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On Monday, the U.S. Supreme Court affirmed a decision that lets Marvel Enterprises out of a deal to pay royalties to Stephen Kimble, the inventor of a Spider-Man toy called the Web Blaster.
Kimble patented his idea in 1990 for the toy letting users mimic Spider-Man’s web-shooting abilities. Marvel began manufacturing a similar toy, which led Kimble to sue for patent infringement. The two sides came to a settlement in 2001, which provided him with three percent of net sales. Kimble earned more than $6 million from the agreement and all was well until 2006 when Marvel licensed the rights to Hasbro and a dispute erupted over the calculation of royalties.
Marvel, in response, pointed to Brulotte v. Thys Co., a 1964 Supreme Court decision which forbids patent holders from collecting royalties after the expiration date of the patent. The defendant prevailed in seeking a declaratory ruling that it owed nothing to Kimble past 2010. The case went up to the high court on the question of whether it was time to create new precedent and deem the old rule forbidding post-expiration royalties as a “product of a bygone era.”
In today’s ruling, Justice Elena Kagan says that the old precedent must stand untouched under what’s known as stare decisis.
“What we can decide, we can undecide,” she writes. “But stare decisis teaches that we should exercise that authority sparingly.”
In her analysis, Kagan says that very strong justification is needed to depart from stare decisis and allow inventors to make deals that provide them royalties past a patent’s expiration. Otherwise, she says, a “whole web of precedents” would be threatened. Here, the parties made a deal in reliance on judicial doctrine, and in the absence of Congress stepping in with an amendment to the law, she rules it wise not to upset what’s come before even upon arguments that more flexibility is needed in contracting. She adds that patent holders and licensees can accomplish alternative arrangements to satisfy goals of payment deferral and risk-spreading, and while she implies that the outcome might be different if it involved antitrust rather than patent issues, the justice elects to turn in a modest decision.
She even quotes the Spider-Man comics by saying, “In this world, with great power there must also come great responsibility.”
She was joined by five other justices. Here’s her opinion. The dissent was written by Samuel Alito, who along with Clarence Thomas and John Roberts, wrote that the old law “interferes with the ability of parties to negotiate licensing agreements that reflect the true value of a patent, and it disrupts contractual expectations.”
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