The Supreme Court’s 1964 decision in Brulotte v. Thys Co. has been among the Court’s more heavily criticized patent law decisions. A number of academics and appeals court judges have complained that Brulotte, which establishes a rule governing construction of patent licensing agreements, is based on a misunderstanding of the economic considerations underlying such agreements. Perhaps in response to that criticism, the Court granted certiorari in Kimble v. Marvel Enterprises, Inc. to consider a single question: should it overturn the 50-year-old Brulotte rule? The Court will hear oral arguments in Kimble on March 31.
The correct answer is a resounding “no.” At oral argument, the record will show that parties negotiating patent licensing agreements have relied on Brulotte for half a century when drafting terms governing royalty payments. Overturning Brulotte would be a patent troll’s dream. It could expose licensees to unforeseen royalty demands based on long-forgotten license agreements that they reasonably assumed—in reliance on the Brulotte rule—imposed no additional payment obligations after the expiration of the licensed patent. As with patent trolls, the potential liability in some cases may be so high that in terrorem settlement is the licensee’s only reasonable choice. In other cases, the nuisance value of the claim may be smaller than the cost to litigate. Either way, a shortsighted decision in Kimble could lead to decades of costly and vexatious litigation to no one’s benefit. Continue reading