Kimble v. Marvel Entertainment, LLC
and
Interface-Related Copyright Litigation
Scott A. Sher
December 5, 2015
Kimble v. Marvel Entertainment, LLC
Background
•
In Kimble, the Supreme Court re-examined whether licensing agreements
that extract royalties for a licensee’s use after the patent expires constitutes
per se patent misuse.
•
Marvel agreed to purchase Kimble’s patent for a Spider-Man toy in exchange
for lump sum and 3% royalties without specifying end date for royalties.
•
In Brulotte v. Thys Co., 379 U.S. 29 (1964), the Supreme Court established
the per se rule against post-expiration royalty provisions on the basis that
they extended the patent holder’s rights beyond the patent period and
subjected the post-expiration market to “monopoly influences.”
•
Kimble argued to adopt the antitrust law’s rule of reason analysis to assess
the competitive merits of post-expiration royalties on a “case-by-case” basis.
 i.e., to examine whether the patent holder has power in the relevant
market to curtail competition by imposing post-expiration royalty clauses
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Kimble v. Marvel Entertainment, LLC
Kimble’s Economic Arguments
•
Long-term licensing agreements lead to lower royalty rates, which lower
consumer prices and thereby allow technologies to price competitively with
alternatives.
•
The prohibition against post-expiration royalties impedes technological
innovation by preventing parties from reaching agreements to commercialize
patents.
•
The Court should adopt the antitrust law’s rule of reason analysis to assess
the competitive merits of post-expiration royalties on a “case-by-case” basis.
 i.e., to examine whether the patent holder has power in the relevant
market to curtail competition by imposing post-expiration royalty clauses.
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Kimble v. Marvel Entertainment, LLC
Holdings
•
The Court refused to overturn Brulotte and held that charging licensees
royalties for post-expiration use of inventions remains a per se patent
misuse.
•
The majority, however, noted various alternatives available for parties to
work around the per se rule.
•
Thus, parties can compensate patent holders after a patent expires when:
 Royalties are earned before expiration;
 Post-expiration royalties are tied to non-patent rights; or
 Royalties can be extracted until the latest-running patent in the
agreement expires
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Interface-Related Copyright Litigation
Oracle America, Inc. v. Google, Inc.
•
2010 - Oracle sued Google alleging copyright infringement by incorporating
Oracle’s Java Application Programming Interface (API) packages in Google’s
Android smartphone OS.
•
The Court addressed the copyrightability of code related to Oracle’s Java
API packages.
•
2014 - Reversing the district court, the Federal Circuit held that the code and
the structure, sequence, and organization of Oracle’s API packages was
entitled to copyright protection.
Cisco Systems, Inc. v. Arista Networks, Inc.
•
2014 - Cisco sued Arista alleging copyright infringement by incorporating
Command Line Interface (CLI) text commands in network technologies.
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Open Early, Close Late Phenomenon
•
Similarities in the oversight of platforms and Standard Setting
Organizations
 Both reduce costs of entry for new products or new firms, thus
increasing rate of product innovation.
 Both reduce cost of introducing new products while reaching large
numbers of customers.
•
Antitrust concerns may arise when platforms are “open early.”
 Owners adopt open policies that induce reliance, attract investment, and
eventually confer on the platform a monopoly position in a relevant
market.
•
Platform owners then “close late.”
 Owners exploit their dominant position by asserting IP rights to the
exclusion of competitors.
 The real losers in this situation are customers, who have their
investments turned against them
 E.g., customer invests in an “open interface” and when it closes, loses benefits of
investment
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Copyright’s Lock-in Effect
Lotus Development Corp. v. Borland International
•
Boudin, Circuit Judge, concurring:
 “Applying copyright law to computer programs is like assembling a
jigsaw puzzle whose pieces do not quite fit.” 49 F.3d at 820.
•
Judge Boudin recognized that computer users had invested considerable
time and effort in order to obtain expertise in a “de facto industry standard”
(i.e., code and scripts).
•
When users’ investments cannot be transferred, they are discouraged from
switching even to superior technologies.
•
Thus, the effect of providing robust copyright in the context of computer
software would be to lock users into potentially inferior products.
CONCLUSION: There are potentially far-reach effects if interfaces can
be copyrighted, and antitrust is one way to tackle the issue
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