U.S. Supreme Court Says No to "Mandatory Collection of Expired Patent Royalties"

The U.S. Supreme Court's case of Stephen Kimble v. Marvel Entertainment (Kimble vs. Marvel Entertainment, LLC) for patent infringement may give us some inspiration. In this case, the U.S. Supreme Court ruled that after the expiration of the patent right, the patent owner may not force the licensing fee for the relevant patent.

As Brulotte v. Thys Co. As in the case of infringement, the impact of the judicial conclusion that the expired patent can continue to collect royalties is not limited to the issue of royalties after the expiration of the patent, but indicates an attitude of choosing between economic benefits and encouraging innovation.

I don't want to pay royalties indefinitely.

Stephen Kimble is the owner of an earlier patent for a toy that describes the technology of spewing pressurized foam spider webs from the palm of your hand, very similar to the character features of the Amazing Spider-Man. After Marvel Entertainment learned of the patent, it began to manufacture and sell toys with the characteristics of the patent without permission.

In 1997, Kimble sued Marvel Entertainment for patent infringement. After that, the two sides reached a settlement agreement: Kimble authorized the patent right of the technology to Marvel Entertainment. In addition to paying Kimble a one-time fee of about US $500000, Marvel Entertainment also had to pay Kimble 3% of the future sales of the toy as a license fee. However, the agreement does not specify how long the consideration obligation of Marvel Entertainment to pay the license fee will last, that is, there is a vacancy in the contract performance period.

Then the problem also follows.

In 2010, when the patent right involved expired, Marvel Entertainment did not want to continue to pay royalties and found out the previous Brulotte v. Thys Co. In the case of infringement, it is insisted that after the expiration of the patent right, the right of the patent holder to collect the license fee should also disappear.

In previous Brulotte v. Thys Co. In the case, the U.S. Supreme Court denied a contract that required the purchaser of the patented machinery to continue to pay royalties for the use of the machinery's patent after the machinery's patent had expired. The court held that the practice of requiring payment of royalties after the expiration of the patent was not permissible because it sought to extend the patent to the date after the patent entered the public domain. The Supreme Court held that this constituted patent abuse and was itself illegal.

However, in the case between Kimble and Marvel Entertainment on patent licensing fees, Kimble believes that the previous agreement signed with Marvel Entertainment is in line with the corresponding provisions of the patent law, and the agreement was signed with the approval of both parties. At that time, Marvel Entertainment was authorized to use not only the patented technology involved, but also a series of related specific production details behind the patented technology. These are the main factors that Marvel Entertainment benefits from. If reference is made to Brulotte v. Thys Co. The case, denying the collection of royalties after the expiration of the patent right, will cause unfair damage to the interests of the patentee.

Although Kimble vigorously defended himself, the U.S. Supreme Court ruled that he could not force Marvel Entertainment to collect royalties on expired patents.

Focus on innovation, not markets

In fact, the Brulotte v. Thys Co. cited in the case. Although the infringement case has passed for decades, it has been controversial in the judicial and theoretical circles in the United States.

Economists have criticized the ruling, arguing that allowing the payment of royalties for maturing patented technology can provide long-term benefits to the economy: given that the patentee can collect royalties for a longer period of time, so that the patent licensee may pay a lower patent license fee during the validity of the patent, the consumer price of the patented product will be lowered and the patented product will be more competitive than alternative products, more companies can afford patent licensing fees and can also promote competition among patentees.

However, the U.S. Supreme Court has held that the above-mentioned economic and market competition issues are not the focus of patent law. And patent law, unlike the Sherman Act (the antitrust law of the United States), is not designed to maximize market competition. Because the main focus of the patent law is to promote innovation, the patent law has drawn a very clear boundary, indicating whether the patent right is valid after a certain year, so that the patent after expiration can be used without any restrictions, and promote The subsequent development of the entire society and re-innovation on this basis.

As Professor Daryl Lim of the John Marshall Law School in Chicago put it, "The Supreme Court has rightly recognized the character of patent law, which focuses on the public domain and innovation rather than the marketplace. Thus, the court's central concern is to prevent patent rights from being extended outside the term of patent protection and to ensure that the subject matter of the patent is free to use after the patent expires."

However, in China, there is no express provision that a patent holder may not continue to charge a licensing fee from a patent licensee after the expiration of a patent right. In order to avoid unnecessary troubles and losses, before signing the authorization contract, Nanjing Huaxun believes that the following points should be paid attention:

1. The agreement contains multiple patents: If an agreement contains multiple patents, the patent licensee may request to sign multiple agreements, and if these patents expire at different times, the patent licensor may charge a patent licensing fee for the latest period.

2. Installment repayment: When the patent licensor signs the authorization document with the patent licensee, it usually requires the patent licensee to pay a one-time patent licensing fee for several decades, at which time the patent licensee can ask for installment payment, so as to avoid paying the licensing fee after the expiration of the patent right.

3, bundled authorization: the patent licensor in the signing of the agreement will be non-patent affairs such as trade secrets, together with the patent licensee, even if the patent right expires, the patent licensor can still charge the licensee a licensing fee, because the non-patent affairs did not expire.