Royalty Agreement and its Impact on Patent Expiration - The Lex-Warrier: Online Law Journal

The Supreme Court of the United States of America, in the landmark case Brulotte v. Thys Co. 379 U.S. 29 (1964), established that a royalty agreement requiring the payment of royalties beyond the expiration of a patent is an abuse of patent rights and is not enforceable under the American Constitution.

Case Background: Brulotte, a Washington farmer, purchased hop-picking machinery from Thys Co., which held certain patents. They entered into a royalty agreement without specifying the duration of the royalty period. When the patents expired in 1957, Thys Co. sued Brulotte for defaulting on the royalty payments. In response, Brulotte counterclaimed, alleging the misuse of patents through an extension of the license agreements beyond the patent expiration date.

The trial court ruled in favor of the respondent, a decision that was later affirmed by the Supreme Court of Washington.

Court’s Opinion: Justice Douglas, delivering the opinion of the court, noted that any attempt to reserve or continue the patent monopoly beyond its expiration, regardless of the legal device used, contradicts the policy and purpose of patent laws. Once the 17-year period of patent protection ends, the patent rights become public property. The court rejected the argument that the royalty agreement merely extended the payment period, as the royalties were tied to the use of the machinery after the expiration of the attached patents.

While patents grant patent holders the right to negotiate and extract royalties, leveraging this position to project royalty payments beyond the patent expiration date would enlarge the patent monopoly by connecting the sale or use of the patented article to unpatented ones. Consequently, the court held that a patentee’s use of a royalty agreement extending beyond the expiration date of the patent is inherently unlawful.

However, Justice Harlan dissented, expressing the view that once a patented idea falls into the public domain, its use should not be restricted. In this case, Thys Co. sold both a machine and the use of an idea, and Justice Harlan argued that Thys should be allowed to restrict the use of its machine even beyond the expiration of the patent.

Despite facing criticism from the academic community, the Supreme Court refused to overrule the Brulotte decision in Kimble v. Marvel Entertainment, LLC, 576 U.S. 446 (2015).