Caught in the Web: SCOTUS’ Recent Decision Regarding Patent Royalties

Your friendly neighborhood U.S. Supreme Court laid down a crucial decision involving patent royalties and a Spiderman themed toy that has everyone’s spidey senses tingling.

Kimble v. Marvel Entertainment involves a toy Stephen Kimble invented and patented called the “Web Blaster,” which consists of a glove with a valve and canister of pressurized foam, allowing kids to pretend that they are their favorite web-slinging superhero by having string shoot from the palm of their hands.  Kimble had previously sued Marvel for marketing a similar toy and their settlement included an agreement that licensed the patent to Marvel in return for royalty payments from its sale.  However, the agreement set no end date for these payments.  Neither side was aware at the time that a 1964 Supreme Court case, Brulotte v. Thys, made agreements for royalty payments after the expiration of a patent per se unlawful.  Kimble urged the Court to overturn this decision, while Marvel argued that Brulotte prevented them from having to pay royalties after the patent expired in 2010.  Marvel already paid Kimble $6 million for use of his patent.

Justice Kagan, who wrote for the majority, was able to tuck superhero and comic book references into the opinion, making it one of the more fun Supreme Court opinions to read.  She stated that patents give their holders “superpowers;” that Brulotte has a close relation to a whole “web” of precedents; that to use “superpowered” stare decisis, the Court needs a “superspecial justification;” and in her conclusion, she quotes Stan Lee’s Spiderman comic, “in this world, with great power there must also come – great responsibility.”  But that is where the “fun” ends because the Court decided to uphold Brulotte, an incredibly unpopular decision in the patent world.

The Court reasoned that stare decisis, “the idea that today’s Court should stand by yesterday’s decisions,” requires them to not overturn past decisions unless they have a special justification for doing so.  The Court even went so far to say that, “respecting stare decisis means sticking to some wrong decisions.” Justice Kagan argues that the Court should instead defer to Congress’ judgment.  After all, Congress has modified the Patent Act numerous times, and has not sought to deal with this issue of post-expiration royalties in the way that Kimble is suggesting.  Justice Kagan writes that, “Congress, not this Court, is [Kimble’s] proper audience.”

For a brief background in patent law, the Patent Act was meant to strike a balance between promoting innovation on one hand and making sure the public has access to inventions on the other hand.  The Patent Act states that the patent holder has certain exclusive rights for 20 years from the date the patent application was filed.  In particular, the patent owner has the right to stop anyone else from using their invention until their patent expires.  Patent owners can require users to pay “royalties” in exchange for the use of their patent.  But because of the Supreme Court’s decision in Brulotte, the user and patent owner cannot agree to the user paying royalties after the patent expires.  In other words, a contract would be automatically invalid if it contained a provision that allowed for post-expiration royalties.  The Court in Kimble v. Marvel Entertainment upheld this practice.

Patent experts were hoping that this decision would be their savior and overturn Brulotte.  Critics of the Kimble decision argue that there has been no concern over stare decisis in past patent decisions and it seems as if the Supreme Court is out to declare “war on patent owners.”  From an economic standpoint, Richard Posner and William Landes have called Brulotte “one of the all-time economically dumb Supreme Court decisions.”  Justice Alito, in his dissent, argues that the majority’s decision restricts freedom of contract and reaffirms “a clear case of judicial overreach.”

Kimble v. Marvel Entertainment is a case in which the Supreme Court shot its legal web-slingers and left patent experts disappointed and hoping for another chance to fight back.

*Amanda Whorton is a second year law student at Wake Forest University.  Before law school, she studied Broadcasting at Southeastern University and was a television producer at a local PBS station in Florida.  After graduation, she hopes to practice intellectual property and entertainment law.  She enjoys dancing and watching baseball in her free time.