royalty

Kimble v. Marvel Enterprises

Issues

Can royalty payments from a patent licensing contract extend beyond the life of the patent?

In this case, the Supreme Court will reconsider Brulotte, which held that a “royalty agreement that projects beyond the expiration date of the patent is unlawful per se.” Kimble argues that the Court should overturn Brulotte and replace it with a flexible rule grounded in a reasonable standard. However, Marvel counters that the Court should not overrule Brulotte because there are insufficient reasons to deviate from stare decisis. The Court’s decision may alter patent licensing practices by transforming the evaluation of patent agreements, and may affect the public’s access to patented inventions. 

Questions as Framed for the Court by the Parties

Petitioners are individuals who assigned a patent and conveyed other intellectual property rights to Respondent. The court of appeals "reluctantly" held that Respondent, a large business concern, was absolved of its remaining financial obligations to Petitioners because of "a technical detail that both parties regarded as insignificant at the time of the agreement." App. 2-3; 23. Specifically, because royalty payments under the parties' contract extended undiminished beyond the expiration date of the assigned patent, Respondent's obligation to pay was excused under Brulotte v. Thys Co., 379 U.S. 29, 32 (1964), which had held that "a patentee's use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se."

A product of a bygone era, Brulotte is the most widely criticized of this Court's intellectual property and competition law decisions. Three panels of the courts of appeals (including the panel below), the Justice Department, the Federal Trade Commission, and virtually every treatise and article in the field have called on this Court to reconsider Brulotte, and to replace its rigid per se prohibition on post--expiration patent royalties with a contextualized rule of reason analysis.

The question presented is:

Whether this Court should overrule Brulotte v. Thys Co., 379 U.S. 29 (1964).

Stephen Kimble patented a Spider-Man toy that was set to expire in May 2010. Kimble v. Marvel Enters., 727 F.3d 856, 857-58 (9th Cir. 2013). Importantly, “[a] patent grants the patent holder the exclusive right to exclude others from making, using . . .

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Quanta Computer, Inc. v. LG Electronics, Inc.

 

In the latest Supreme Court case on patent law, LG Electronics, Inc. (LGE) sued Quanta Computers, Inc. (Quanta) for patent infringement. A patent license agreement between LGE and Intel allowed Intel to use LGE's patents but required Intel to notify its customers, including Quanta, that its license did not extend to third-party purchasers' combinations of Intel and non-Intel components. LGE alleges that Quanta infringed LGE's patents by combining Intel and non-Intel components. LGE argued that Intel's sale to Quanta did not exhaust LGE's rights as a patent holder, allowing LGE to sue Quanta. Quanta, however, argued that Intel's authorized sale to Quanta exhausted LGE's patent rights. The Federal Circuit agreed with LGE, holding that the exhaustion doctrine did not apply because the notice provided by Intel to Quanta created a conditional sale, and that sales of patented devices do not exhaust a patent holder's methods claims. In deciding this case, the Supreme Court will determine whether a patent holder can sue customers who use patented components purchased from licensees. The outcome of this case will clarify the exhaustion doctrine generally and will help define the scope of patent holders' rights, including their ability to collect royalties from and sue downstream users of their patents.

Questions as Framed for the Court by the Parties

Whether the Federal Circuit erred by holding, in conflict with decisions of this Court and other courts of appeals, that respondent's patent rights were not exhausted by its license agreement with Intel Corporation, and Intel's subsequent sale of product under the license to petitioners.

LG Electronics, Inc. (LGE), a Korean company, owns patents that relate to personal computers. See LG Electronics, Inc. v. Bizcom Electronics, Inc., 453 F.3d 1364, 1368 (Fed. Cir.

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