IP Partner Deborah Fishman weighed in for Daily Journal, Bloomberg BNA, Inside Counsel, Law360 and Managing IP on the recent SCOTUS ruling regarding Kimble v. Marvel. In its June 22 decision, the Supreme Court reaffirmed a ruling that has stood for more than 50 years when deciding that patent holders are barred from charging royalties from licensees once a patent has expired, handing a win to comic book publisher Marvel Enterprises LLC.
In the Daily Journal’s “Marvel Wins Supreme Court Patent Royalties Dispute,” Fishman commented that, “Sophisticated organizations that do more routine licensing will be more careful,” and “I think it will be a trap for the unwary, for the licensors who may not be in as good of a position as licensees.”
In Bloomberg BNA’s “Supreme Court Retains Brulotte Rule: No Royalties on Post-Expiration Use of Patent,” Fishman said, “The Supreme Court decision doesn't squarely address how to structure a contract in the form of a license to shift payment for use during the life of a patent into its post-expiration period without having to depart from a licensing arrangement.” She noted that, “This gap leaves a grey area that district courts and, ultimately circuit courts, will have to sort out in each case as to whether parties intended to defer payments for past use or whether they intended to have a pay-as-you-go approach in their patent license agreements.”
“It’s a good reminder,” Fishman said of the decision to InsideCounsel in “Kimble v. Marvel ruling does not bring about many changes on licenses.” Deborah also advised companies to be careful in licensing language and suggested that sometimes it may be preferable to use a different vehicle than a licensing agreement. Fishman added that the ruling may particularly impact such sectors as university licensing and biotech companies, but overall there is no change in the law from the ruling.
In Law360’s “Taking Stock Of The 5 Supreme Court IP Decisions This Term,” Fishman commented the court's decision to keep the Brulotte rule means that the case was “a big nothing at the end of the day,” although the justices helpfully outlined some clear-cut exceptions. “It's a good reminder for parties doing licenses to be careful with the agreements because the Brulotte rule can operate as a one-way 'gotcha' down the road for the licensor.”
In Managing IP’s “An Obscure Rule Gets Time In Spotlight,” Fishman explained that these types of agreements can be difficult for universities or early biotech start-ups, where you have the patent protection on the front end, but it is years before you can know whether the technology will succeed or fail. However, she says, “For situations like this, something like a joint venture rather than a licensing deal may be a better way to allocate the risks and benefits.”
Although the Kimble ruling covers all types of patent licensing, Fishman pointed out that the deal involved in Kimble was a rather unique licensing agreement. “Both parties agreed that Brulotte applies, though Kimble argued that it should be overturned, ” she explained. “However, the structure of this deal was very strange – rather than a straightforward licensing deal or a fact pattern that clearly had anti-trust issues as in the Brulotte case, this case involved a sale that came from settlement of litigation, and that sale included an ongoing royalty component. I’m somewhat surprised that Kimble did not argue Brulotte did not apply at all.”
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