Brulotte v. Thys Co.

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Brulotte v. Thys Co.
Seal of the United States Supreme Court.svg
Argued October 20, 1964
Decided November 16, 1964
Full case nameBrulotte, et al. v. Thys Co.
Citations379 U.S. 29 ( more )
85 S.Ct. 176; 13 L. Ed. 2d 99; 3 A.L.R.3d 761; 143 U.S.P.Q. 264
Case history
PriorThys Co. v. Brulotte, 62 Wn.2d 284, 382 P.2d 271 (1963); cert. granted, 376 U.S. 905(1964).
Court membership
Chief Justice
Earl Warren
Associate Justices
Hugo Black  · William O. Douglas
Tom C. Clark  · John M. Harlan II
William J. Brennan Jr.  · Potter Stewart
Byron White  · Arthur Goldberg
Case opinions
MajorityDouglas, joined by Warren, Black, Clark, Brennan, Stewart, White, Goldberg
DissentHarlan

Brulotte v. Thys Co., 379 U.S. 29 (1964), was a Supreme Court of the United States decision holding that a contract calling for payment of patent royalties after the expiration of the licensed patent was misuse of the patent right and unenforceable under the Supremacy Clause, state contract law notwithstanding. [1] The decision was widely subjected to academic criticism but the Supreme Court has rejected that criticism and reaffirmed the Brulotte decision in Kimble v. Marvel Entertainment, LLC . [2]

Contents

Background

Patented hops-picking machine of Thys Thys's Patented Machine.gif
Patented hops-picking machine of Thys

Thys owned patents on hop-picking machinery. He sold a machine to Brulotte, a farmer in Washington, for $3000 and granted him a license to use the machine for a minimum royalty of $500 for each hop-picking season or $3.33 per 200 pounds of hops harvested by the machine, whichever was greater. The license had no termination date. Of the seven patents covering the machine, the last expired by 1957. Brulotte failed to pay the royalties and Thys sued him for breach of contract in Washington State court. [3]

The trial court rendered judgment for Thys and the Supreme Court of Washington affirmed. [4] The Supreme Court of Washington held that in the present case the period during which royalties were required, even though beyond the expiry of the patents, was only "a reasonable amount of time over which to spread the payments for the use of the patent[s]." [5]

Ruling of Supreme Court

The Supreme Court reversed (8-1) in an opinion written for the Court by Justice William O. Douglas. Justice John Marshall Harlan II dissented.

Majority opinion

Justice William O. Douglas Williamodouglas.jpg
Justice William O. Douglas

Justice Douglas began the majority opinion by citing precedents holding that patent "rights become public property once the 17-year period expires." [6] He then quoted Chief Justice Stone, speaking for the Court in Scott Paper Co. v. Marcalus Co.:

. . . any attempted reservation or continuation in the patentee or those claiming under him of the patent monopoly, after the patent expires, whatever the legal device employed, runs counter to the policy and purpose of the patent laws. [7]

The Court rejected the claim that the contract merely spread the payment for using the patent over a longer period. The payments were clearly proportioned to the extent of use after the patents expired: "The royalty payments due for the post-expiration period are by their terms for use during that period, and are not deferred payments for use during the pre-expiration period." [6] Thys "was using the licenses to project its monopoly beyond the patent period." Because the license made no distinction between the pre- and post-expiration period, the contracts were "on their face a bald attempt to exact the same terms and conditions for the period after the patents have expired as they do for the monopoly period," contrary to patent policy. That made them unenforceable. [8]

The Court therefore ruled:

n light of those considerations, we conclude that a patentee's use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se. If that device were available to patentees, the free market visualized for the post-expiration period would be subject to monopoly influences that have no proper place there.

