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les Nouvelles June 2017 Article of the Month
Unraveling The Conundrums Of Running Royalties In Cross-Border Patent License Agreements

Mizuki HashiguchiMizuki Hashiguchi

Oh-Ebashi LPC & Partners
Attorney-at-Law
Osaka, Japan

Introduction

Adjacent to the glorious and delicate stained glass of Sainte-Chapelle stands the magnificent “Palace of Justice,” currently housing the Court of Appeal of Paris.1 The court encountered an enigma involving patent royalties and European competition law. A license agreement licensed three patents. One patent was subsequently revoked. The other two patents were later found not to be infringed by the licensee. Yet, the license agreement imposed an obligation on the licensee to pay running royalties throughout the contractual term. Is the imposition of this obligation permitted under Article 101 of the Treaty on the Func tioning of the European Union?

The Court of Appeal of Paris referred this question to the Court of Justice of the European Union.2  On July 7, 2016, the Court of Justice of the European Union issued a judgment answering the question in the affirmative.3

Analyzing the judgment in comparison with legal precedent in the United States evinces differing judicial approaches to interpreting license agreements and discerning the parties' commercial intent when royalty payments and patent monopoly are at issue. Similar cases in the United States, France, and Japan provide practical guidance concerning the licensees' obligation to pay royalties and whether licensees are entitled to a refund when the licensed patents are ultimately invalidated.

Genentech v. Hoechst:
A Judgment by the Court of Justice of the European Union

License Agreement, Patents, and the Royalty Clause
On August 6, 1992, Behringwerke AG and Genentech executed a non-exclusive license agreement for a technology using a human cytomegalovirus enhancer.4

The patents licensed under this agreement were (i) European Patent No. EP 0173 177 53,5  (ii) United States Patent No. 5,849,522,6 and (iii) United States Patent No.  6,218,140.7  As  consideration for the right to use the technology, the agreement set forth (i) a one-time fee of 20,000 Deutschmarks, (ii) a fixed annual fee of 20,000 Deutschmarks, and (iii) a running royalty equal to 0.5 percent of the net sales of “finished products” sold by Genentech, its affiliates, and sub-licensees.8

Genentech allegedly used the licensed technology to market its pharmaceutical product Rituxan in the United States and the product MabThera in the European Union.9 Genentech paid the one-time fee.10 It also paid the fixed annual fee from 1992 to 2008.11 However, it did not pay the running royalty.12

European Patent is Revoked, Arbitration Starts

In 1996, Behringwerke assigned its status as a patentee and licensor to Hoechst AG.13  On January 12, 1999, the European Patent Office revoked European Patent No. EP 0173 177 53.14 On June 30, 2008, Hoechst's subsidiary, Sanofi-Aventis Deutschland GmbH, inquired Genentech about the unpaid running royalty.15

The license agreement provided that “the licensee may terminate this agreement and the licenses granted pursuant hereto by giving Behringwerke two (2) months' notice for that purpose, if the licensee decides to stop using the license rights conferred hereunder.”16 Pursuant to this clause, Genentech informed Sanofi-Aventis Deutschland on August 27, 2008, that Genentech will terminate the license agreement as of October 28, 2008.17

On October 24, 2008, Hoechst initiated arbitration against Genentech before the International Chamber of Commerce.18 Hoechst asserted that Genentech used the licensed technology without paying the running royalties set forth in the license agreement.19

A Finding of Non-Infringement of the United States Patents

Three days later, Sanofi-Aventis Deutschland sued Genentech in the United States District Court for the Eastern District of Texas, alleging infringement of United States Patent Nos. 5,849,522 and 6,218,140.20 On that same day, Genentech filed an action in the United States District Court for the Northern District of California, seeking a declaratory judgment of non-infringement and invalidity of the patents.21

The District Court for the Northern District of California consolidated these two cases.22 The court found, on March 7, 2011, that Genentech did not infringe the patents.23

Arbitrator Awards Payment of Running Royalties

On September 5, 2012, the arbitrator determined that Genentech must pay the running royalty to Hoechst for the sales of Rituxan manufactured from the date that the United States Patent No. 5,849,522 was issued24 up to the date on which the license agreement was terminated.25

Action for Annulment of the Arbitral Award

Articles 1518 and 1520 of the Code of Civil Procedure of France allow a party to bring an action for the annulment of an international arbitral award delivered in France if certain conditions are met.26 On December 10, 2012, Genentech filed an action before the Court of Appeal of Paris, seeking annulment of the arbitrator's decision.27

