KIMBLE V. MARVEL ENTER., INC.

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  FOR PUBLICATION UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT S TEPHEN K  IMBLE ;   R  OBERT M ICHAEL G RABB , individuals,  Plaintiffs-Appellants ,v.M ARVEL E  NTERPRISES I  NC .,  Defendant-Appellee . No. 11-15605D.C. No.4:08-cv-00372-DCBOPINIONAppeal from the United States District Courtfor the District of ArizonaDavid C. Bury, District Judge, PresidingArgued and SubmittedDecember 5, 2012—San Francisco, CaliforniaSubmission vacated December 14, 2012Resubmitted May 29, 2013Filed July 16, 2013Before: Diarmuid F. O’Scannlain, Sidney R. Thomas,and Consuelo M. Callahan, Circuit Judges.Opinion by Judge Callahan  K  IMBLE V .   M ARVEL E  NTER  .,   I  NC .2 This summary constitutes no part of the opinion of the court. It has *  been prepared by court staff for the convenience of the reader. SUMMARY * Patent Rights The panel affirmed the district court’s summary judgmentin favor of Marvel Enterprises, Inc., holding that royalties hadto end when the patent expired for the Web Blaster, a Spider-Man toy.The panel held that under   Brulotte v. Thys Co. , 379 U.S.29 (1964), a so-called “hybrid” licensing agreementencompassing inseparable patent and non-patent rights isunenforceable beyond the expiration date of the underlying patent, unless the agreement provides a discounted rate for the non-patent rights or some other clear indication that theroyalty at issue was in no way subject to patent leverage. COUNSEL Antonio R. Durando (argued), Tucson, Arizona; StephenKimble, Tucson, Arizona; and Robert Grabb, Tucson,Arizona, for Plaintiffs-Appellants.David Fleischer (argued), Haynes and Boone, LLP, NewYork, New York; Andrew M. Jacobs, Snell & Wilmer L.L.P.,Tucson, Arizona; and Jason T. Christiansen, ZunigaChristiansen PLLC, Houston, Texas, for Defendant-Appellee.  K  IMBLE V .   M ARVEL E  NTER  .,   I  NC .3 OPINION CALLAHAN, Circuit Judge:This appeal calls on us to again construe the SupremeCourt’s frequently-criticized decision in  Brulotte v. Thys Co. ,379 U.S. 29 (1964). In  Brulotte , the Court held that a patentlicensing agreement requiring a licensee to make royalty payments beyond the expiration date of the underlying patentwas unenforceable because it represented an improper attempt to extend the patent monopoly.  Id. at 30–33. Wehave previously noted that  Brulotte has been read to requirethat any contract requiring royalty payments for an inventioneither after a patent expires or when it fails to issue cannot beupheld unless the contract provides a discount from thealternative, patent-protected rate.  Zila, Inc. v. Tinnell  ,502 F.3d 1014, 1021 (9th Cir. 2007). We acknowledged thatthe  Brulotte rule is counterintuitive and its rationale isarguably unconvincing.  Id. at 1019–20 & n.4. Nonetheless,recognizing that we are bound by Supreme Court authorityand the strong interest in maintaining national uniformity on patent law issues, we have reluctantly applied the rule.  Id. at1020, 1022. We are compelled to do so again. Accordingly,we join our sister circuits in holding that a so-called “hybrid”licensing agreement encompassing inseparable patent andnon-patent rights is unenforceable beyond the expiration dateof the underlying patent, unless the agreement provides adiscounted rate for the non-patent rights or some other clear indication that the royalty at issue was in no way subject to patent leverage. See Meehan v. PPG Indus., Inc. , 802 F.2d881, 884–86 (7th Cir. 1986); Boggild v. Kenner Prods. ,776 F.2d 1315, 1319–20 & n.5 (6th Cir. 1985); Pitney Bowes, Inc. v. Mestre , 701 F.2d 1365, 1371–72 (11th Cir. 1983).  K  IMBLE V .   M ARVEL E  NTER  .,   I  NC .4 Kimble is the inventor of the intellectual property at issue, while 1 Appellant Robert Grabb represented Kimble in a prior litigation withMarvel and, at some point, acquired an interest in the property.Accordingly, as most of the references concern Kimble alone, we use“Kimble” in the singular to refer to both Appellants for ease of reference.Marvel Entertainment, LLC is the entity actively litigating the action, 2 and is the successor to Marvel Enterprises, Inc. (the named party), andToy Biz, Inc. (the entity that Kimble allegedly shared his ideas with anddefendant in the 1997 action). We refer to all of these entities as“Marvel.” IA Around 1990, Appellant Stephen Kimble invented a 1 Spider-Man toy that allowed a child or other user to “role play” as Spider-Man by mimicking Spider-Man’s web-shooting abilities with foam string. A user would operate thetoy by activating a trigger attached to a valve in the palm of a glove. The valve was attached to a flexible line leading toa can of foam strapped to the user’s wrist or waist. Kimble patented the idea under U.S. Patent No. 5,072,856 (the “‘856Patent”). The ‘856 Patent expired on or about May 25, 2010.In December 1990, Kimble met with Lou Schwartz (thePresident of Appellee Marvel’s predecessor) to discuss the 2 idea covered by then-pending application for the ‘856 Patentand other “ideas and know-how.” Kimble contends that atthe meeting, Schwartz verbally agreed that Marvel wouldcompensate him if it used any of his ideas. Marvelsubsequently told Kimble that it was not interested in hisideas. Despite its supposed lack of interest, Marvel thereafter  began manufacturing a similar Spider-Man role-playing toy
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