. . . A patent empowers the owner to exact royalties as high as he can negotiate with the leverage of that monopoly. But to use that leverage to project those royalty payments beyond the life of the patent is analogous to an effort to enlarge the monopoly of the patent by tieing the sale or use of the patented article to the purchase or use of unpatented ones. The exaction of royalties for use of a machine after the patent has expired is an assertion of monopoly power in the post-expiration period when, as we have seen, the patent has entered the public domain. . . . [A]fter expiration of the last of the patents incorporated in the machines "the grant of patent monopoly was spent" and . . . an attempt to project it into another term by continuation of the licensing agreement is unenforceable. [9]

Dissent

Justice Harlan disagreed: " I think that more discriminating analysis than the Court has seen fit to give this case produces a different result." [10] In his analysis, what Thys did was no more objectionable than restrictions on the machine rather than the patented idea that it embodied. "In fact Thys sells both a machine and the use of an idea. The company should be free to restrict the use of its machine." [11]

Subsequent developments

Reaffirmance

Despite criticism of Brulotte (see next section), the Supreme Court reaffirmed the decision in Kimble v. Marvel in 2015.

Criticism

The decision was widely criticized by academics and economic theorists. In a subsequent opinion, 50 years later, nonetheless affirming Brulotte, the Supreme Court listed some of the criticism suggesting that the case should be overruled: [12]

Other criticism of Brulotte includes the following:

Other commentators, however, have rejected adoption of an antitrust lens for analysis of patent misuse:

Related Research Articles

Copyright misuse is an equitable defence to copyright infringement in the United States based upon the doctrine of unclean hands. The misuse doctrine provides that the copyright holder engaged in abusive or improper conduct in exploiting or enforcing the copyright will be precluded from enforcing his rights against the infringer. Copyright misuse is often comparable to and draws from the older and more established doctrine of patent misuse, which bars a patentee from obtaining relief for infringement when he extends his patent rights beyond the limited monopoly conferred by the law.

In United States patent law, patent misuse is a patent holder's use of a patent to restrain trade beyond enforcing the exclusive rights that a lawfully obtained patent provides. If a court finds that a patent holder committed patent misuse, the court may rule that the patent holder has lost the right to enforce the patent. Patent misuse that restrains economic competition substantially can also violate United States antitrust law.

<i>Mallinckrodt, Inc. v. Medipart, Inc.</i>

Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700, is a decision of the United States Court of Appeals for the Federal Circuit, in which the court appeared to overrule or drastically limit many years of U.S. Supreme Court precedent affirming the patent exhaustion doctrine, for example in Bauer & Cie. v. O'Donnell.

Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008), is a case decided by the United States Supreme Court in which the Court reaffirmed the validity of the patent exhaustion doctrine. The decision made uncertain the continuing precedential value of a line of decisions in the Federal Circuit that had sought to limit Supreme Court exhaustion doctrine decisions to their facts and to require a so-called "rule of reason" analysis of all post-sale restrictions other than tie-ins and price fixes. In the course of restating the patent exhaustion doctrine, the Court held that it is triggered by, among other things, an authorized sale of a component when the only reasonable and intended use of the component is to engage the patent and the component substantially embodies the patented invention by embodying its essential features. The Court also overturned, in passing, that the exhaustion doctrine was limited to product claims and did not apply to method claims.

A post-sale restraint, also termed a post-sale restriction, as those terms are used in United States patent law and antitrust law, is a limitation that operates after a sale of goods to a purchaser has occurred and purports to restrain, restrict, or limit the scope of the buyer's freedom to utilize, resell, or otherwise dispose of or take action regarding the sold goods. Such restraints have also been termed "equitable servitudes on chattels".

FTC v. Actavis, Inc., 570 U.S. 136 (2013), was a United States Supreme Court decision in which the Court held that the FTC could make an antitrust challenge under the rule of reason against a so-called pay-for-delay agreement, also referred to as a reverse payment patent settlement. Such an agreement is one in which a drug patentee pays another company, ordinarily a generic drug manufacturer, to stay out of the market, thus avoiding generic competition and a challenge to patent validity. The FTC sought to establish a rule that such agreements were presumptively illegal, but the Court ruled only that the FTC could bring a case under more general antitrust principles permitting a defendant to assert justifications for its actions under the rule of reason.

Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942), is a patent misuse decision of the United States Supreme Court. It was the first case in which the Court expressly labeled as "misuse" the Motion Picture Patent/Carbice tie-in defense to a charge of patent infringement and created the present blanket remedy in infringement cases of unenforceability of the misused patent. The decision re-emphasized that misuse can be found without finding an antitrust violation.

Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502 (1917), is United States Supreme Court decision that is notable as an early example of the patent misuse doctrine. It held that, because a patent grant is limited to the invention described in the claims of the patent, the patent law does not empower the patent owner, by notices attached to the patented article, to extend the scope of the patent monopoly by restricting the use of the patented article to materials necessary for their operation but forming no part of the patented invention, or to place downstream restrictions on the articles making them subject to conditions as to use. The decision overruled The Button-Fastener Case, and Henry v. A.B. Dick Co., which had held such restrictive notices effective and enforceable.

Kimble v. Marvel Entertainment, LLC, 576 U.S. 446 (2015), is a significant decision of the United States Supreme Court for several reasons. One is that the Court turned back a considerable amount of academic criticism of both the patent misuse doctrine as developed by the Supreme Court and the particular legal principle at issue in the case. Another is that the Court firmly rejected efforts to assimilate the patent misuse doctrine to antitrust law and explained in some detail the different policies at work in the two bodies of law. Finally, the majority and dissenting opinions informatively articulate two opposing views of the proper role of the doctrine of stare decisis in US law.

Ethyl Gasoline Corp. v. United States, 309 U.S. 436 (1940), was a decision of the United States Supreme Court that limited the doctrine of the Court's 1938 decision in General Talking Pictures Corp. v. Western Electric Co. Beginning with the 1926 decision in United States v. General Electric Co., the Supreme Court made a sharp distinction between (i) post-sale restraints that a patentee imposed on purchasers of a patented product and (ii) restrictions (limitations) that a patentee imposed on a licensee to manufacture a patented product: the former being illegal and unenforceable under the exhaustion doctrine while the latter were generally permissible under a lenient "rule of reason." Thus, under the General Talking Pictures doctrine, a patent holder may permissibly license others to manufacture and then sell patented products in only a specified field (market), such as only a particular type of product made under the patent or only a particular category of customer for the patented product. The Ethyl decision held, however, that a patent licensing and distribution program based on both the sale of a patented product and licenses to manufacture a related product was subject to ordinary testing under the antitrust laws, and accordingly was illegal when its effect was to "regiment" an entire industry.

Princo Corp. v. ITC, 616 F.3d 1318 was a 2010 decision of the United States Court of Appeals for the Federal Circuit, that sought to narrow the defense of patent misuse to claims for patent infringement. Princo held that a party asserting the defense of patent misuse, absent a case of so-called per se misuse, must prove both "leveraging" of the patent being enforced against it and a substantial anticompetitive effect outside the legitimate scope of that patent right. In so ruling, the court emphasized that the misuse alleged must involve the patent in suit, not another patent.

Henry v. A.B. Dick Co., 224 U.S. 1 (1912), was a 1912 decision of the United States Supreme Court that upheld patent licensing restrictions such as tie-ins on the basis of the so-called inherency doctrine—the theory that it was the inherent right of a patent owner, because he could lawfully refuse to license his patent at all, to exercise the "lesser" right to license it on any terms and conditions he chose. In 1917, the Supreme Court overruled the A.B. Dick case in Motion Picture Patents Co. v. Universal Film Mfg. Co.,

<i>Button-Fastener case</i>

The Button-Fastener Case, Heaton-Peninsular Button-Fastener Co. v. Eureka Specialty Co., also known as the Peninsular Button-Fastener Case, was for a time a highly influential decision of the United States Court of Appeals for the Sixth Circuit. Many courts of appeals, and the United States Supreme Court in the A.B. Dick case adopted its "inherency doctrine"—"the argument that, since the patentee may withhold his patent altogether from public use, he must logically and necessarily be permitted to impose any conditions which he chooses upon any use which he may allow of it." In 1917, however, the Supreme Court expressly overruled the Button-Fastener Case and the A.B. Dick case, in the Motion Picture Patents case.

Leitch Manufacturing Co. v. Barber Co., 302 U.S. 458 (1938), is a 1938 decision of the United States Supreme Court extending the tie-in patent misuse doctrine to cases in which the patentee does not use an explicit tie-in license but instead relies on grants of implied licenses to only those who buy a necessary supply from it.

