Bug Week, Part Seven: No Royalties Need Be Paid On Web-Shooters.
Recently, the Supreme Court handed down its decision in “Kimble v. Marvel,” also known as the “Spider-Man Case.” Writing for the majority, Justice Elena Kagan held that patent holders may not collect royalties on a patent after it expires. This meant that the court declined to overrule its 1964 decision in “Brulotte v. Thys Co.,” which pretty much said (to the layman) that a patent holder cannot charge royalties for the use of his invention after its patent term has expired…which is what I said a sentence ago. As I understand it, the law is often just that repetitive, people, so bear with me.
The case dealt with a toy that shoots out silly string, in the same way that Spider-Man shoots webs. Supreme Court Justice Kagan is apparently a fan of comic books, and decided to weaving Spider-Man references throughout her opinion. After noting that the toy is designed for “children (and young-at-heart adults),” Kagan delivers of series of jokes that make this sort of patent law ruling readable to a non-lawyer. For instance:
“The parties set no end date for royalties, apparently contemplating that they would continue for as long as kids want to imitate Spider-Man (by doing whatever a spider can).”
“Patents endow their holders with certain superpowers, but only for a limited time.” That one might be my favorite of her more humorous asides to the material, because it is completely on point with the actual ruling.
You see, Kimble, the patent holder, was basically asking the court to overrule a previous decision, in a way that would benefit him. That would substantially change a longstanding legal precedent. Kagan refused, instead abiding by “stare decisis”…a principle that the court should follow its own precedents. Otherwise, the rules are too fluid, and the law becomes even more slippery.
To make that point, Kagan actually references the Spider-Man comic books themselves, to much media attention:
“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) (“In this world, with great power there must also come—great responsibility”).”
Although that is how the case was just ruled on, the history and facts of the case are pretty interesting, and go back pretty far. In 1990, Stephen Kimble obtained a patent for a Spider-Man toy that was set to expire in May 2010. Kimble claimed that he discussed the idea with Marvel, and that he would be paid if they ever made such a toy. Later, Marvel produced a toy that was similar to Kimble’s design. In 1997, Kimble sued for patent infringement, since Marvel did not pay him in any way, and the parties settled in 2001. Marvel agreed to purchase the patent and pay royalties to the Kimble without an expiration date. The “without an expiration date” was the key point. However, reaching an agreement, the case was subsequently dismissed.
In 2006, Marvel entered a licensing agreement with Hasbro Inc. that gave Hasbro the right to produce the toy. Disagreements arose between Kimble and Marvel concerning the royalty payments, and Kimble claimed that the original patent would be infringed if royalties were not paid. Kimble sued Marvel in Arizona state court, and the case was then removed to the federal district court.
The higher judge determined that settlement agreement was a “hybrid” agreement. This meant that the patent and non-patent rights couldn’t be separated from each other, and that the Supreme Court decision in “Brulotte v. Thys Co.” applied. In that case, the Court ruled that, when patents are sold in return for a royalty payment, the purchaser was not obligated to continue these payments beyond the expiration date of the patents. That case used the reasoning that continuing royalty payments past the patent expiration would “over-compensate” the seller of the patent. This, in turn, would then improperly extend the patent monopoly beyond the intended time limit.
This judgment went in favor of Marvel and ruled that the settlement agreement transferred patent rights, but that it was unclear if non-patent rights were transferred. Kimble appealed and argued that the settlement agreement transferred both patent and non-patent rights and that, while royalty payments ended for the PATENT, they did not end for the toy itself.
The Supreme Court thought otherwise, and upheld the lower court’s decision with 6 in favor, and 3 opposed.
As readers know, I usually fall in favor of fairness to creators of intellectual property. So my big question was…in the initial settlement with Marvel, for the patent, how well did Mr. Kimble do on the deal? Well, True Believers, hang on to your seats. In that settlement, Marvel acquired his patent in exchange for a lump sum of about $500,000 and 3% of all future sales. Half a million up front, and 3% of Spider-Man Web Shooters sold in the time frame of the patent. That is solid money.
Interestingly, Kimble argued that his inability to collect royalties beyond the patent term, even when his agreement with Marvel did not specify an end date, would hurt innovation. That’s kind of an excellent point…why invent something new, if after a certain amount of time, everyone and their dog can copy your invention for a tidy profit? Still…at twenty bucks a Web-Blaster, Kimble was making sixty cents per blaster sold, and fifteen cents on refill web canisters, for easily a decade. With a half a million up front. That seems like good incentive to innovate to me. It also sounds like a pretty fair deal…I don’t have any life problems that can’t be cured for a whole lot less than half a million dollars.
In her majority opinion, Kagan responded to that, saying that “neither Kimble nor his amici have offered any empirical evidence connecting Brulotte to decreased innovation; they essentially ask us to take their word for the problem.” It does help to come to the table with evidence, to be sure.
This idea that Spider-Man had a case in the Supreme Court, ruled on this summer, seemed like a good way to end “Bug Week.” It also gave me a chance to draw hands, close up, as our hero tries on her old school web shooters. Oddly, it is not the first time that she has been depicted wearing them, when “Edge of Spider-Verse” was going on, I drew a piece which featured the “iconic” super hero tool. Let’s look at that nearly year old art:
And with that lengthy analysis, this Sunday Bonus Post, and Bug Week, are done.