One of the primary benefits of obtaining a patent for an invention is to negotiate licensing agreements with companies that wish to produce and sell the product. These agreements are often long-standing and provide the patent-holder with substantial royalties in exchange for the license to use the invention.
In 1964, the Supreme Court’s opinion in Brulotte v. Thys Co. substantially limited these licensing agreements in holding that a patent-holder could not continue to collect royalties for any licenses after the expiration date of the patent. Once a patent expires (i.e., 20 years), the market is technically free to use the invention, and all licensing agreements expire along with the patent. The Brulotte decision in effect voided many existing licensing agreements and limited a patent-holder’s negotiating power in future contracts.
The Supreme Court recently revisited this issue in Kimble v. Marvel Entertainment. In 1990, Stephen Kimble invented and obtained a patent for a Spider-man toy that allowed a user to put on a glove and shoot out pressurized foam, simulating the web-casting of the famous superhero. Kimble pitched the “Web Blaster” toy to Marvel Entertainment and, though Marvel passed on licensing Kimble’s product, the company began selling a very similar toy. In the resulting lawsuit, the parties signed a settlement agreement whereby Marvel was granted a license to use the product and Kimble would obtain royalties from toy sales. The settlement provided no end date. Once Marvel discovered the Brulotte decision, it obtained a judgment in court confirming that the company no longer had to pay any royalties to Kimble after his patent expired in 2010. Kimble appealed the decision, requesting that the Supreme Court overturn its prior decision.
The Court ruled 6-3 in favor of upholding its precedent in Brulotte v. Thys Co and upheld the lower court’s decision denying royalties to Kimble. The majority did not believe that Kimble presented enough of a “superspecial justification” to overturn the precedent set in Brulotte. Although the Court noted that Brulotte could serve to hinder innovation and limit economic competition, the Court stated it would respect its past decision, even if it was not necessarily a good one. Thus, for the time being, the ruling in Brulotte stands and limits the rights of patent holders to retain royalties after the 20-year patent term.