Uncle Ben at the Supreme Court

Thanks to Joe, Josh, and others for pointing out Justice Kagan’s quotation in yesterday’s decision in Kimble v. Marvel:

What we can decide, we can undecide. But stare decisis teaches that we should exercise that authority sparingly. Cf. S. Lee and S. Ditko, Amazing Fantasy No. 15: “Spider-Man,” p. 13 (1962) (“[I]n this world, with great power there must also come—great responsibility”). Finding many reasons for staying the stare decisis course and no “special justification” for departing from it, we decline Kimble’s invitation to overrule Brulotte.

I happen to disagree with the majority’s decision; Brulotte v. Thys was wrongly decided*, and the Court wasted a rare opportunity to correct a mistake.  So on the one hand the citation and other references to Spider-Man were fun, but on the other hand it felt a little too cute by half for a decision that will ultimately result in Marvel (now part of the second largest media company in the world) avoiding royalty payments to an individual inventor whose idea Marvel (apparently) pretty blatantly ripped off.  The tone of the opinion is incongruous with its consequences.

It may seem a little overly dramatic in a case that is ultimately about money, but I am reminded of Robert Cover’s Violence and the Word:

Legal interpretation takes place in a field of pain and death. This is true in several senses. Legal interpretive acts signal and occasion the imposition of violence upon others: A judge articulates her understanding of a text, and as a result, somebody loses his freedom, his property, his children, even his life. Interpretations in law also constitute justifications for violence which has already occurred or which is about to occur. When interpreters have finished their work, they frequently leave behind victims whose lives have been torn apart by these organized, social practices of violence. Neither legal interpretation nor the violence it occasions may be properly understood apart from one another.

This is not to say that all judicial writing should be humorless.  I have enjoyed reading any number of funny, often acerbic opinions, but those opinions were usually written in response to parties that were themselves behaving badly or foolishly, and so deserved to be treated lightly or even mockingly.  In this case, however, the Court has sided with a multi-billion dollar corporation over an individual inventor and did so on fairly technical grounds.  The majority interpreted the law of stare decisis, and as a result Stephen Kimble lost his property (i.e. the contractual right to royalties from sales of the patented toy).  This does not seem like an appropriate occasion for such levity.

Stepping back off my soap box, I promise the next post will return to discussing the legal implications of comic book hijinks.

* A full discussion of why this is the case is beyond the scope of this blog, but if you’re interested, see the dissent in Kimble and Judge Posner’s opinion in Scheiber v. Dolby Labs.

19 responses to “Uncle Ben at the Supreme Court

  1. As a non-lawyer, I can see the basis for the dissent in Kimble and Posner’s opinion. Contrariwise, I think can also see the argument underlying the rulings against such contracts, which seems ultimately rooted in considering the “limited times” element of patents as the legally paramount principle — which seems to have some sound basis in the arena of political policy.

    Nohow, the political question appears subtly different from the legal one; “law”, “justice”, and “a good thing” are all different.

    • James Pollock

      “Marvel would have had to continue to pay royalties on the invention in perpetuity”

      Absent this ruling, Marvel, of course, could have ensured that it did NOT have to pay royalties in perpetuity by the simple expedient of not buying the patent, or by negotiating different terms.

  2. He lost his property, because it went the way of all things. His patent expired, as they all must, and that is a Good Thing. I see this more as a question about sanctity of contract. Can a private agreement enforce terms on intellectual property even after the property enters the public domain? I would have thought so, but apperently the court sees otherwise.

    I’m not sure this is a horrible thing, either. Had the court found otherwise, Marvel would have had to continue to pay royalties on the invention in perpetuity, but no one else would have had to pay at all (though of course, everyone else would have to pay royalties to Marvel for the use of Spidey)

    • The inequity inherent in allowing a contract that includes terms requiring a licensee pay royalties in perpetuity — or at all beyond term allowed by patent — as part of license terms during the span of a patent seems unconscionable. (Possibly even in the legal sense; in so far as access to knowledge in the public domain can be viewed as part of the birthright of humanity. Contrariwise, artificial persons may not automatically have such birthright….) At the very least, it seems contrary to the notion from Singer v June that “It is self evident that on the expiration of a patent the monopoly created by it ceases to exist, and the right to make the thing formerly covered by the patent becomes public property.

