Stephen Kimble claims that in 1990 he invented a toy that could shoot foam string from a wristband. He says that he had a verbal agreement with Marvel that the company would compensate him if it used his idea.
Marvel later created a “Web Blaster” toy but did not compensate Kimble. He sued Marvel in 1997 for patent infringement and breach of contract.
The parties settled the dispute in 2001. Marvel agreed to pay Kimble $500,000 and a royalty of 3% on Web Blaster sales. Kimble eventually earned $6 million in royalties.
In 2006, Marvel granted Hasbro the right to produce the Web Blaster and other toys. Marvel and Kimble disagreed about the royalties due from this arrangement. One issue was the calculation of royalties for Web Blasters packaged with other role-playing toys like Spider-Man masks.
Kimble filed another breach of contract suit against Marvel in 2008.
Kimble’s US Patent No. 5,072,856 expired in 2010. Under the Supreme Court’s 1964 decision in Brulotte v. Thys Co., an inventor may not enter into a royalty agreement that allows the inventor to collect payments after a licensed patent has expired.
The Ninth Circuit noted that the rule of Brulotte is “counterintuitive, and its rationale is arguably unconvincing” but still ruled in favor of Marvel in July of 2013.
The Ninth Circuit joined other courts which have held that so-called “hybrid” patent licensing agreements are unenforceable after the underlying patents expire, unless certain conditions apply to prevent patent owners from “leveraging” a patent beyond its legal life.
Kimble had argued that his settlement with Marvel distinguished between patent and non-patent rights and thus that Brulotte did not apply.
The Ninth Circuit disagreed. Judge Consuelo Callahan wrote:
We cannot agree because the agreement plainly involved one royalty rate for both patent and Web Blaster rights, with no discount or other clear indication that the Web Blaster royalties were not subject to patent leverage.