Will the Supreme Court Remove Brulotte’s Shadow Over Patent Licensing?

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Fifty years ago, in Brulotte v. Thys Co., the U.S. Supreme Court held that the collection of royalties after a patent’s expiration constitutes per se patent misuse. Although criticized by scholars, antitrust agencies, and the lower courts as economically irrational, Brulotte has not only endured, it has impacted licensing practices in a number of contexts. Brulotte looms large over the licensing of a single patent, packages of patents, patents combined with trade secrets, and patent applications. It has bedeviled licensing negotiations, voided freely negotiated contracts, and been used to reopen what were considered long-settled agreements. All that may change, however, because the Court—contrary to the suggestion of the Solicitor General—granted certiorari in Kimble v. Marvel Enterprises, Inc. to decide whether to overrule Brulotte.

The Court’s decision in Kimble could significantly impact licensing practices. Unless the Court leaves Brulotte undisturbed, the decision will certainly affect the licensing analysis not only for agreements involving a single patent, but also for agreements involving patent applications, packages of patents, and packages of patents and other intellectual property rights. The outcome could allow for more flexible licensing structures, potentially ushering in an era of innovative licensing. Such a change may, however, come with more uncertainty about what practices constitute misuse. Kimble may therefore be a harbinger of significant change in the world of patent licensing.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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