RESPONDENT: Marvel Enterprises, Inc.
LOCATION: United States District Court of Arizona
DOCKET NO.: 13-720
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT: United States Court of Appeals for the Ninth Circuit
CITATION: 576 US (2015)
GRANTED: Dec 12, 2014
ARGUED: Mar 31, 2015
DECIDED: Jun 22, 2015
Malcolm L. Stewart - for the respondent
Roman Melnik - for the petitioners
Thomas G. Saunders - for the respondent
Facts of the case
In 1990, Stephen Kimble obtained a patent for a Spider-Man toy that was set to expire in May 2010. Kimble claimed that he discussed the idea with the president of Marvel Enterprises Inc., and that he would be compensated for use of his ideas. Although no agreement was reached, Marvel produced a toy that was similar to Kimble's design. In 1997, Kimble sued for patent infringement, and the parties settled in 2001, with Marvel agreeing to purchase the patent and pay royalties to the petitioner without an expiration date. The case was subsequently dismissed. In 2006, Marvel entered a licensing agreement with Hasbro Inc. that gave it the right to produce the toy. Disagreements arose between Kimble and Marvel concerning the royalty payments, and Kimble claimed that the original patent would be infringed if royalties were not paid. Kimble sued Marvel in Arizona state court, and the case was then removed to the federal district court.
The magistrate judge determined that settlement agreement was a "hybrid" agreement, in which patent and non-patent rights were inseparable, and that the Supreme Court decision in Brulotte v. Thys Co. applied. In that case, the Court ruled that, when patents are sold in return for a royalty payment, the purchaser was not obligated to continue these payments beyond the expiration date of the patents because doing so would over-compensate the seller of the patent and improperly extend the patent monopoly beyond the intended time limit. On recommendation of the magistrate, the district court granted summary judgment in favor of Marvel and ruled that the settlement agreement transferred patent rights, but that it was unclear if non-patent rights were transferred. Kimble appealed and argued that the settlement agreement transferred both patent and non-patent rights and that, while royalty payments ended for the patent, they did not end for the toy itself. The U.S. Court of Appeals for the Ninth Circuit affirmed the decision of the district court.
Should the decision in Brulotte v. Thys Co, which held that a patentee cannot continue to receive royalty payments after the patent has expired, be overturned?
Media for Kimble v. Marvel
Audio Transcription for Opinion Announcement - June 22, 2015 in Kimble v. Marvel
John G. Roberts, Jr.:
Justice Kagan has our opinion this morning in case 13-720, Kimble v. Marvel Entertainment.
This case is about a doctrine called stare decisis, and a 50-year-old Patent Law decision called Brulotte, but its story happens to begin with Spider-Man.
In 1990, Stephen Kimble got a patent for a toy glove that allows kids to imitate Spider-Man by shooting webs, really foam string, from the palms of their hands.
Marvel Entertainment makes other Spidey-themed products and Kimble approached the company to see whether it might be interested in buying his patent.
Marvel didn't bite, but shortly afterward Marvel began selling its own web-slinging glove.
When Kimble found out he sued for patent infringement.
The parties ultimately reached a settlement in which Kimble sold Marvel his patent in exchange for a 3% royalty on all Marvel's future sales of the toy.
Their agreement didn't specify an end date for those royalty payments.
Several years later, however, Marvel discovered a case called Brulotte, which this Court decided in 1964.
Brulotte held that a patent holder cannot charge royalties for the use of his invention after his patent expires, usually 20 years from the date of his patent application.
That holding was based on a statute providing a strict end date for patents as well as on prior decisions holding that all members of the public must have unrestricted access to no longer patented inventions.
Relying on Brulotte, Marvel sought a judicial ruling declaring that it didn't have to pay Kimble royalties after his patent expired.
The courts below agreed.
We took this case to consider Kimble's argument that Brulotte should be overruled.
We now hold the stare decisis requires us to adhere to Brulotte.
Stare decisis is a Latin term for the principle that today's court should stand by yesterday's decisions.
Sometimes, we make exceptions to that rule, but not often.
Predictability, consistency and evenhandedness are hallmarks of the rule of law and most of the time that means in Justice Brandeis' words that it's more important that the law be settled then that it be settled right.
For that reason overruling precedent always requires some special justification beyond an argument that a case was wrongly decided.
Brulotte presents an unusually good case for stare decisis.
Brulotte involved statutory rather than constitutional interpretation because Congress is free to correct any mistakes we make in interpreting statutes, stare decisis carries more weight in that context and here Congress has declined to reverse Brulotte despite many opportunities to do so.
In addition, Brulotte involves two areas of law, property and contracts with the possibility of private parties relying on a prior decision makes us particularly reluctant to overturn precedent.
Kimble essentially argues that we should overrule Brulotte because it was a big mistake.
He claims that the Brulotte Court misunderstood the competitive effects of agreements for post-patent royalties and he contends that Brulotte deters innovation and so harms the economy.
But we think Kimble misunderstands the basis for Brulotte's decision which was based on the Court's view of the patent laws and the policy they expressed for free use following a patent's expiration rather than on the court's evaluation of whether post-patent royalty agreements have anticompetitive consequences. And still more important, we think Kimble's arguments are better addressed to Congress.
If Congress thinks this Court was wrong in its understanding of patent policy or if Congress thinks the Court's ruling has had adverse consequences, Congress has the prerogative to overturn our decision.
For us to do so would be to accept the kind of naked wrong on the merits claim that shouldn't suffice to overcome stare decisis.
We therefore affirm the judgment of the Ninth Circuit.
Justice Alito has filed a dissenting opinion in which the Chief Justice and Justice Thomas have joined.