Distribution, Competition, and Antitrust / IP Law

SCOTUS Reaffirms that in Antitrust Cases, It Gives Less Deference to Precedent

Spiderman-exclusive-rooftop

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Yesterday, in Kimble v. Marvel Entertainment, LLC, the U.S. Supreme Court upheld the rule first announced in Brulotte v. Thys Co., 379 U.S. 29 (1964), that a patentee cannot collect royalties on sales made after expiration of the patent.

The patent law decision upholds a probably anticompetitive rule that from an economic perspective makes little sense. That said, the decision is not particularly surprising, resting as it does on stare decisis (settled law) grounds – though it is amusingly chock-full of references to Spiderman (Marvel Entertainment had licensed a Spiderman product from the plaintiff-patentee, who had a patent on a toy that lets children shoot “webs” from a device held in the palm of the hand). Somewhat disappointingly, the decision does not expressly address an important issue – whether, when a patent portfolio is licensed, license fees must decrease as patents expire.

Perhaps the most important portion of the decision is the following discussion of stare decisis and antitrust law:

If Brulotte were an antitrust rather than a patent case, we might [address the issues] as Kimble would like. This Court has viewed stare decisis as having less-than-usual force in cases involving the Sherman Act. See, e.g., Khan, 522 U. S., at 20–21. Congress, we have explained, intended that law’s reference to “restraint of trade” to have “changing content,” and authorized courts to oversee the term’s “dynamic potential.” Business Electronics Corp. v. Sharp Electronics Corp., 485 U. S. 717, 731–732 (1988). We have therefore felt relatively free to revise our legal analysis as economic understanding evolves and (just as Kimble notes) to reverse antitrust precedents that misperceived a practice’s competitive consequences. See Leegin, 551 U. S., at 899–900. Moreover, because the question in those cases was whether the challenged activity restrained trade, the Court’s rulings necessarily turned on its understanding of economics. See Business Electronics Corp., 485 U. S., at 731. Accordingly, to overturn the decisions in light of sounder economic reasoning was to take them “on [their] own terms.” Halliburton, 573 U. S., at ___ (slip op., at 9).

This is a strong reaffirmation of the Court’s ability to reshape antitrust law according to economic principles and new economic understandings – despite the traditional rule of stare decisis. In other words, for stare decisis principles, some animals really are more equal than others.

Update (06/26/15): I was quoted in Law360 about this (may be behind a paywall).

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