On March 31, 2015, the United States Supreme Court heard oral argument in Kimble v. Marvel Enterprises, a patent case in which Schlam Stone & Dolan represents a group of nine amici curaie, including Memorial Sloan Kettering Cancer Center, The Rockefeller University, and the Association of American Medical Colleges, supporting the petitioner, an inventor who patented a toy that allows users to mimic Spiderman’s web-spinning abilities by shooting foam from their hands using a can strapped to the waist or wrist.
The case presents the question whether the Court should overrule Brulotte v. Thys Co., 379 U.S. 29 (1964), which established a per se ban on licensing agreements that provide for royalty payments on patent rights that extend beyond the end of the patent term. The assumption underlying this rule of law—that payment of post-expiration royalties based on the licensee’s use of the patented invention unlawfully extends the patent beyond the fixed term provided by law—has since been widely criticized. Courts and commentators have explained that as a matter of economic substance there is no distinction between a yearly or lump sum payment during the patent term and royalty payments extending beyond the term based on the licensee’s use of the patented product; the total payment, whether paid before or after the patent expires, reflects the value of practicing the patent during the patent term. Even if the licensee pays royalties based on post-expiration use of the patent, it remains the case that after the patent expires anyone can practice the patent without being guilty of infringement and the patent holder can no longer exclude anyone from using the patent in any respect.
In its amicus brief, Schlam Stone & Dolan and the amici sought to bring to the Court’s attention the significant negative impact that Brulotte has on the commercialization of scientific and technological breakthroughs. By structuring licensing agreements to allow for payment by the licensee based on sales of the commercialized product, the risk of failure incurred by the licensee can be shared with the patent holder. The sharing of risk, in turn, maximizes the potential for scientific research to be translated into life-saving drugs, because it allows companies that are attempting to commercialize research the flexibility to enter into arrangements that are financially manageable for them. The experience of the Schlam Stone & Dolan amici was repeatedly referred to at oral argument to illustrate the real world impact of Brulotte’s per se rule. The transcript is available here.