Kimble v Marvel Entertainment, LLC: US Supreme Court Maintains Limit On (Super) Powers of Patentees

On June 22, 2015, the US Supreme Court released its opinion in Kimble v Marvel Entertainment, LLC, which maintained the rule that a patentee cannot continue to receive royalties for sales made after the expiration of the patent. In its reasoning the Court noted “patents endow their holders with certain superpowers, but only for a limited time”. The decision follows precedential case law which precludes measures that restrict free access to formerly patented inventions.

The patent at issue was for a toy that allows children (and young-at-heart adults) to role-play as “a spider person” by shooting webs (pressurized foam string) “from the palm of [the] hand.” Marvel Entertainment, LLC eventually acquired the patent from the patentee, Stephen Kimble, in exchange for approximately a half-million US dollars and a 3% royalty on Marvel’s future sales of products derived from the patent.

The parties set no end date for the royalties. However, longstanding case law (see Brulotte v Thys) prevents a patentee from receiving royalties for sales made after a patent’s expiration. After learning of the Brulotte rule, Marvel commenced this action to invalidate the requirement to pay royalties after Kimble’s patent expired.

In reaching its decision, the US Supreme Court noted the Brulotte rule can make contract provisions unenforceable, even preventing parties from entering into deals they desire. However, the Court also noted there are a number of ways to contract around the Brulotte rule.

To circumvent the Brulotte rule, the US Supreme Court indicated that licensees may defer payments for pre-expiration use of a patent into the post-expiration period; the Brulotte rule only bars royalties for using an invention after it has moved into the public domain. For example, a licensee could agree 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. The Court also noted the Brulotte rule poses no bar to business arrangements other than royalties — joint ventures, for example, can enable parties to share the risks and rewards of commercializing an invention.

Ultimately, the Court indicated the Brulotte rule applies to this case because of stare decisis, ie the principle that today’s Court should stand by yesterday’s decisions. Accordingly, Stephen Kimble cannot continue to receive royalties for sales made after his patent expired.

Additional commentary on the decision is available here.

Summary by: Robert Dewald