Last week the Supreme Court heard oral arguments in the patent licensing dispute known as Kimble v. Marvel Enterprises, Docket No. 13-720. In that case the license of Mr. Kimble’s patent covering a web-shooter-toy appears to extend beyond the expiry date of the patent and Supreme Court’s prior precedent holds that such post-expiry royalty arrangements are not enforceable. Brulotte v. Thys, 379 U.S. 29 (1964) (post expiry patent license is per se patent misuse).
The per se rule created in Brulotte is what Chief Justice Roberts called a “problem with the ’60s.” More recently, the Supreme Court has overruled a whole set similar per se antitrust cases — and instead applying a rule of reason.
The patentee’s basic argument is that it makes sense to allow parties to negotiate for their own contract terms and decouple a private contract from the patent’s right to exclude.
MR. MELNIK (for patentee): The way that I would reconcile it … is to decouple the notion of the right to exclude, which is what the statutory term is about, the right to prevent the public as a whole from using the patented invention from the specific royalty arrangement.
Under a rule of reason, a post-expiry license could still be seen as misuse, but that result would depend upon the particular circumstances.
One reason not to overrule Brulotte is that such a course is a rather drastic policy-based action.
JUSTICE SOTOMAYOR: How long has Brulotte been around?
MR. MELNIK: 50 years.
JUSTICE SOTOMAYOR: Why don’t we just let Congress fix it, because if it’s wrong, people can complain to [Congress]. . . .
JUSTICE KAGAN: It may or may not be right, but there’s nothing incredibly sort of wierd and anomalous about it. . . . we have a very strong rule of statutory stare decisis. We need some special justification to break away from that rule. . . . But [this issue] surely is a question for Congress, to go back to what Justice Sotomayor was saying, you know, to the extent that there’s a real world problem, and maybe there is and maybe there’s not, it’s a little bit hard to tell from the amicus briefs. I mean, they’re surely better equipped than we are to deal with that.
The response to the Court here is that the court has been revising statutes for many years without much concern for stare decisis — i.e., that it is really too late for the court to claim it is not an activist court.
On the policy side – the basic reason to keep the rule is as a mechanism for better insuring that inventions are available to the public at the patent term’s expiration.
Dennis:
Dennis, I don’t know exactly what you meant to say by this, but I certainly do not think you meant to say that the Supreme Court is revising statutes.
Ned,
I find your expressed thoughts (especially the emphasis of “certainly”) to be disingenuous at best.
“but I certainly do not think you meant to say that the Supreme Court is revising statutes.”
You continue to choose to ig nore the plain points that I put on the table for discussion.
You continue to clench tight your eyes as to the Supreme Court being the entity that is violating the separation of powers doctrine.
Your continued inability to accept the fact that Judge Rich intimately knew the written words of statutory patent law better than the Supreme Court – because he helped write those statutes – is beyond the pale of credibility.
Your continued refusal to accept the Act of 1952 for its full effect, in multiple aspects from the removal of authority of the judicial branch to use common law evolution to set the definition of “invention” to the opening up of the use of functional descriptive language – all revolve around your desire to have the judicial branch hold onto the ability to change statutory law in violation of the Constitution.
You “choose” your words far “too” carefully to think that you can “get away with” not seeing this bigger picture. It would be far better or all for you to come clean on these things.
Think drugs. Assume the FDA required everyone to prove their drugs worked, but tests could only begin after a patent expired. Let us assume that this took at least a year. For that year, prices for the drugs would be higher.
Now let us assume a drug manufacturer could license generics to begin tests early, but that the royalty for doing so would extend one year past the expiration of the patent. In other words, it would take one year for the public to begin receiving lower prices.
In either case the public is harmed.
Ultimately, the courts might decide that such licenses were unlawful regardless of a per se rule. But I would like to have the comfort of the per se rule the keep such types of agreements from happening in the first place.
Rather an obvious strawman, Ned – and quite proves the opposite point that you think.
As it is with objects and processes that do not impinge the public safety as do the items under FDA control, this country does provide freedom to contract opposite your statements (and ironically, you seem to argue here for a rather substantial public property aspect of patents so as to “incur” the need to supersede freedom to contract).
You seem to want to dance blithely in a mine field.
“Freedom of contract?”
