| Abstract |
I. JUSTICE KAGAN delivered the opinion of the Court. 1. In 1990, petitioner Stephen Kimble obtained a patent on a toy that allows children (and young-at-heart adults) to role-play as “a spider person” by shooting webs – really, pressurized foam string – “from the palm of [the] hand.” Respondent Marvel Entertainment, LLC (Marvel) makes and markets products featuring Spider-Man, among other comic-book characters. … Their agreement provided that Marvel would purchase Kimble’s patent in exchange for a lump sum (of about a half-million dollars) and a 3 % royalty on Marvel’s future sales of the Web Blaster and similar products. The parties set no end date for royalties, apparently contemplating that they would continue for as long as kids want to imitate Spider-Man (by doing whatever a spider can). … And then Marvel stumbled across Brulotte v. Thys Co., 379 U.S. 29 (1964), the case at the heart of this dispute. Brulotte had read the patent laws to prevent a patentee from receiving royalties for sales made after his patent’s expiration. See 379 U.S., at 32. So the decision’s effect was to sunset the settlement’s royalty clause. 2. We granted certiorari, … to decide whether, as some courts and commentators have suggested, we should overrule Brulotte. For reasons of stare decisis, we demur. 3. When the patent expires, the patentee’s prerogatives expire too, and the right to make or use the article, free from all restriction, passes to the public. This Court has carefully guarded that cut-off date, just as it has the patent laws’ subject-matter limits: In case after case, the Court has construed those laws to preclude measures that restrict free access to formerly patented, as well as unpatentable, inventions. … In one line of cases, we have struck down state statutes with that consequence. … In a related line of decisions, we have deemed unenforceable private contract provisions limiting free use of such inventions. … Brulotte was brewed in the same barrel. There, an inventor licensed his patented hop-picking machine to farmers in exchange for royalties from hop crops harvested both before and after his patents’ expiration dates. The Court (by an 8-1 vote) held the agreement unenforceable – “unlawful per se” – to the extent it provided for the payment of royalties “accru[ing] after the last of the patents incorporated into the machines had expired.” 379 U.S., at 30, 32. 4. Yet parties can often find ways around Brulotte, enabling them to achieve the same ends. To start, Brulotte allows a licensee to defer payments for pre-expiration use of a patent into the post-expiration period; all the decision bars are royalties for using an invention after it has moved into the public domain. A licensee could agree, for example, to pay the licensor a sum equal to 10 % of sales during the 20-year patent term, but to amortize that amount over 40 years. … Under Brulotte, royalties may run until the latest-running patent covered in the parties’ agreement expires. Too, post-expiration royalties are allowable so long as tied to a non-patent right – even when closely related to a patent. That means, for example, that a license involving both a patent and a trade secret can set a 5 % royalty during the patent period (as compensation for the two combined) and a 4 % royalty afterward (as payment for the trade secret alone). … Finally and most broadly, Brulotte poses no bar to business arrangements other than royalties – all kinds of joint ventures, for example – that enable parties to share the risks and rewards of commercializing an invention. 5. Contending that such alternatives are not enough, Kimble asks us to abandon Brulotte in favor of “flexible, case-by-case analysis” of post-expiration royalty clauses “under the rule of reason.” Of primary importance in this context, Kimble posits, is whether a patent holder has power in the relevant market and so might be able to curtail competition. Resolving that issue, Kimble notes, entails “a full-fledged economic inquiry into the definition of the market, barriers to entry, and the like.” 6. Overruling precedent is never a small matter. Stare decisis – in English, the idea that today’s Court should stand by yesterday’s decisions – is “a foundation stone of the rule of law.” … To reverse course, we require … what we have termed a “special justification” – over and above the belief “that the precedent was wrongly decided.” … Congress has spurned multiple opportunities to reverse Brulotte – openings as frequent and clear as this Court ever sees. … Brulotte’s statutory and doctrinal underpinnings have not eroded over time. … Nothing about Brulotte has proved unworkable. The decision is simplicity itself to apply. A court need only ask whether a licensing agreement provides royalties for post-expiration use of a patent. If not, no problem; if so, no dice. … Brulotte is a patent rather than an antitrust case. Even assuming that Brulotte relied on an economic misjudgment, Congress is the right entity to fix it. By contrast with the Sherman Act, the patent laws do not turn over exceptional law-shaping authority to the courts. Accordingly, statutory stare decisis – in which this Court interprets and Congress decides whether to amend – retains its usual strong force. 7. Kimble also seeks support from the wellspring of all patent policy: the goal of promoting innovation. Brulotte, he contends, “discourages technological innovation and does significant damage to the American economy.” … Maybe. Or, then again, maybe not. While we recognize that post-patent royalties are sometimes not anticompetitive, we just cannot say whether barring them imposes any meaningful drag on innovation. II. JUSTICE ALITO, with whom THE CHIEF JUSTICE and JUSTICE THOMAS join, dissenting. The Court employs stare decisis, normally a tool of restraint, to reaffirm a clear case of judicial overreach. Our decision in Brulotte v. Thys Co., 379 U. S. 29 (1964), held that parties cannot enter into a patent licensing agreement that provides for royalty payments to continue after the term of the patent expires. That decision was not based on anything that can plausibly be regarded as an interpretation of the terms of the Patent Act. It was based instead on an economic theory – and one that has been debunked. The decision interferes with the ability of parties to negotiate licensing agreements that reflect the true value of a patent, and it disrupts contractual expectations. Stare decisis does not require us to retain this baseless and damaging precedent. |
