On Monday, the U.S. Supreme Court issued a ruling in Kimble v. Marvel Enterprises that leaves intact a 50-year-old rule barring royalty agreements that continue after a patent expires. Here, attorneys tell Law360 why the decision is significant.
Erik Paul Belt, McCarter & English LLP
“Many innovative companies will view Kimble as a missed opportunity to modernize the anachronistic five-decade-old Brulotte rule and bring it into line with how product development and commerce works. Any sector with heavy upfront costs or long lead times to commercialization — for example, life sciences — felt the sting. Willing parties should be free, absent coercion, to structure royalty obligations as they see fit. Kimble forces those businesses to creatively structure royalty obligations to reflect — as best they can — commercial and economic realities. For example, parties can specify a reduction in royalty rates after patent expiration to reflect other benefits of the bargain.”
Eric E. Grondahl, McCarter & English LLP
“The Kimble decision, while nominally maintaining the status quo, may result in unnecessary, increased complexity in patent licenses. This will increase the cost of negotiating licenses and may subject more licenses to legal challenge. Licensors seeking to avoid the limits imposed by Brulotte — and now Kimble — will have to look to license other, nonpatent rights, such as trade secrets, to continue royalty streams after a patent expires. Counsel working on these agreements must be careful to identify the nonpatent rights with sufficient specificity to ensure such agreements are enforceable.”