Los Angeles partner Mitch Reinis recently published an article in the Patent, Trademark & Copyright Journal, a publication of Bloomberg BNA.
Titled "Supreme Court’s Marvel Decision Provides No Comic Relief for Toy Inventor," the article critically analyzes the U.S. Supreme Court’s recent decision upholding a strict interpretation of significant IP law and the questionable use of stare decisis, offering legal principles ignored by the Court and counsel as well as dissenters Justice Alito, Chief Justice Roberts and Justice Thomas.
Kimble v. Marvel reached the Supreme Court after Kimble was denied relief by the Ninth Circuit Court. This case centered on a dispute whereby Marvel used Kimble’s patent involving a Spider-Man toy without permission and got sued for patent infringement. After that case was settled obligating Marvel to pay royalties indefinitely, the patent expired. Believing they were no longer required to pay royalties, Marvel filed for declaratory judgment in federal district court confirming that it could stop.
The Supreme Court’s decision to affirm the Ninth Circuit has caused some, including Mitch, to look into whether the court made errors in the use of precedent when deciding its opinion. “Even if you are right and even if you get your case all the way to the U.S. Supreme Court, you can still get caught in the web of inapt precedent,” Mitch wrote in the article. He and others believe the court applied stare decisis in error and took a passive approach by pointing their finger toward Congress as the proper arena to challenge statutory law such as the 20 year patent term in this case. “Critics of our ruling can take their objections across the street, and Congress can correct any mistake it sees,” stated Justice Kagan, who delivered the Court’s opinion.
Mitch writes that intellectual property law got “short shrift” in the Marvel case, likely due to what he believes is a preference of the court to deal with hot political issues rather than “mundane matters of business or contract.” The cases involving Obamacare and the right of same sex couples to marry were issued the same week as Marvel in June of this year.
As for how the decision affects businesses, Mitch agrees with the dissenting opinion. “The dissenters believe that the decision interferes with the ability of the parties to negotiate licensing agreements that reflect the true value of a patent, and it disrupts contractual expectations. Further, the dissenters argue that Brulotte v. Thys [the lonely precedent] was not a true case of statutory interpretation, and the majority did not really explore the economic arguments raised by Kimble.”
In addition, Mitch believes that the time honored doctrine of “licensee estoppel” should have been raised. “Neither Brulotte nor Marvel discusses this seemingly relevant contract principle that prevents licensees from challenging the title of their licensors.” The doctrine of licensee estoppel was precedent for 113 years, from 1856 until it was overturned in Lear v. Adkins in 1969. Mitch argues that if stare decisis is so important, the U.S. Supreme Court in Lear should have “bowed to the 113 years of multiple licensee estoppel decisions and upheld the license in that case.” The Brulotte decision has only stood ground for 51 years.
To further strengthen the argument, Mitch writes that the weak precedent isn’t even applicable to begin with. The Brulotte case involved a license agreement calling for the payment of royalties going beyond the patent term. In Marvel, the user did not have a license. Marvel was an outright infringer who was sued by the inventor (Kimble) for infringement, and the two parties solved the lawsuit by making a settlement agreement, not a license agreement, that called for payment beyond the term of the patent. Mitch feels as though this could be “justified as a penalty for Marvel’s misconduct.”
Upholding stare decisis, licensors and licensees now know that regardless of how long an idea protected under a patent might take to develop, amend, and eventually market, once the 20 years has expired the user is not required to continue paying royalties. Going forward, Mitch says, this decision will impact how business entities negotiate licenses and draft contracts when intellectual property is in play.