Brulotte v. Thys Co.

Brulotte v. Thys Co., 379 U.S. 29 (1964)
(case included in Patent Law and Policy: Cases and Materials, Fourth Edition by Merges and Duffy)

Facts: The respondent, owner of a hop-picking machine patent, sold a machine to each of the petitioners for a flat sum and issued a license for use of each machine. The license required payment of the greater of either a flat fee, or a fee based upon the amount of hops harvested. However, the licenses remained effective beyond the expiration dates of the patents covered by them. The petitioners defaulted on the payments accruing both before and after expiration of the patents.

Procedural Posture: The petitioners defended their suit based on misuse of the patents through extension of the license agreement beyond the expiration date of the patents. The trial court rendered judgment for the patent holder and the Supreme Court of Washington affirmed. The United States Supreme Court reversed, based on the holding below.

Issue:Is a patent monopoly enforceable after expiration of the patent?

Rules on Patent Rights: The right to make, the right to sell, and the right to use of a patent “may be granted or conferred separately by the Patentee.” Adams v. Burke, 84 U.S. 17 Wall 453, 456 1873. But 35 U.S.C. Section 154 provides (at the time of this case) that patents are granted for a term of seventeen years. The above mentioned rights therefore become public property at the seventeen-year expiration date.

Holding: No. Royalty payments that extend, unchanged, beyond the life of a patent is abuse of a patent. Therefore, a patentee’s use of a royalty agreement that projects beyond the expiration date of a patent is unlawful per se.

Reasoning: The purchase price for the machines was a flat sum. The annual payments, payments that were not part of the flat sum, were royalties for the use of the machines. The licensor was, in essence, using the licenses to project his monopoly beyond the patent period. The annual charges in this case were different from those types of agreements where long-term payments are based upon the deferment of the purchase costs.
The contracts here are an attempt to continue the terms and conditions for the period after the patents have expired, as they did for the monopoly period.

Dissent: Thys was only selling its machine based on use. Because the majority finds this difficult to understand, the company should redraft its sales contract so that its terms disassociate the use payment from the patent license payment.

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