Kevin T. Lavery v. Pursuant Health, Inc.

Kimble v. Marvel Enterprises, LLC, 576 U.S. 446 (2015) upheld the rule announced in Brulotte v. Thys Co., 379 U.S. 29 (1964) that an agreement to pay royalties on a patent after its expiration is patent misuse and unlawful per se. The Kimble majority did not defend the reasoning of Brulotte, relying instead on stare decisis. Three justices would have overruled “our obvious mistake” in Brulotte. 576 U.S. at 472 (Alito, J. dissenting). There is a worsening split among the circuits on how to apply the Brulotte rule. In a remarkable span of only six months, four appellate courts have issued irreconcilable opinions. Three have enforced post-expiration royalties by distinguishing Brulotte and Kimble or construing those cases QDUURZO\7ZRWUHDWWKHDQDO\VLVDVDTXHVWLRQRIODZFRQÀQLQJ the inquiry to the four corners of the contract. In contrast, the Third Circuit instructs courts to engage in intensive fact ÀQGLQJHYHQDGYLVLQJWKDWUHVSHFWLQJBrulotte may require a “trial within a trial” to determine patent infringement. One court strains to avoid Brulotte with implausible contract construction while another applies the rule mechanically, ignoring context. Notably, all four cases involved royalty disputes over sales of drugs and medical devices—patentdependent technologies with large upfront expenses, lengthy GHYHORSPHQWRXWVL]HULVNVEXWSRWHQWLDOO\OXFUDWLYHSURÀWV These important industries are especially sensitive to legal uncertainty over their patent rights and obligations. The question presented is: Whether the Court should overrule Brulotte and Kimble or at least clarify that an agreement containing a post-expiration royalty is not per se patent misuse if the promised royalty is a means of sharing the risks and rewards of commercialization.