A Study on the Legality of Royalty Collection Clauses after Expiration of Patent Rights, 15 J. Marshall Rev. Intell. Prop. L. 213 (2016)

Authors

Wei-Lin Wang

Abstract

Whether a contract clause may permit a patent owner to continuously collect royalty payments from a licensee after the expiration of its patent rights is a highly controversial issue in practice. Some believe that because patent rights are a kind of monopoly granted by the government, it shall not be extended after expiration; otherwise, it shall be regarded as patent misuse and/or unfair competition as the case may be. Nonetheless, others believe that this kind of clause is actually beneficial to a licensee because the licensee is allowed to make royalty payments throughout the whole patent term and even after expiration, which is helpful in terms of innovation. Regarding such debate, the Supreme Court of the United States adopts the view of the former, strongly opposing the collection of royalties after a patent’s expiration. Recently in Kimble v. Marvel, the Supreme Court reviewed this issue all over again. The Supreme Court reasoned that, although its former judgment might have certain flaws, there are no special justifiable reasons to correct such former judgment, and according to the doctrine of stare decisis, a court must abide by its former judgment in order to maintain the reliability of judicial decisions. The Supreme Court leaves such issues to the hand of Congress, waiting for future amendments to the law. Hence, this issue has not yet been settled and needs further clarification by the judicial and legislative branches of the United States. The author believes that such clauses might be simultaneously good and bad for innovation and economic efficiency depending upon the circumstances and, therefore, the correct approach is to examine such clauses based on the “rule of reason” principle. The author offers suggestions regarding this issue after comparing different views and approaches adopted by the relevant authorities of the United States and Taiwan.

Recommended Citation

Wei-Lin Wang, A Study on the Legality of Royalty Collection Clauses after Expiration of Patent Rights, 15 J. Marshall Rev. Intell. Prop. L. 213 (2016)