The Lockner era?
You seriously have to be kidding.
Caught in filter:
Once again Ned – the plain take way here is that your position is the one that merits disbelief.
No, anon, freedom of contract is not the issue. It is harm to the public.
Ned,
You are blithely dancing on the mine field of your own demise, as you would expand past FDA controlled items some type of “public harm” concern on ANY patent item.
Do you even realize that this statement affects your very own active case?
Wake up son!
Also, please do not drive the trail off the tracks.
The issue is whether a patentee could authorize ANDA’s by generics in exchange for post expiration royalties. Whether the Hatch-Waxman procedures will allow this is a different question entirely; so too the question of whether protecting the public against untested drugs.
It is Brulotte v. Thys that now prevents the drug companies from even considering this approach.
You do not deny, I would assume, that the head start provided by the license is worth quite a bit of money to the generic. But the problem is that the post-expiration royalties continue to keep drug prices high.
Is the abandonment of the per se rule going to help or hurt the public? That is the question we must ask ourselves. It is not really a question of freedom to contract.
Ned – wake up and realize that this is NOT a case solely about some FDA contracting thing.
Last I checked, spider-man wrist blasters were not an FDA controlled item.
Please, please, please wake up first, think just a little before you engage the conversation here.
The basic public policy underlying Brulotte was to prevent a patentee from using a governmentally granted monopoly to coerce terms beyond the scope of the grant. If the right to exclude were “decoupled” from the license terms, there would be no license.
“Coerce”….?
See “contracts of adhesion.”
If you don’t want to five the patent holder what the patent holder wants, nobody is forcing you to do so.
(oops – autocorrect, change “five” to “give”)
I see this as a 1L contracts issue, with a public policy red herring.
Quid pro quo. At the time of entering into the license agreement, the licensor was not obligated to give a license. The licensor gave up a license in exchange for royalties over an agreed term that extends beyond the term of the patent. The licensor agreed and performed. Ding ding ding. Ladies and gentlemen we have an enforceable contract.
The patent expiry is a collateral issue that is not material to the enforceability of the contract.
Surely the Supremes are not confused with the collateral issue.
Know-how isn’t subject to patent term yet it is part of the license. This alone should be enough for the enforceability of a post expiry pat lic.
However, when the contract was signed, both parties knew that any provisions that required the payment of royalties (covering the use of the patent) beyond the expiration date of the patent were not enforceable. It is not a stretch to say that this was part of the understanding between the lisensor and the licensee. The know-how issue is a bit more interesting, but it seems that you would have to somehow divorce the patent royalty from any ongoing royalty do to know-how (e.g., when the patent expired, did the royalty drop?).
You are assuming your conclusion (again) – and in the process ig noring the scope of what “freedom to contract” means at a most basic level.
And you are assuming that there is value in an absolute freedom of contract, and that it is an ideal that everyone agrees with.
Regardless, under the actual conditions that the contract was negotiated under, this particular clause was (or should have been with competent representation) understood to be not enforceable.
“And you are assuming that there is value in an absolute freedom of contract”
Not at all as understanding the basics of freedom to contract does not require (at all) your strawman of and absolute freedom – and my position likewise does not require such.
You continue to miss the “nanny” point here.
You continue to miss that the ability to say “No” in any contract negotiation remains.
I absolutely recognize that the patentee had the option to say no. He could have structured the deal to avoid this problem, and then could have walked about if Marvel balked. He, after all, is the holder of the right to exclude.
Is your invocation of the “nanny” point suppose to mean something to me? Saying that I miss the point assumes that I don’t see the issue. An alternate possibility is that I do see the issue and I do not care.
What I care about is pragmatism. Whether or not there is merit in the freedom of contract argument or the nanny state argument, contract using the rules that exist, not the rules you wish them to be.
“absolutely recognize that the patentee had the option to say no”
Your being purposely obtuse AND deciding to “not care” is your downfall.
It is BOTH parties to a contract that have the option to say “No.”
What could be more pragmatic than that?
All else here is just you clenching tight your eyes and exclaiming that you don’t see the issue.
Both parties could have said no, but Marvel wasn’t the one that needed to. Marvel was not the party that was going to be harmed by the inclusion of an unenforceable provision.
?