The license agreement imposed an obligation on Genentech to pay running royalties when, in fact, one of the licensed patents was revoked and the other licensed patents were found not to be infringed. The Court of Appeal of Paris was uncertain whether such an agreement is permissible under Article 101 of the Treaty on the Functioning of the European Union.28

Question is Referred to the Court of Justice of the European Union

The European Union is based on the Treaty of the European Union and the Treaty on the Functioning of the European Union.29  These treaties are considered to be the “primary law” of the European Union.30 A court of a Member State of the European Union may refer a question to the Court of Justice to clarify an issue concerning the interpretation of European Union law.31 In Genentech v. Hoechst, the Court of Appeal of Paris sought guidance from the Court of Justice of the European Union on the royalty provision's compatibility with Article 101.

The Court of Justice of the European Union interpreted the question as follows: When patents protecting the licensed technology are revoked or are not infringed, and the license agreement requires the licensee to pay royalties throughout the term of the license agreement, should Article 101, Section 1 of the Treaty on the Functioning of the European Union be construed as prohibiting the imposition of this payment obligation?32

Article 101 of the Treaty on the Functioning of the European Union prohibits certain anticompetitive agreements. In particular, Section 1 of Article 101 provides that:

  1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which:
    1. directly or indirectly fix purchase or selling prices or any other trading conditions;
    2. limit or control production, markets, technical development, or investment;
    3. share markets or sources of supply;
    4. apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
    5. make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.33

Genentech argued that the arbitrator's decision to require Genentech to pay royalties for selling products that do not infringe the licensed patents contravenes Article 101 because Genentech's competitors who are not bound to the license agreement need not pay these royalties, thereby placing Genentech at a competitive disadvantage.34  Meanwhile, Hoechst argued the link between the arbitral award of royalty payments and the trade between Member States of the European Union was tenuous.35

The Judgment by the Court of Justice of the European Union

The Court of Justice of the European Union applied its prior judgment in Ottung.36 The Court in Ottung interpreted Article 85(1) of the Treaty Establishing the European Community,37  which is the predecessor of Article 101(1) of the Treaty on the Functioning of the European Union. According to the Ottung judgment, if the licensee is free to terminate an exclusive license agreement by providing a reasonable notice, it is permissible under the Article to require the licensee to pay royalties throughout the term of the agreement, even after the licensed patents have expired.38

Based on Ottung, the Court concluded that the license agreement in Genentech v. Hoechst does not contravene Article 101(1). The Court stated that, even if the licensed patent has expired, and the patentee cannot enforce its patent rights against the licensee, royalty payments are due as long as two conditions are met.39 First, the license agreement must still be in effect.40 Second, the licensee must be capable of freely terminating the license agreement by giving a reasonable notice.41 The Court observed that the royalty is a price that the licensee pays for commercially exploiting the licensed technology without any apprehension that the licensor will enforce its intellectual property rights against the licensee.42

Kimble v. Marvel:
A Decision by the United States Supreme Court

The legality of a contractual provision for royalty payments was also at issue before the United States Supreme Court in Kimble v. Marvel Entertainment, LLC, 135 S.Ct. 2401 (2015). The Court concluded that compelling payments of royalties for use of the patented technology is unlawful per se if the use occurs after the expiration of the licensed patent. “Per se” means “in itself” or “inherently.”43

The ‘856 Patent and the “Web Blaster”

Mr. Stephen Kimble obtained U.S. Patent No. 5,072,856 for a toy inspired by Spider-Man.44  The toy is a glove that children can wear and pretend as if they are Spider-Men spinning spider webs from their palms.45  The glove is designed to eject pressurized foam, which looks like spider webs.46  Marvel Entertainment manufactured a similar toy called “Web Blaster,” also inspired by Spider-Man.47

Agreement on Royalty for “Future Sales”

After Mr. Kimble sued Marvel Entertainment, the parties entered into a settlement agreement.48 The agreement provided that Marvel Entertainment would pay Mr. Kimble a three percent royalty on its future sales of “Web Blaster” and other analogous products.49

Post-Expiration Royalties and the Precedent of Brulotte

Marvel Entertainment sought a declaratory judgment that it will not need to pay the royalty once U.S. Patent No. 5,072,856 expires.50 The district court granted the request by following Brulotte v. Thys Co., 379 U.S. 29 (1969).51  Brulotteheld that agreements requiring payments of royalties accruing after all the licensed patents have expired are “unlawful per se” under the patent laws.52  The district court's declaratory judgment in Kimble v. Marvel was affirmed by the United States Court of Appeals for the Ninth Circuit, but with reluctance.53 The Court of Appeals opined that Brulotte's decision is “counterintuitive.”54

