Patent Falls In Spiderman’s Web: Are You Paying Royalties Unnecessarily?

Spiderman

While the Supreme Court’s recent healthcare and marriage equality rulings garnered a lot of attention, there was another decision at the end of the Court’s term that may be more meaningful to the business of fashion – Kimble v. Marvel Entertainment, the Spiderman patent litigation. Steven Kimble secured a patent for a Spiderman toy that shot the character’s “webs” from a hand. Marvel, owner of the character, purchased the patent to resolve a claim of patent infringement, promising to pay royalties on sales of the toy.

The popularity of the toy outlived the twenty-year patent term. Under a fifty-year-old Supreme Court decision, the obligation to pay royalties under a contract ends when the patent term expires, even if the agreement contains no termination date. Court decisions have applied the same rule to copyright licenses and assignments.

The Spiderman case called for the Supreme Court to reconsider the rule and permit the continued collection of royalties as provided in the contract. Although conceding that the fifty-year-old case might have been wrongly decided, as a number of courts and commentators have noted, the Court declined the opportunity to overrule it. Instead, it advised that, if the rule is to be changed, it is up to Congress to do so. Spidey is now free to cast his web without writing any more checks.

The decision is a reminder to licensors that patent and copyright rights do not last forever. In contrast, trademarks last as long as they are used and protected and trade secrets last as long as their secrecy is maintained. Joining a license for patents and copyrights with related trademarks or trade secrets can be a good way to maintain royalties after the patents and copyrights have expired. Licensees, on the other hand, should periodically investigate whether they are paying royalties under patents or copyrights that may have expired.

Credit: Helene M. Freeman


Say What You Mean, Mean What You Say

ForkInTheRoad-Decide

As we have discussed here, fashion is about nothing if not intellectual property, and most fashion intellectual property is comparatively easy to copy or emulate without great expense. If you have any success at what you do, the odds are fairly good that someone, somewhere on the planet will come out with what you believe to be a brand or product that infringes on your proprietary rights.

You will then have come to a fork in the road. The failure to take action to protect your rights may be used against you later. In the case of trade dress, for example, your silence may be used as evidence of everything from a showing that you suffered no lasting harm to the de facto abandonment of the right to the exclusive use of the trade dress. On the other hand, if you send out a strong cease and desist letter with a clear threat to sue for non-compliance but do not follow up in a reasonable time with a lawsuit should the recipient not comply, you may be deemed estopped (barred) from filing your lawsuit at a later date. That is why cease and desist letters typically threaten the “possibility” or the “potential” of the initiation of litigation—to avoid being estopped by the failure to carry out an explicit, promised remedial act.

Perhaps even worse, if you send a cease and desist letter that is strong enough to make the recipient fear an imminent lawsuit, and if the recipient believes it was within its rights to use the intellectual property that you claim infringes, it may make a preemptory strike. It would do that by filing a declaratory judgment action, asking a court to declare that what it has done was in fact lawful. To use jargon, when you have been so “d.j.’ed,” you have lost the “race to the courthouse door,” possibly to a “forum shopper.” For example, having been ready to sue in New York, where you are located or where you believe the law is favorable to your position, you may find yourself defending an action on the other coast in a court chosen by the plaintiff because it is near to its home base or in the belief that the law there is more favorable to it.

So there is an art in knowing when to send a cease and desist letter and what the tone and the content of the letter should be. As you may remember from your days on the playground, consider the advice you got never to make a threat you are not prepared to carry out and, of course, never to play the bully—because you just do not know what may come back at you.

Credit:  Alan Behr