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S. Ct. Maintains Expired-Patent Royalty Bar


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On June 22, 2015, the Supreme Court decided Kimble v. Marvel Entertainment, LLC (2015) declining to overrule Brulotte v. Thys .   Interesting can "license" around the ruling by amortizing 20-years of licensing into a 40-year scheme.  The "financing" extends beyond the patent term but the license itself does not.  The Supreme Court held:
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. That arrangement would at least bring down early outlays, even if it would not do everything the parties might want to allocate risk over a long timeframe.
As Brulotte remains essentially intact, our prior analysis likewise still holds.  Nevertheless, this will remain a "gotcha" provision for inexperienced license drafters.   Key points to remember:
  1. If solely a patent license, the royalty is zero when the patent expires;
  2. If bundled with another non-patent right (e.g., trade secret), then the royalty must be less when the patent expires; and
  3. If you want a long payment scheme, make a one-time license fee up front but finance it over a period of time.
Visit our licensing section for some general licensing concepts.

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