rationale is arguably unconvincing." 727 F.3d 856, 857 (2013).
We granted certiorari, 574 U.S. ––––, 135 S.Ct. 781, 190 L.Ed.2d 649 (2014), to decide whether, as some courts and commentators have suggested, we should overrule Brulotte .3 For reasons of stare decisis, we demur.
Patents endow their holders with certain superpowers, but only for a limited time. In crafting the patent laws, Congress struck a balance between fostering innovation and ensuring public access to discoveries. While a patent lasts, the patentee possesses exclusive rights to the patented article—rights he may sell or license for royalty payments if he so chooses. See 35 U.S.C. § 154(a)(1). But a patent typically expires 20 years from the day the application for it was filed. See § 154(a)(2). And when the patent expires, the patentee's prerogatives expire too, and the right to make or use the article, free from all restriction, passes to the public. See Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 230, 84 S.Ct. 784, 11 L.Ed.2d 661 (1964).
This Court has carefully guarded that cut-off date, just as it has the patent laws' subject-matter limits: In case after case, the Court has construed those laws to preclude measures that restrict free access to formerly patented, as well as unpatentable, inventions. In one line of cases, we have struck down state statutes with that consequence. See, e.g., id., at 230–233, 84 S.Ct. 784 ; Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 152, 167–168, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989) ; Compco Corp. v. Day–Brite Lighting, Inc., 376 U.S. 234, 237–238, 84 S.Ct. 779, 11 L.Ed.2d 669 (1964). By virtue of federal law, we reasoned, "an article on which the patent has expired," like an unpatentable article, "is in the public domain and may be made and sold by whoever chooses to do so." Sears, 376 U.S., at 231, 84 S.Ct. 784. In a related line of decisions, we have deemed unenforceable private contract provisions limiting free use of such inventions. In Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249, 66 S.Ct. 101, 90 L.Ed. 47 (1945), for example, we determined that a manufacturer could not agree to refrain from challenging a patent's validity. Allowing even a single company to restrict its use of an expired or invalid patent, we explained, "would deprive ... the consuming public of the advantage to be derived" from free exploitation of the discovery. Id., at 256, 66 S.Ct. 101. And to permit such a result, whether or not authorized "by express contract," would impermissibly undermine the patent laws. Id., at 255–256, 66 S.Ct. 101 ; see also, e.g., Edward Katzinger Co. v. Chicago Metallic Mfg. Co., 329 U.S. 394, 400–401, 67 S.Ct. 416, 91 L.Ed. 374 (1947) (); Lear, Inc. v. Adkins, 395 U.S. 653, 668–675, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969) ().
Brulotte was brewed in the same barrel. There, an inventor licensed his patented hop-picking machine to farmers in exchange for royalties from hop crops harvested both before and after his patents' expiration dates. The Court (by an 8–1 vote) held the agreement unenforceable—"unlawful per se "—to the extent it provided for the payment of royalties "accru[ing] after the last of the patents incorporated into the machines had expired." 379 U.S., at 30, 32, 85 S.Ct. 176. To arrive at that conclusion, the Court began with the statutory provision setting the length of a patent term. See id., at 30, 85 S.Ct. 176 (). Emphasizing that a patented invention "become[s] public property once [that term] expires," the Court then quoted from Scott Paper : Any attempt to limit a licensee's post-expiration use of the invention, "whatever the legal device employed, runs counter to the policy and purpose of the patent laws." 379 U.S., at 31, 85 S.Ct. 176 (quoting 326 U.S., at 256 ). In the Brulotte Court's view, contracts to pay royalties for such use continue "the patent monopoly beyond the [patent] period," even though only as to the licensee affected. 379 U.S., at 33, 85 S.Ct. 176. And in so doing, those agreements conflict with patent law's policy of establishing a "post-expiration ... public domain" in which every person can make free use of a formerly patented product. Ibid.
The Brulotte rule, like others making contract provisions unenforceable, prevents some parties from entering into deals they desire. As compared to lump-sum fees, royalty plans both draw out payments over time and tie those payments, in each month or year covered, to a product's commercial success. And sometimes, for some parties, the longer the arrangement lasts, the better—not just up to but beyond a patent term's end. A more extended payment period, coupled (as it presumably would be) with a lower rate, may bring the price the patent holder seeks within the range of a cash-strapped licensee. (Anyone who has bought a product on installment can relate.) See Brief for Memorial Sloan Kettering Cancer Center et al. as Amici Curiae 17. Or such an extended term may better allocate the risks and rewards associated with commercializing inventions—most notably, when years of development work stand between licensing a patent and bringing a product to market. See, e.g., 3 R. Milgrim & E. Bensen, Milgrim on Licensing § 18.05, p. 18–9 (2013). As to either goal, Brulotte may pose an obstacle.
Yet parties can often find ways around Brulotte, enabling them to achieve those same ends. To start, Brulotte allows a licensee to defer payments for pre-expiration use of a patent into the post-expiration period; all the decision bars are royalties for using an invention after it has moved into the public domain. See 379 U.S., at 31, 85 S.Ct. 176 ; Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 136, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969). A licensee could agree, for example, to pay the licensor a sum equal to 10% of sales during the 20–year patent term, but to amortize that amount over 40 years. That arrangement would at least bring down early outlays, even if it would not do everything the parties might want to allocate risk over a long timeframe. And parties have still more options when a licensing agreement covers either multiple patents or additional...
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