      Additionally, a ruling in the other direction would seem ludicrously easy to circumvent via setting up shell corporations — which as a new person not having been party to the original agreement, would not be bound to pay such royalties.

      • James Pollock

        “The inequity inherent in allowing a contract that includes terms requiring a licensee pay royalties in perpetuity — or at all beyond term allowed by patent — as part of license terms during the span of a patent seems unconscionable.”

        Why? Don’t the parties negotiating the price of the license have the best information regarding its value? Wouldn’t a demand for perpetual royalties fail unless the licensee thought the price was worthwhile? And if the (informed) buyer finds perpetual royalties conscionable, who am I (as representative of the people, generally) to disagree and override their contract?

      • Unconscionable, in that if as I suggest access to knowledge in the public domain can be viewed as part of the birthright of humanity, then that would seem to such access a fundamental civil right — which may not lawfully be abrogated by contract, even in exchange for a clear thing of value. And, in so far as there may be a compelling public interest in ensuring such access, a representative of the people may have a duty to furtherance of such interest despite contracts against such Constitutionally enshrined public policy (as reflected in the “limited times” portion of the Progress clause). More hyperbolically, I’ll note that those rhetorical questions you put forth seem to need only minor tweaking to be applied into an defense of allowing someone to sell themselves into slavery — which would seem to suggest that the law considers some policy element beyond purely economic arguments. 

        Contrariwise, I’d distinguish this case from a hypothetical instance where contract requires a annuity-type post-patent term payment with amount that is determined by events within the span of the patent; EG, requiring Marvel annually pay Kimble an amount equal to 5% of the product’s maximum sales in dollars during the term of the patent.

        Nohow, tracing this to the philosophical roots ultimately reaches the bedrock of the Humean is-ought distinction.

      • James Pollock

        My best guess, based on extremely limited facts and no research, is that Marvel agreed to pay royalties beyond the patent exclusivity period because it was easier than trying to reach an amount to cover any past infringement, and because that way they wouldn’t have to re-open the books and re-state their financial results to account for paying a royalty. Something along the lines of “OK, we made this product for a couple of years before we got your demand letter and learned about your patent… how about if we pay royalties, starting now, until the patent expires, and then a couple of years more to make up for the ones where we didn’t pay?”

        I’ve yet to hear anything like a coherent line of argument for why patent licenses need special incantations that other types of contracts don’t need, and why the protections that apply to every other kind of contract aren’t sufficient to handle patent licensing.

        No, you don’t want to allow people to claim they have a patent when they really don’t, and charge a license for something they don’t own. But fraud is already reason to void a contract. But if you want to license your patent and receive money beyond the term of the patent, you’d better word the contract exactly right or the government will step in and alter the agreement in a way that neither party to it intended.

      • “Something along the lines of “OK, we made this product for a couple of years before we got your demand letter and learned about your patent… how about if we pay royalties, starting now, until the patent expires, and then a couple of years more to make up for the ones where we didn’t pay?””

        That would make sense and should probably be permitted. But that doesn’t appear to be the case here – if I understand correctly, the contract simply never addressed the question of what happens when the patent expires, as though neither side had thought about it at all. So, perhaps Marvel’s lawyers were thinking “heh heh, he thinks we’re offering royalties in perpetuity, but he’s forgotten that patents expire” and perhaps the patent holder’s lawyers were thinking “heh heh, he forgot to put in an expiry clause, so we’re getting royalties in perpetuity when we’re only entitled to x years worth” … if so, though, I’d have thought that would invalidate the contract under the “meeting of minds” requirement?

        OTOH, perhaps both sides really did forget about patent expiry. There must be legal precedent for what happens if a critical part of a contract got left out by mistake?

      • James Pollock

        “OTOH, perhaps both sides really did forget about patent expiry. There must be legal precedent for what happens if a critical part of a contract got left out by mistake?”

