Case law appears to be well-settled when it comes to whether a patent license remains enforceable beyond the expiration of the underlying patent (it doesn’t). But what happens if the license addresses both patent and non-patent rights – is a licensee still on the hook for royalties after the patent expires?
The issue is at the center of a dispute between Kimble and Marvel concerning a Spiderman-esque web-shooting toy design. The parties entered into a licensing arrangement covering products that “infringe the patent” as well as “sales of the Web Blaster product.” When the patent expired, Marvel argued it no longer owed royalty payments to Kimble. Conversely, Kimble argued that it is still owed royalties because sales of the Web Blaster product are separate from patent-related aspects of the agreement. Kimble relies on the plain language of the agreement and Marvel’s pre-license position in court that the Web Blaster product did not infringe the patent in support.
The Ninth Circuit ruled in favor of Marvel, finding that there was not a clear enough indication in the agreement that any non-patent rights were intended to survive patent expiration. The court relied on Broulotte v. Thys Co., 379 U.S. 29 (1964) and other cases in holding that a “so-called ‘hybrid’ licensing agreement encompassing inseparable patent and non-patent rights is unenforceable beyond the expiration date of the underlying patent, unless the agreement provides a discounted rate for the non-patent rights or some other clear indication that the royalty at issue was in no way subject to patent leverage.” Additional information about the firm and its attorneys may be found at www.klemchuk.com.