Did both parties agree to the contract as written by freely signing that contract?
You are not being “pragmatic” about the plain reality here, and you are still assuming the conclusion to be reached.
I am taking for granted the state of contract law as it existed when the contract was signed. They both freely contracted and signed. They both freely signed a contract that contained a provision they both knew was unenforceable. The unenforceablility was to the detriment of one of the parties. That party has the responsibility to not freely sign a contract that is to their detriment.
Clench ever tighter your eyes my ordinary friend and continue to show your lack of understanding of the legal nature of contracts.
That is not “ordinary,” that which you wish to embrace.
“The response to the Court here is that the court has been revising statutes for many years without much concern for stare decisis – i.e., that it is really too late for the court to claim it is not an activist court.”
“The response” sounds neutral enough, but there are plenty who would still clamor that they don’t see the Court as “activist” at all.
As unbelievable as that may be.
But then also consider which section of law this is, how this particular section of statutory law is expressly authorized under the US constitution, and how that factor comes – and should come – into play, and the image of those wanting to play fast and loose with judicial activism to obtain a desired end comes into sharp focus.
Chakrabarty: “Our task, rather, is a narrow one of determining what Congress meant by the words it used in the statute; once that is done, our powers are exhausted.”
Wax addiction is a horrible thing to witness.
I think there are good arguments to impeach all 9 based on the way they have treated the 1952 Patent Act.
““On the policy side – the basic reason to keep the rule is as a mechanism for better insuring that inventions are available to the public at the patent term’s expiration.”
That basic reason does not wash.
Unless these are contracts of adhesion, which has its own ready remedy, any such contract is willingly entered into by the parties involved, AND only affects those willing parties.
The rest of society has full and unfettered availability at the expiration of term without any judicial nanny-ing.
The SCOTUS in these oral arguments really tip their hand. They act as if the 1952 Patent Act is to be reviewed de nova on all issues. That patent law is for the common law of the SCOTUS.
Here it is not so pronounced as in other cases, but the fact that Soot-in-my-ears had to say the following is very telling.
>>Why don’t we just let Congress fix it, because if it’s wrong, people can >>complain to [Congress]. . . .
The other “justices” would respond, ’cause we own patent law. Their attitude is outrageous. We need a strong leader that will publicly shame the SCOTUS for their behavior.
The court discussed that point – and the counterpoint that a contract between two parties about a patent right involves more than merely the two parties, because the public is also affected by the existence of a deal which may prevent or alter the behavior of a party well-positioned to offer the benefits of the invention to the public but for the terms of the contract.
More broadly, if everyone wants a rule of reason approach to patent anti-trust, then go the whole way and remove the sovereign immunity of the USPTO in anti-trust matters. Per arguments in the recent Amtrak case, the fact that the office is a self-funded, profit generating enterprise is a clue its not just a government agency….as Amtrak, government funded, is not just a private corporation….and truly, why should the office be able to spew weapons of economic destruction of the lowest quality into the economy with no penalty to those profits for the worst examples? The incentives are totally distorted right now…
But then Martin, you have never filed a patent application have you? Nor has your company.
Why would we? We deal in abstract concepts. When we invent something that does something in the physical world, we will head right for the patent office.
I assume then that nobody without a patent has standing in any matters related to patents? Novel idea you have there. You should patent it.
Can you copyright an abstract concept?
Oh wait, you have run away from this discussion point before….
Of course you can, once the abstract concept is fixed to some medium.
Who has run from what? Whya?
Then U&B admit as to being completely wrong about this “purely” “abstract” thing then?
“The court has been revising statutes for many years without much concern for stare decisis…”
Well, not everyone on the court, but as a whole, yes…
Sotomayor can’t subtract 1964 from 2015 and come up w/ the answer to her own question? Maybe that’s why Thomas keeps his mouth shut.
“It’s better to remain silent and be thought a fool than open ones mouth and remove all doubt” - Mark Twain
Thomas is a national embarrassment.
Magnus, I disagree about Thomas. I think his opinions are extremely clear. Think, Quanta, Myriad. I have no idea why he does not engage in public debate with his colleagues.
In contrast, Kennedy’s opinion are hard to understand. Think, Bilski and “abstract.”
Breyer is also a bit abstruse. Think Mayo.
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