In a much-anticipated decision, the U.S. Supreme Court has retained the long-standing rule that patent holders cannot charge royalties for use of a patent after its term has expired.
In Kimble v. Marvel Enterprises, Inc., the Court considered an appeal of a case in which the inventors of a toy with Spider-Man-like web-shooting capabilities sold a patent covering the toy to Marvel Enterprises. The agreement imposed a 3% royalty and had no expiration date. After the patent expired , the inventors filed suit for breach of contract. Marvel argued that it was not obligated to pay royalties for sales made after the patent’s expiration. Both the district court and the U.S. Court of Appeals for the Ninth Circuit agreed with Marvel, but the inventors appealed to the Supreme Court.
In the appeal, the inventors argued that the the 50-year-old rule of Brulotte v. Thys Co., which states the “a royalty agreement that projects beyond the expiration date of the patent is unlawful per se,” was “[a] product of a bygone era” and should be overruled.
The Court disagreed. While acknowledging that “[t]he Brulotte rule … prevents some parties from entering into deals they desire,” the Court favored retaining the status quo since overturning the prior decision would “upset expectations” and there was no “superspecial justification” warranting reversal.
In addition, the Court noted that there are many ways for parties to structure deals that provide longer royalty periods without violating Brulotte, including:
- payments for use of an invention during the patent’s term can be deferred into a post-expiration period;
- post-expiration royalties can be tied to a non-patent right (such as a license of trade secrets); and
- other business arrangements (such as joint ventures) can confer benefits long after a patent term has expired.
Patent licensors who want a longer royalty term should carefully draft license agreements to ensure that the royalties fall under these exceptions to the Brulotte rule and are not considered to be merely post-expiration patent royalties.
After a period in which the Court has seemed eager to change a number of fundamental principles of U.S. patent law, the Court’s citation of stare decisis in Kimble v. Marvel Enterprises, Inc. may strike some as surprising. At a minimum, it suggests that the Court isn’t ready to completely abandon predictability in U.S. patent law.
The United States District Court for the Western District of Pennsylvania has proposed a set of changes to its local rules governing patent infringement cases. The proposal would change and clarify several procedures, including:
- the Initial Scheduling Conference will be replaced with a Planning Meeting and Report that will address more than just scheduling, such as whether a special master may be helpful, early motions, the format of the claim construction hearing, and whether a tutorial will be used;
- the plaintiff’s Initial Disclosures must include all documents evidencing ownership of the patent;
- the defendant’s Initial Disclosures must include summary sales or use information about the accused product process;
- the plaintiff must provide a good faith damages estimate within 14 days of the defendant’s disclosure of summary sales information;
- additional model language for a Protective Order is provided;
- more precise pleading requirements for infringement will apply, including additional detail about the specific statutory section(s) asserted, direct infringement, and the doctrine of equivalents;
- new requirements on amendments of contentions, advice of counsel defense, and a prehearing statement.
The changes adapt various requirements that some other courts are already using, along with recent changes to the Federal Rules of Civil Procedure. The court will accept comments on the proposed changes through July 6, 2015. Additional details are available here.
May 13, 2015 marks a significant day for inventors who apply for design patent protection in the United States. That’s the day that United States rule changes take effect to implement the Hague Agreement for the Registration of Industrial Designs, which allows applicants to designate over 60 countries with a single design application.
Under new rules that the USPTO published in April 2015, an applicant who seeks an international design registration may do via a single application. Under the new structure:
- an applicant for an international design registration must designate the countries for which the applicant seeks registration;
- the applicant must identify the number of designs included in the application (up to a maximum of 100);
- applicants are encouraged to include a brief description of each drawing with the application (but the USPTO cautions that too much description of characteristic features can “serve to limit the claim in the United States”);
- the applicant may be the inventor(s) or another entity such as the assignee;
- the international application may be filed directly with the World Intellectual Property Office (WIPO), or through the USPTO; and
- the application will publish 6 months after filing.
The new structure also extends the term for all U.S. design patents, including both international and domestic-only filings. Instead of the previous 14-year term, U.S. design patents and international design registrations resulting from applications filed on or after May 13, 2015 will have a term of 15 years from the date of grant.
