KIMBLE V. MARVEL ENTERPRISES, INC.

Patent Licensing Cert. Pending

Issue: Whether the Supreme Court should overrule Brulotte v. Thys Co., which held “a patentee’s use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se.”

In Brulotte v. Thys Co., 79 U.S. 29 (1964), the Supreme Court found “a patentee’s use of a royalty agreement that projects beyond the patent expiration date is unlawful per se” as an improper extension of the patent monopoly.

Petitioner Kimble patented a toy based on a Marvel comic book hero in 1991. During the appeal of Kimble’s patent infringement action, Kimble and Marvel agreed to settle the case in exchange for Kimble assigning the patent and other IP rights to Marvel, and Marvel paying a lump sum and running royalty. Under the agreement, the royalty would not end or reduce in rate when the patent expired. Years later, when Kimble sued Marvel for breach of the settlement agreement, the district court found the royalty was based, at least in part, on the assigned patent, and, thus, uncollectible under Brulotte. The Ninth Circuit “reluctantly” affirmed.

Kimble argues Brulotte should be reversed because post-expiration patent royalties do not extend the patent monopoly and because Brulotte discourages pro-competitive licensing practices. Marvel arguesBrulotte is a narrow rule reaching only those agreements in which royalties accrue post-expiration, thus preventing patent misuse.

B&B HARDWARE, INC. V. HARGIS INDUSTRIES, INC.

Trademark - Argument: Dec. 2, 2014

Issue: Whether a Trademark Trial and Appeal Board’s (TTAB) finding of a “likelihood of confusion” precludes the alleged infringer from arguing no likelihood of confusion in a district court trademark infringement case.

Petitioner B&B owns the registered trademark SEALTIGHT; respondent Hargis manufactures a similar product and sought the trademark SEALTITE. B&B filed an opposition to Hargis’s trademark with the TTAB. The TTAB denied Hargis’s trademark because it was “substantially identical” to B&B’s and was “used on closely related products” such that it would cause a likelihood of confusion. But in a co-pending trademark infringement litigation, the district court did not afford the TTAB’s decision preclusive effect. The Eighth Circuit affirmed, finding the TTAB’s likelihood of confusion test and the applicable burden of persuasion distinct from the Eighth Circuit’s.

On appeal, B&B argues that the Eighth Circuit’s decision diverges from that of the Second, Third and Seventh Circuits, which afford a TTAB likelihood of confusion finding preclusive in some circumstances, and that of the Fifth and Eleventh Circuits, which give the TTAB’s decision deference. B&B notes that the TTAB and Federal Circuit give preclusive effect to district court findings of likelihood of confusion in the reciprocal instance. Hargis responds that all circuits agree the weight a district court should give a TTAB decision depends on the facts of the case. Further, Hargis argues district courts cannot afford presumptive preclusive effect to a TTAB likelihood of confusion analysis because its analysis differs materially from those of the different circuits.

TEVA PHARMACEUTICALS USA, INC. V. SANDOZ, INC.

Patent - Argument: October 15, 2014

Issue: Whether the Federal Circuit’s standard of reviewing a district court’s factual findings in support of claim construction de novo is correct in view of Fed. R. Civ. P. 52(a).

This case raises the long-debated question of whether a district court’s factual findings supporting a claim construction are entitled to appellate deference. The oral argument focused heavily on three key questions: (1) Is claim construction different? (2) What is a fact? (3) How much would deference matter anyway?

On the first question, some justices expressed concern that a de novo standard creates an anomaly by treating appellate review of fact-finding in one area – claim construction – differently from all other areas. For example, Justice Stephen G. Breyer asked, “Where are we going if we start carving out one aspect of the patent litigation?” Other justices, however, suggested claim construction might warrant different treatment. For example, Chief Justice John Roberts observed that deference could result in appellate endorsement of different constructions from different district courts on a “public patent that is going to bind a lot of other people.”

On the second and third questions, Justice Samuel B. Alito asked whether it was even worth struggling to distinguish factual questions from legal questions in the claim construction context. Citing a study that suggested most appellate outcomes would be the same under either a deferential or a non-deferential standard of review, he asked, “Is it worthwhile as a practical matter?” If the Supreme Court affirms the Federal Circuit’s de novo standard, there will of course be no need to grapple with these questions further. But if the Supreme Court institutes a deferential standard, these questions will take center stage.