The Mercoid casesMercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661 (1944), and Mercoid Corp. v. Minneapolis-Honeywell Regulator Co., 320 U.S. 680 (1944)—are 1944 patent tie-in misuse and antitrust decisions of the United States Supreme Court. These companion cases are said to have reached the "high-water mark of the patent misuse doctrine." The Court substantially limited the contributory infringement doctrine by holding unlawful tie-ins of "non-staple" unpatented articles that were specially adapted only for use in practicing a patent, and the Court observed: "The result of this decision, together with those which have preceded it, is to limit substantially the doctrine of contributory infringement. What residuum may be left we need not stop to consider." The Court also suggested that an attempt to extend the reach of a patent beyond its claims could or would violate the antitrust laws: "The legality of any attempt to bring unpatented goods within the protection of the patent is measured by the antitrust laws, not by the patent law."

Dawson Chemical Co. v. Rohm & Haas Co., 448 U.S. 176 (1980), is a 1980 5–4 decision of the United States Supreme Court limiting the patent misuse doctrine and explaining the scope of the 1952 amendment of the patent laws that resurrected the contributory infringement doctrine in the wake of the Mercoid cases. The Mercoid cases and a few predecessor cases had denied relief against patent infringement to patentees who were deriving revenue from the sale of unpatented products used as supplies for patented combinations or as components of patented combinations, even when the unpatented products were specially adapted for use with the patented combinations and even when they lacked any utility other than that use. The patentees used contributory infringement suits or threats of such suits to enforce their business model, which the Mercoid cases outlawed.

<i>National Lockwasher Co. v. George K. Garrett Co.</i>

National Lockwasher Co. v. George K. Garrett Co., 137 F.2d 255, is one of the earliest or the earliest federal court decision to hold that it is patent misuse for a patentee to require licensees not to use a competitive technology. Such provisions are known as "tie-outs."

<i>United States v. Vehicular Parking Ltd.</i>

United States v. Vehicular Parking Ltd. is a patent–antitrust case in which the United States Government eroded the doctrine of United States v. General Electric Co. permitting patentees to fix licensee prices, but failed to persuade the court to decree royalty-free licensing as a remedy.

United States v. Line Material Co., 333 U.S. 287 (1948), is a decision of the United States Supreme Court limiting the doctrine of the 1926 General Electric decision, excusing price fixing in patent license agreements. The Line Material Court held that cross-licenses between two manufacturer competitors, providing for fixing the prices of the licensed products and providing that one of the manufacturers would license other manufacturers under the patents of each manufacturer, subject to similar price fixing, violated Sherman Act § 1. The Court further held that the licensees who, with knowledge of such arrangements, entered into the price-fixing licenses thereby became party to a hub-and-spoke conspiracy in violation of Sherman Act § 1.

Hartford-Empire Co. v. United States, 323 U.S. 386 (1945), was a patent-antitrust case that the Government brought against a cartel in the glass container industry. The cartel, among other things, divided the fields of manufacture of glass containers, first, into blown glass and pressed glass, which was subdivided into: products made under the suction process, milk bottles, and fruit jars. The trial court found the cartel violative of the antitrust laws and the Supreme Court agreed that the market division and related conduct were illegal. The trial court required royalty-free licensing of present patents and reasonable royalty licensing of future patents. A divided Supreme Court reversed the requirement for royalty-free licensing as "confiscatory," but sustained the requirement for reasonable royalty licensing of the patents.

References

The citations in this article are written in Bluebook style. Please see the talk page for more information.

  1. Brulotte v. Thys Co., 379 U.S. 29 (1964). PD-icon.svg This article incorporates public domain material from this U.S government document.
  2. Kimble v. Marvel Entertainment, LLC ,No. 13-720 , 576 U.S. ___(2015).
  3. 379 U.S. at 29-30.
  4. 62 Wash. 2d 284, 382 P.2d 271 (1963).
  5. 62 Wash. 2d, at 291, 382 P. 2d, at 275.
  6. 1 2 379 U.S. at 31.
  7. Scott, 326 U.S. 249, 256 (1946).
  8. 379 U.S. at 32.
  9. 379 U.S. at 32-34
  10. 379 U.S. at 34.
  11. 379 U.S. at 35.
  12. Kimble v. Marvel , 561 U.S. —, - n.3 (2015).