After the patent period, the licensee’s continuing costs would give new competitors a cost advantage, enabling them to compete more vigorously against the licensee. During the patent period, the licensee would have lower costs, enabling it to compete more vigorously with the patent holder and any other licensees. If post-expiration royalties were allowed, a patent holder and licensee could bargain for lower royalty payments during the patent period in exchange for continuing royalties after the patent’s expiration. After a patent expires, the once-patented product is freely available to the public. In fact, post-expiration royalties can promote competition, the antitrust agencies concluded. Accordingly, if a patent holder were to try to exact higher royalties than a competitor would charge, the buyer could simply walk away. A patent alone does not confer market power, i.e., “the ability profitably to maintain prices above, or output below, competitive levels for a significant period of time.” While a patent holder has a right to exclude others from using a particular product, there are, almost always, functionally similar products that a licensee can use instead. Department of Justice and the Federal Trade Commission- explained in a 2007 report, tying is not problematic unless the seller has market power. As the federal antitrust agencies-the U.S. Tying-conditioning the sale of a product on the customer’s purchase of a second product- was per se illegal under antitrust law at the time.īut today, after significant developments in economics, tying is usually allowed. Brulotte explained that conditioning a patent license during the patent period on royalty payments for use of the invention after the patent’s expiration was analogous to tying. If patent holders “exact the same terms and conditions for the period after the patents have expired as they do for the monopoly period,” Brulotte stated, then they are misusing the bargaining power provided by the patent to obtain benefits after the patent’s expiration.īrulotte concluded that post-expiration royalties are “unlawful per se,” that is, without any exceptions. Brulotte bans post-expiration royalties because they are “a projection of the patent monopoly after the patent expires.” Under the Patent Act, patents are time-limited monopolies on technology. In Kimble, the Supreme Court conceded that a “broad scholarly consensus” criticizes Brulotte and that “we see no error in that shared analysis.” Nonetheless, the Court upheld Brulotte under the doctrine of stare decisis, which it defined as “the idea that today’s Court should stand by yesterday’s decisions.” In doing so, the Court all but conceded that Brulotte was wrongly decided: “ stare decisis has consequence only to the extent it sustains incorrect decisions correct judgments have no need for that principle to prop them up.”Ĭourts, federal agencies, and scholars have criticized Brulotte largely for its inconsistency with economics and antitrust law. Patent and Trademark Office, and “virtually every treatise and article in the field.” Thys, had faced severe criticism from a wide range of sources, including three courts of appeals decisions, the federal antitrust agencies, the U.S. The ban, originally announced by the Court in 1964 in Brulotte v. Nonetheless, the Court emphasized the ban’s virtue: it is “simplicity itself to apply.” In an opinion full of Spiderman references, the Court conceded last month that the ban might stand on as shaky a ground as a spider’s web. Marvel, the Supreme Court has upheld its 50-year-old ban on charging royalties for use of an invention after its patent has expired.
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