Hybrid Licensing Agreement Unenforceable Beyond the Patent Expiration Date

This case highlights the importance of separating license grants by the type of intellectual property (IP) right granted and clearly identifying the royalty rates and rights associated with a particular type of IP.  In other words, trademark, copyright and patent rights should be granted in separate sections of an agreement and the rights and obligations associated with each should be clearly identified.  Otherwise, the copyright and trademark rights, which could continue indefinitely or at least extend beyond our lifetimes, will end when the patent expires.  In most instances, patents expire twenty years from the date of the patent application.

In Kimble v. Marvel Enterprises, Inc., the Ninth Circuit recently applied the U.S. Supreme Court’s ruling in Brulotte v. Thys Co., to hold that because the patent royalties in the agreement between Kimble and Marvel were not separated from the non-patent royalties, Marvel’s obligation to pay royalties under the agreement ended when Kimble’s patent expired on May 25, 2010.  Brulotte held that “a patent licensing agreement requiring a licensee to make royalty payments beyond the expiration date of the underlying patent was unenforceable because it represented an improper attempt to extend the patent monopoly.”  (Opinion pdf page 3).  Brulotte has been widely criticized as depriving the patent holder of the benefit of her bargain by preventing her from agreeing to receive a lower rate of royalties over a longer period of time, instead of a higher rate of royalties over a shorter period of time.  In Kimble v. Marvel, the Ninth Circuit felt compelled to apply Brulotte, even though it considers the reasoning in that case to be flawed.

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