When weighing the option of a U.S. design patent application against the option of an international design registration, applicants should consider the relative costs and benefits of each program. The international design registration can be a very cost-effective way of obtaining protection in large number of countries, since it streamlines the application process into a single proceeding. However:
- Applicants who select the international option must pay a fee for each country that is designated in the application.
- Unlike U.S. design patents, international design registrations are subject to renewal fees every 5 years.
- Requests for continued examination are not available in industrial design applications.
Because of differences such as these, applicants who are considering only the U.S. (or the U.S. and a small number of additional countries) should weigh the costs of making individual filings in each country against the benefits of the new single-application option.
For more information, see the following resources:
- USPTO Final Rule re: Changes to Implement the Hague Agreement Concerning International Registration of Industrial Designs (Apr. 2, 2015)
- USPTO EFS-Web Guide for International Designs:
- WIPO Guide to International Design Registration
- WIPO online Hague System Fee Calculator tool (to help applicants estimate filing fees for international applications)
The U.S. Patent and Trademark Office has launched a new tool that helps interested parties monitor pending patent applications and receive alerts when applications of interest are published. The Patent Application Alert Service enables registered users to receive notice of published applications using various search criteria, including:
- applications filed by particular inventors or assignees;
- applications containing specified keywords in the claims, abstract, title or description, or
- applications having certain CPC classifications.
The USPTO noted that the new service may help more third parties participate in the “pre-issuance submission” process. In that process, any interested party can submit prior art against a pending patent application for the USPTO Examiner to consider. The time frame for submitting prior art against an application is the later of (i) six months from publication, or (ii) the date of first rejection by the Examiner.
“Patent misuse” is perhaps one of the most “misused” phrases in patent law. When faced with a patent lawsuit or even just a cease-and-desist letter, accused infringers who disagree with the patent holder’s actions often ask whether they can counter the infringement accusation with a claim of patent misuse.
Which leads to the question: what exactly is “patent misuse” in U.S. patent law?
Patent misuse can occur when a patent holder improperly tries to expand the scope of the patent in a way that has an anti-competitive effect. (See B. Braun Med., Inc. v. Abbott Labs, 124 F.3d 1419, 1426 (Fed. Cir. 1997).) Patent misuse requires more than just aggressive litigation tactics or disagreement as to whether or not an accused product actually infringes: “the defense of patent misuse is not available to a presumptive infringer simply because a patentee engages in some kind of wrongful commercial conduct.” Princo Corp. v. International Trade Commission and U.S. Philips Corp.616 F.3d 1318, 1329 (Fed. Cir. 2010) (en banc). Because patent misuse typically requires an anti-competitive effect, courts give the doctrine a “narrow scope.” Id. Even a finding of anti-competitive effect may not be sufficient to find that patent misuse occurred. Continue reading
When drafting and negotiating a license agreement, it’s tempting for the parties to simply use definitions and so-called “standard” paragraphs that are taken from previous agreements. This can be risky. Even paragraphs that might be considered boilerplate need to be carefully reviewed to ensure that they are consistent with the parties’ intent
The Licensing Journal recently published my article “Defining ‘Affiliate’: Pay Attention to the Boilerplate“, in which I describe two examples in which boilerplate terms led to unintended consequences. For more details, click the hyperlink above for the full article.
Since the June 2014 U.S. Supreme Court decision in Alice Corporation Pty Ltd. v. CLS Bank Int’l, the vast majority of district court decisions, Federal Circuit decisions, and Patent Trial and Appeals Board (PTAB) decisions that considered the issue have overturned software and business method patents under the new patent-eligibility standard of Alice. In the first quarter of 2015 alone, when considering a motion to dismiss or a motion for judgment on the pleadings on the basis of patent-eligibility under §101, U.S. district courts have granted the motions and ruled the patents to be invalid over 66% of the time.
In November 2014, I published a post that summarized court and PTAB decisions that bucked this trend and found software to be patent-eligible. Since then, a small but growing number of cases refused to overturn patents that involved software, and the USPTO issued an Interim Guidance document describing actual and hypothetical claims that could survive post-Alice scrutiny.
To track the activity since then, I have updated my original post. It’s still available via this link. I intend to keep it updated on a periodic basis, so feel free to bookmark it or simply check back for future updates.