The Decision by the Supreme Court of the United States

The Supreme Court of the United States decided whether or not it should overrule Brulotte. The Supreme Court applied the principle of stare decisis. Stare decisis means that a court will adhere to authoritative precedent concerning the same issue.55 The Supreme Court in Kimble v. Marvel stated that, “[a]s against this superpowered form of stare decisis, we would need a superspecial justification to warrant reversing Brulotte.56

The Supreme Court concluded that there is no sufficient justification for overruling Brulotte.57  Although Brulotte was decided 52 years ago, the Supreme Court explained that “the core feature of the patent laws on which Brulotte relied remains just the same.”58 Once a patent expires, the invention protected by that patent passes to the public domain.59 Anyone is free to exploit the invention after the patent expires.60  Therefore, “[a]ny attempt to limit a licensee's post-expiration use of the invention”61  “runs counter to the policy and purpose of the patent laws.”62  Hence, under Kimble v. Marvel, a provision in a license agreement that requires the licensee to pay royalties for using the invention after the patent has expired is unenforceable.63

Comparative Analysis of European and United States Judicial Decisions involving Running Royalty Obligations under License Agreements

Adherence to precedent played a decisive role in both Genentech v. Hoechst and Kimble v. Marvel. The Court of Justice of the European Union reached its judgment by applying its prior judgment in Ottung. Similarly, the Supreme Court of the United States rendered its decision by following its precedent in Brulotte. Nonetheless, the judgment by the Court of Justice of the European Union differs from the decision by the Supreme Court of the United States in multiple respects.

  1. Expiration, Invalidation, and Non-Infringement
    First, in Kimble v. Marvel, the United States Supreme Court examined royalties for sales made after the patent had expired. Meanwhile, the licensed patents in Genentech v. Hoechst did not exactly expire. One of the licensed patents was revoked, and the others were held not to be infringed. The decision of non-invalidity was affirmed on appeal.

    Despite this distinction, the propriety of imposing patent-based royalties on licensees becomes an issue in each of these circumstances because the licensed patent no longer endows the licensor with the authority to limit the licensee's use of the licensed technology.64
  2. The Public is Free to Use the Invention Once the Patent Expires
    Second, the principle that a patented invention enters the public domain upon the patent's expiration was at the core of the United States Supreme Court's decision in Kimble v. Marvel. The Court emphasized that “when the patent expires, the patentee's prerogatives expire too.”65

    The licensee in Ottung made the same argument before the European Court of Justice. The licensee asserted that “Mr. Ottung's right to the royalty ceased upon the expiry of the patents, the factual and legal basis for the payment of royalties.”66 However, this argument was not discussed in the judgment of the Court of Justice of the European Union in Ottung.
  3. Issue in Genentech v. Hoechst was Limited to the Compliance with Article 101
    Third, the issue before the Court of Justice of the European Union in Genentech v. Hoechst was confined to whether Article 101 of the Treaty on the Functioning of the European Union precludes the royalty clause at issue.

    On the contrary, the United States Supreme Court's analysis in Kimble v. Marvel was not limited to any particular statutory provision. It determined that the royalty clause at issue was unlawful per se.
  4. Determining the Parties' Commercial Intent
    Fourth, the Court of Justice of the European Union in Ottung made a finding on why the parties added a clause to their license agreement requiring the licensee to pay royalties. The judgment in Ottung stated that:
    The possibility cannot be ruled out that the reason for the inclusion in a licensing agreement of a clause imposing an obligation to pay royalty may be unconnected with a patent. Such a clause may instead reflect a commercial assessment of the value to be attributed to the possibilities of exploitation granted by the licensing agreement.67

    The United States Supreme Court's decision in Kimble v. Marvel was devoid of any conjecture about the parties' purpose for establishing the obligation for paying running royalties.

    This dissimilarity may be explained by the fact that German law governed the license agreement between Genentech and Hoechst. According to the arbitrator in Genentech v. Hoechst, under German law, license agreements are interpreted not only based on the literal provisions set forth in the agreement, but also based on their origin, context, and commercial purpose.68
  5. Interpreting the Definitions Set Forth in License Agreements
    Fifth, there is a difference in the weight given to literal interpretations of contractual clauses. In general, courts in the United States place greater emphasis on the literal terms of a license agreement. Comparing a United States court's decision in Miotox v. Allergan69 with the European Court of Justice's judgment in Genentech v. Hoechst shows a clear distinction. Both involved an interpretation of definitions provided in the license agreement.

