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Will the Supreme Court Remove <i>Brulotte</i>'s Shadow Over Patent Licensing?

By Sean Gates and Jeny Maier
December 31, 2014

Fifty years ago, in Brulotte v. Thys Co., 379 U.S. 29 (1964), the U.S. Supreme Court held that the collection of royalties after a patent's expiration constitutes per se patent misuse. Although criticized by scholars, antitrust agencies and the lower courts, Brulotte has not only endured, it has impacted licensing practices in a number of contexts. See, Sean Gates & Jeny Maier, “Brulotte 's Continuing Shadow Over Patent Licensing'” 4 J. Intell. Prop. L. & Prac. 181 (2009). Brulottelooms large over the licensing of a single patent, packages of patents, patents combined with trade secrets, and patent applications.'See, e.g., Outman v. Western Contracting Corp., 204 U.S.P.Q. (BNA) 289 (N.D. Iowa 1979); Phillips Screw Co. v. Amtel, Inc., 465 F. Supp. 3, 5, 7 (D. Mass. 1978); Veltman v. Nortel Simon, Inc., 425 F. Supp. 774, 775 (S.D.N.Y. 1977); Beckman Instruments, Inc. v. Technical Dev. Corp., 433 F.2d 55, 61 (7th Cir. 1970); Well Surveys, Inc. v. Perfo-Log, Inc., 396 F.2d 15 (10th Cir. 1968); Rocform Corp. v. Acitelli-Standard Concrete Wall, 367 F.2d 678 (6th Cir. 1966); Pitney Bowes, Inc. v. Mestre, 701 F.2d 1365 (11th Cir. 1983); Baladevon, Inc. v. Abbott Labs., Inc., 871 F. Supp. 89 (D. Mass. 1994); Sanford Redmond, Inc. v. Mid-America Dairymen, Inc., 29 U.S.P.Q.2d (BNA) 1222 (S.D.N.Y. 1992); Veltman, 425 F. Supp. 774; Meehan v. PPG Indus., Inc., 802 F.2d 881 (7th Cir. 1986).'It has bedeviled licensing negotiations, voided freely negotiated contracts, and been used to reopen what were considered long-settled agreements. All that may change, however, because the Court ' contrary to the suggestion of the Solicitor General ' granted certiorari in Kimble v. Marvel Enterprises, Inc., No. 13-720 (cert. granted Dec. 12, 2014), to decide whether to overrule Brulotte.

Unless the Court leaves Brulotte undisturbed, the decision will certainly affect the licensing practices not only for agreements involving a single patent, but also for agreements involving patent applications, packages of patents, and packages of patents and other intellectual property rights. The outcome could allow for more flexible licensing structures, potentially ushering in an era of innovative licensing. Such a change may, however, come with more uncertainty about what practices constitute misuse. Kimble may therefore be a harbinger of significant change in the world of patent licensing.

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