        Apparently, both sides knew that patents expire, but neither side knew that contracts for royalties payable after the patent expires have to be worded in a specific way or they’re void.

        As this was NOT a patent license, but rather a sale of the patent, it’s entirely reasonable that neither side knew they had an illegal term in their contract.

  3. Arturo Magidin

    What about Kagan’s argument that since the decision prior was on statutory interpretation, an “easy fix” would be for Congress to amend the statute and thus reverse the opinion?

    • James Pollock

      Congress can’t fix problems that are widely obvious and for which there is clear demand from millions of Americans.

      Waiting for Congress to fix a statute that affects, what? Maybe hundreds of people a year? I won’t be holding my breath.

      Maybe if you convinced Republicans that fixing the statute to allow patent licenses under whatever contract law principles might apply would somehow repeal Obamacare…

      • Arturo Magidin

        Well, hence the quote marks…

        It was a fun read, and even Alito seemed to get a bit caught up (using the term “super-duper”). I was a bit surprised that no Justice objected by not joining certain paragraphs, the way CJ Burger did way back when on the opinion by Blackmun that started off by listing great baseball players.

  4. Is there any evidence that Marvel actually used Kimble’s design, or were even aware of Kimble’s patent when they designed their product?

    • James Pollock

      “Is there any evidence that Marvel actually used Kimble’s design”

      Yes… they agreed to pay a substantial sum of money to obtain it. They would not have done so had their product not infringed the patent.

      • But you can infringe a patent without having copied the design. The patent holder still has exclusive rights, even if you developed the same invention completely independently.

      • James Pollock

        You’ve switched verbs there, from “used” to “copied”. That makes a big difference. A patent protects against independent re-invention, so you can sue for patent infringement if a design is the same as yours, even if it wasn’t copied… even if the other party was completely unaware of your invention and patent.

        However, if they don’t use any of your patent claims, you have nothing to sue them for. Since Marvel paid up, there’s at least a strong likelihood that their product did, in fact, infringe on at least one of the claims of the patent.

        The following paragraph is 100% conjecture, but I’d bet money it’s fairly accurate. They didn’t do a patent search to see if anyone had already patented a web-shooter because… seriously? A web-shooter? They have oodles of lawyers who know everything about copyrights and licensing them. They have another batch who know everything about trademarks. They don’t have any patent lawyers on staff, and nobody thought they’d need one… until they got the demand letter.

      • Yes, by “used his design” I really did mean “design” rather than “invention” or “claims” – if it was in fact a reinvention then the design would be different, even though it incorporated elements covered by the patent. That was a poor choice of words on my part.

        It’s just that the article says “ripped off” which seems an excessively strong phrase if the original inventor didn’t actually do anything useful. It may be an ethical distinction rather than a legal one, but I think it’s relevant to the public policy aspects – one of the reasons that it is important that patents expire is to prevent patent holders from profiteering on the back of someone else’s work.

        If that was in fact the situation here, it’s practically the poster child for why contracts based on patents shouldn’t be allowed to extend beyond the lifetime of the patent!

      • James Pollock

        “If that was in fact the situation here, it’s practically the poster child for why contracts based on patents shouldn’t be allowed to extend beyond the lifetime of the patent!”

        Working through some of the alternatives:

        1. Marvel’s device is completely independently invented, but uses the patented claims, and Marvel makes no use of the patent (that is, the disclosure)
        In this case, Marvel has a bit of a bummer. Most of the value of a silly-string cannister on your wrist is playing at being Spider-Man, and that comes from Marvel. But the patent was issued, and it was valid, and they have to pay the inventor. They can license the patent, license it exclusively, or just buy it. (assuming a deal can be reached.) In each case, Marvel knows about how much money they’re going to make from the toy, and they can negotiate a fair price for the license. It’s not like the inventor can practice the invention himself profitably… the key element is the Spider-Man copyright and trademarks, which he isn’t going to get from Marvel. Marvel has a pretty strong position here… no need for the government to be looking out to protect Marvel’s interests, they’re in position to do it themselves.