    Miotox v. Allergan involved an invention for treat ing migraine headaches with Botox products. The parties agreed that the licensee would pay royalties on “Net Sales” defined as “[t]he actual selling price of Licensed Product sold by [the licensee].
    …”70  The license agreement defined “Licensed Product” as “[a]ny medical product containing Botulinum Toxin or other toxin made, used, or sold by [licensee] … whose use is covered by a Valid Patent Claim.”71 Nonetheless, the licensor sought payment of royalties on all Botox products regardless of whether it is covered by a valid patent claim.72  The licensee refused, asserting that the definitions tied royalty payments to a valid patent claim.73  The United States District Court for the Central District of California found that the licensee's position is “clearly supported by the explicit language of the License Agreement.”74

    The license agreement in Genentech v. Hoechst contained analogous definitions. Article 3.1 of the agreement provided that the running royalty was to be paid for the net sales of “finished products.” The agreement defined “finished products” as “commercially marketable goods incorporating a licensed product…”75 “Licensed products” were defined in the agreement as “the materials (including organisms), the manufacture, use or sale of which would, in the absence of the present agreement, infringe one or more unexpired claims [of] the licensed patents.”76

    Genentech argued during arbitration that it did not need to pay running royalties because the contractual terms provided that the royalties are due if Genentech's products infringe an unexpired patent claim.77 Unlike Miotoxv.Allergan, the arbitrator in Genentech v. Hoechst rejected this argument as being a “literal interpretation” of the license agreement.78
  6. Licensee's Ability to Terminate the License Agreement
    Sixth, the Court of Justice of the European Union in Genentech v. Hoechst emphasized that a licensee must be able to terminate the license agreement in order for the royalty obligations to comply with Article 101 of the Treaty on the Functioning of the European Union. The reasoning underlying this judgment is that, as long as the licensee can terminate the license agreement, the expiration of the licensed patent would not place the licensee at a competitive disadvantage in the market79 because terminating the license agreement would relieve the licensee of the obligation to pay running royalties.

    In contrast, the United States Supreme Court in Kimble v. Marvel did not consider the licensee's ability to terminate the license agreement because it did not regard the issue of post-expiration royalty obligation as an antitrust issue.80

Whether Licensees are Entitled to Refunds of Royalty Payments

An issue concerning royalty obligations and the timing of terminating a license agreement is whether royalty payments may be refunded to the licensee. When a court or a tribunal declares that a licensed patent is invalid or that the licensee does not infringe the patent, the licensee might have already paid running royalties up to the termination of the agreement even though, in retrospect, the patent was invalid or not infringed. If so, are licensees entitled to a refund of the royalties? The answer varies among jurisdictions, for example, the United States, France, and Japan.

United States:
Royalties Paid Before Challenging Patent Validity Cannot be Refunded

In the United States, a licensee is responsible for paying royalties under a license agreement up until the date on which the licensee first challenges the validity of the licensed patent.81 Federal courts in the United States have held that a subsequent invalidation of the licensed patent does not allow the licensees to recover royalties that they previously paid, unless the patent was procured by fraud.82

In St. Regis Paper Co. v. Royal Industries, 552 F.2d 309 (2d Cir. 1977), Mr. Gerald Bower obtained U.S. Patent No. 2,767,113 for a plastic strip that could be used to bundle fresh vegetables.83 Mr. Bower assigned his patent rights to Royal Industries.84 The plastic strip was also suitable for packaging bakery products.85  St. Regis Paper Co., a company supplying wrapping paper to the bakery industry, sought to manufacture and sell the plastic strips.86

On May 1, 1963, Royal Industries and St. Regis Paper Co. entered into a license agreement.87 The agreement required St. Regis Paper Co., the licensee, to pay royalties equal to 10 percent of its sales.88 The licensee paid royalties from 1963 to 1967.89 However, the licensee found evidence suggesting that U.S. Patent No. 2,767,113 was invalid.90  The licensee stopped paying royalties after July 19, 1967.91 On April 24, 1968, the licensee filed a lawsuit, seeking a declaration that the licensed patent is invalid. The licensee also sought recovery of the royalties that it had paid.92

The United States Court of Appeals for the Ninth Circuit held that the licensed patent is invalid for obviousness.93 Yet, the Court of Appeals held that the licensee is not entitled to a refund of the royalties that it paid before challenging the validity of the licensed patent.94  The Court of Appeals' concerns were based on the policies of federal patent law:

