This Kat for a number of years taught a course on legal aspects of IP transactions. Consistently, the most challenging case to convey to students was the U.S. Supreme Court decision of Brulotte v Thys Co. (379 U.S. 29 (1964)), which fixed a bright-line rule that a patentee cannot charge royalties for the use of its invention after the expiry of the patent. The Court held that because such an agreement had the effect of extending "the patent liability beyond the period", such an agreement was held "unlawful per se". I always found this decision difficult to explain, because it straddled in an unsatisfying way a consideration of patents as an IP right, competition law concerns regarding the potentially anticompetitive effects of exercising a patent and commercial arrangements for the pricing and timing of royalty payments. Against this backdrop and after the passing of a half century, this Kat hoped that the U.S. Supreme Court, in revisiting the issue in the case of Kimble v Marvel Entertainment, LLC (as reported by AmeriKat on June 30th), would provide some clarity. Alas, it did not. In so not doing, permit this Kat some further thoughts on this most frustrating of Supreme Court IP-related rules.
To recall, the Kimble court, in considering the ongoing obligation of Marvel to a royalty with respect to the Spider-Man toy, chose not to abandon the bright-line rule fixed in Brulotte in favour of a case-by-case analysis based on the "rule of reason" approach used in antitrust (what the Americans call competition law) cases. In a 6-3 decision, the majority opinion, authored by Justice Kagan, framed the case as a question of stare decisis, namely the principle "that today's Court should stand by yesterday's decisions" unless there is "a special justification—over and above the belief 'that the case was wrongly decided'." The opinion quoted the oft-noted words of Justice Brandeis, written in a dissenting opinion no less, that is usually "important that the applicable rule of law be settled than it be settled right." The upshot of the majority ruling is to leave the Brulotte rule in place.
To which Justice Alito, for the dissent, wrote a stinging rebuke:
"[The Brulotte] decision was not based on anything that can plausibly be regarded as an interpretation of the terms of the Patents Act. It was based 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."He continued:
"Brulotte was thus a bald act of policymaking. It was not simply a case of incorrect statutory interpretation. It was not really statutory interpretation at all." "Not only was Brulotte based on policymaking, it was based on a policy that is difficult to defend. Indeed, in the intervening 50 years, its reasoning has been soundly refuted."What comes to mind to this Kat in reading the majority and dissenting opinions in the Kimble case is the image of judicial ships passing at night, so much so that one has to remind himself that both are addressing the same case. Partially because this Kat is sympathetic to the position articulated by the dissent, partially because he recalls his frustration in seeking to explain the Brulotte decision to students (and clients), he is especially disappointed with the majority opinion. In a word, this Kat has the sense that no set of facts or arguments could have constituted the "special circumstances" required to overcome stare decisis in this situation. Consider the main points in their decision.
1. The Court should be especially wary in overturning a precedent when the precedent is based on construing a statute; there always exists the possibility to take one's objections to Congress.Warren Court of those days has subsided, it has not disappeared and the concern over patent trolls has reinvigorated this tendency. Cutting back on Brulotte would have run counter to this orientation.
2. Indeed, Congress has rebuffed several opportunities to overturn Brulotte.
3. Since property and contract issues are also implicated, there is even a greater reluctance to overturn a precedent, given reliance on the principle in day-by-day affairs.
4. There has been no change to the patent laws with respect to the issue under consideration.
5. The Brulotte rule is simple to understand and easy to apply.
6. Since this case is about the patent laws and not the antitrust laws, even if the Brulotte case relied on misconceived economics (especially anti-competitive tying arrangements), it is for Congress to rectify it.
7. Moreover, Kimble's arguments that the Brulotte decision is bad policy, suppresses technological innovation and harms parties from reaching agreements that best enable them to commercialize their inventions, are not supported by empirical evidence and, in any event, are the purview of Congress and not the Court.
As for the position of (this Kat's law professor of a time long ago) Justice Scalia, the impetus seems to derive from Justice Scalia's deeply rooted judicial conservatism rather than any concern with the scope of IP rights and their exploitation (or how the Brulotte rule has worked in practice). What is interesting is how he split ranks from the other three so-called conservative justices, Chief Justice Roberts, and Justices Thomas and Alito, who focused on what they viewed as the deeply flawed and anachronistic foundations that undergird the Brulotte decision. Justice Scalia seems to ignore these factors in favour of doctrinal considerations, which brought him to the same result as his liberal colleagues. Justice Kennedy has been distinguished by his relative lack of ideology as the guiding principle in his decision-making. On this basis, it would seem that he was simply convinced, under the facts of the case, that there was no compelling reason to overturn the Brulotte rule.
Thus not only does the Kimble majority make for strange judicial bedfellows, but it points to the role of ideology when the matter at issue goes beyond the traditional realm of patent law and seeks to embrace concerns such antitrust and contract law as well. To the extent that future patent cases before the Supreme Court will increasingly implicate such additional legal matters, we can expect further split decisions resting on strong differences in underlying orientation, leading to constant shifts in the composition of the majority and minority opinions.