On June 22, 2015, in a 6-3 decision in Kimble et al. v. Marvel Enterprises, LLC, 576 U.S. (2015), the United States Supreme Court reaffirmed its holding in Brulotte v. Thys, 379 U.S. 29 (1964), that it is per se patent misuse for a patentee to charge royalties for the use of its patent after the patent expires. While acknowledging the weak economic underpinnings of Brulotte, the Court relied heavily on stare decisis and Congressional inaction to overrule Brulotte in also declining to do so itself. Although Kimble leaves Brulotte intact, the decision restates the rule of that case and provides practical guidance to avoid its prohibition on post-expiration royalties. Critically, the Court appears to condone the collection of a full royalty for a portfolio of licenses until the last patent in the portfolio expires. In addition, the Court’s reasoning provides guidance as to how patent licensors can draft licenses to isolate the effect of a later finding that patents conveyed under those licenses were previously exhausted.
Last week, in In re Cipro Cases I & II, Case No. S198616, the Supreme Court of California adopted the United States Supreme Court’s application of the Rule of Reason to the antitrust analysis of so-called “reverse payment” patent settlements (and rejected plaintiffs’ arguments that settlement payments exceeding the costs of litigation or other services are per se unlawful), but also set forth a specific “structured” Rule of Reason analysis to be applied in analyzing such settlements. A copy of the decision can be found here.