Welcome back to Legal Geek! This week, we mix all of our favorite things for this holiday season: toys for Christmas, superheroes, and 50-year old patent law precedents at the Supreme Court. The Supreme Court granted cert this week to decide the Kimble vs. Marvel Entertainment case, which involves all of these awesome things.
In a 1964 patent case entitled Brulotte, the Supreme Court deemed that a patent licensee, who pays a patent owner royalties to be able to manufacture and sell goods covered by the patent, is absolved of any further duties after the patent expires following its normal 20 year term. In other words, for 50 years the law has been that a patent owner cannot continue to demand payment of royalties from licensees following expiration of a patent, because public policy dictates that the invention go into the public domain at that point.
That doctrine is now directly under fire thanks to complicated cases like the Kimble case the Supreme Court will hear in early 2015. Kimble received a patent in 1991 for gloves capable of shooting foam string from the palm, just like Spiderman. Or as Andrew Allen would put it...(insert theme music)
He approached Marvel with this idea and an oral agreement was reached that Marvel would not exploit this idea. However, in 1997, a Web Blaster toy which was exactly this type of Spiderman glove hit the market from Marvel.
Kimble sued for patent infringement and breach of contract, and when he won on the contract claims but lost on the patent claims, the parties settled before appeal. This settlement led Marvel to buy out the patent and pay royalties on all future sales of this type of toy. Despite the patent expiring in 2010, the settlement agreement had no set termination date.
A new dispute over this settlement agreement led to another breach of contract lawsuit two years ago, and Marvel asked for declaratory judgment in view of the 50-year old Brulotte patent doctrine. Basically, Marvel argued that the now-expired patent rights released Marvel of any further obligations to pay royalties.
The District Court and the Court of Appeals have ruled in favor of Marvel by using this 50-year old doctrine. The Supreme Court taking this issue means the status of the Brulotte doctrine is unclear, at best. This hybrid contract and patent set of facts is the perfect type of case to determine whether expiration of patent rights trump any other contractual agreements to pay royalties for an idea.
Though it is clear that patented ideas should go into the public domain after 20 years to keep the patent system working as intended, it is not clear whether this need to put things in the public domain is so strong as to override private contractual agreements between two parties. To this end, Marvel had the opportunity to negotiate and write this settlement contract better than it did, so it's unclear why this party should now benefit from a rule intended to protect everyone else in the public.
It's unlikely we will see Justices Scalia and Ginsburg shooting webs at one another during oral argument, but the business makers and innovators in our nerd world will help determine just how far 50-year old patent law precedent can be applied. And there may not be enough spiderwebs available to hold together this seemingly overreaching patent doctrine, at least as it is currently applied.
Bottom Line: I personally expect some minor changes to be implemented to this doctrine for special fact situations just like this where a contract likely should not be disturbed by a patent expiring. If nothing else, this is another fun and nerdy set of toys and facts to see the Supreme Court grapple with this term.
Finally, Apologies for the brief hiatus, thank you for those who sent kind words and segment requests over the past two weeks.
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Thanks for reading. Please provide feedback and legal-themed questions as segment suggestions to me on Twitter @BuckeyeFitzy
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