        2. Marvel’s product is independently developed, infringes the patent, and the patents claims suggest additional changes or improvements, or new products.
        Well, this is the same thing. Marvel knows the value of the patent, and is likely the only one in position to effectively practice it. The only difference here is that the price should be higher, since the inventor is actually providing something beyond owning the patent… the patent’s disclosure is also adding value to the license. Again, the license terms are not likely to be oppressive to Marvel.

        3. Marvel’s invention is independently developed, and doesn’t infringe the patent. In this case, presumably Marvel is buying the patent because the price of the patent is lower than the legal cost of establishing that they’re not infringing. But, a deal in this case won’t have royalties… Marvel will insist on a flat rate to acquire the patent, to make sure they’re really paying less to get the patent than they would to defend their product.

        4. Marvel’s invention is independently developed, and doesn’t infringe the patent, but it suggests new products or improvements that require the patent. This deal is similar to scenario 2, except the price is going to be lower. Marvel still wants to moot the infringement claim, and they want the patent so they can pursue thenew products that would allow. However, they would still have the option to remain with their current product, and fight the infringement suit. That option would require them to forgo any profits on the new products suggested by the patent… but the cost of acquiring the patent has to make the acquisition profitable enough to outweigh the costs. AGAIN we see that Marvel has the power in the relationship… they have the money, and the ability to profitably practice the invention, the customer base to market to, and experience in selling their non-infringing product to guide their exploitation of the newer, patent-based ones.

        In none of these cases does it seem like there is any reason for the government to intercede to set contract terms, and certainly in Marvel’s favor.

  5. James Pollock

    “one of the reasons that it is important that patents expire is to prevent patent holders from profiteering on the back of someone else’s work.”

    I’d say this is a benefit, but not a reason. The reason that patents expire that their whole point of being is to get inventors to disclose their inventions so that they may be used by industry. We give them the carrot of the exclusivity period to get them to disclose, but patents are not, and never have been, about providing benefits to inventors. It’s about getting inventions disclosed and into the public domain.

    That said, I don’t have a problem with an inventor leveraging the patent as best as they are able to, and extracting as much value as they can, in whatever way they can get someone to pay (subject to the rules that govern contracts). The person who is buying a patent license is in the best situation to understand how valuable that patent will be to him, and if, in his own sound judgment, he thinks it would be worth paying 25 years of royalties to license a patent for 20 years… why should we (as embodied in the courts) say “no, even if you think it’s valuable enough now to obtain and practice that inventoion to pay for 25 years, you have to make all your payments to the inventor for the use you make of it during the patent period. Oh, yeah, if you know you need to do it (as Kimble’s lawyers did not), you can set it up to pay out over 25 years for the 20 years of using the patent… but if you don’t set up the incantations correctly, the government will modify your contract in a way that neither party intended, and this will mostly be to the detriment of the inventor, because by the time this issue arises, the inventory no longer has a patent’s exclusivity to bargain with.

    Here’s an analogy. I don’t have a patent, but I DO have exclusive authority to bargain for my own labor. If someone comes to me and says “hey, we need your specific talents. We’ll pay you $100 per hour, for a minimum of 8 hours, if you come work for us today on this project.” I accept the assignment. I show up. It takes me only 4 hours to complete the assignment. At that point, they say to me “We’re only going to pay you for the 4 hours you worked.” I may have reliance issues… I turned down another job, that offered only $90, but would have taken 8 hours… but I can’t go and take that assignment now. More significantly, if I want to insist on being paid the 8-hour minimum that was negotiated, I can’t use my main leverage.. and ability to refuse to do the work… because the work is already done. If I go to court and they say “well, if you’d negotiated to be paid $800 for the job, we’d enforce that contract, but since we don’t think people should be paid for hours they didn’t actually work, you lose your contract case.” I’d think that was really dumb and might just be a little frustrated with the court and the legal profession generally. In short, I can empathize with Mr. Kimble. Fortunately for Mr. Kimble, I assume he will still get paid in another year or so, only by his lawyer’s malpractice carrier rather than Marvel.

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