The possibility of obtaining a refund of all royalties paid might induce a manufacturer to accept a license based on a patent of doubtful validity, derive the benefits of suppressed competition which the patent affords, and challenge validity only after the patent's expiration. The licensee would have a chance to regain all the royalties paid while having enjoyed the fruits of the license agreement.95

France:
Royalties Paid for Licensee's Privileges Cannot be Refunded

In France, the invalidation of a patent will invalidate a license that is based on the patent.96 Despite the invalidation, royalties which were paid in consideration for the privileges enjoyed by the licensee will not be annulled retroactively.97

For example, in a case ultimately decided by LaCour de Cassation of France,98 the owner of a patent for agricultural technology sued an equipment manufacturer for infringing claim 52 of the patent. A court of ap peal in France found the defendant liable for patent infringement. The parties then entered into a settlement and licensing agreement on February 16, 1990. Under the agreement, the defendant was required to pay damages up to the date of the court's decision on infringement. Furthermore, to enable the defendant to manufacture the equipment in the future, the patentee granted a non-exclusive license to exploit the patent. Defendant agreed to pay royalties.

Approximately five years later, on January 24, 1995, an appeals court in France invalidated claim 52 of the patent for lack of inventiveness. The licensee demanded restitution of the payments made under the agreement.

On December 8, 1999, the Court of Appeal of Paris annulled the agreement of February 16, 1990, upheld the validity of the damages payments, and granted the licensee's request for restitution of the royalty payments made before the patent was held to be invalid. The parties appealed.

On January 28, 2003, LaCour de Cassation of France determined that it was proper to void the license agreement because Article L. 613-27 of the French Intellectual Property Code provides that the decision to invalidate a patent has an absolute effect. La Cour de Cassation also affirmed the Court of Appeal's decision that the payment of damages should remain undisturbed. The Court of Appeal's decision on the restitution of royalty payments, however, was overruled. La Cour de Cassation stated that the invalidation of the patent and the resulting annulment of the contract do not trigger the restitution of the royalties that the licensee paid for the privileges under the contract during the period before the court's judgment declaring the invalidity of the patent. Hence, the licensee was not able to obtain a refund of the royalties.

Japan:
Presence of Clauses on Royalty Refunds and Licensor's Assurance are Examined

In Japan, the expiration of a Japanese patent or its invalidation extinguishes the rights granted under a license agreement based on the patent.99 The prevailing view is that when the licensee entered into the license agreement, it assumed the risk that a patent will be invalidated.100 Japanese courts examine if the license agreement explicitly provided whether the licensee is entitled to a refund of royalty payments once the licensed patent is invalidated. Courts also query whether the licensor guaranteed the validity of the patent.

For instance, in a case101  involving Japanese Utility Model No. 909305, the future licensee expressed misgivings about the validity of the utility model. In response the owner of the utility model said, “No problem. Don't worry. We won't cause you any hassle.” The license agreement contained a clause stating that royalties paid by the licensee will not be refunded for any reason. The parties signed the agreement. The licensee paid royalties from October 1974 to June 1976. However, the utility model was invalidated on July 19, 1976, and the invalidation was affirmed on January 24, 1980.

The licensee demanded a refund of the royalty payments pursuant to Article 95 of the Civil Code of Japan. The licensee argued that there was a mistake in the signing of the contract because the licensee had assumed that the utility model would remain valid.

The District Court of Tokyo rejected this argument. The district court noted that the contractual language explicitly denied any entitlement to a refund of the royalties paid by the licensee. The district court also found that the licensee accepted these terms while recognizing a reasonable possibility that the utility model might be invalidated. The district court added that the licensor's oral assurance does not override the contractual agreement that royalties are not refundable.

Scholars in Japan are divided as to whether the licensee is entitled to a refund of the royalties when the contract is silent on the subject.102 The decision of the District Court of Tokyo is viewed as a confirmation that Japanese courts will generally give effect to contractual clauses concerning the licensee's ability to obtain a refund of the royalties.103

Conclusion

Running royalties present multiple levels of intricacies. Principles of patent and antitrust laws are intertwined. Running royalties may be viewed as being premised on the validity of the licensed patents, while they can also be viewed as consideration for the licensee's rights, paid under the assumption that the patents might be invalidated. Case law from various jurisdictions provides clarity to issues involving running royalties. Genentech v. Hoechst indicates that running royalties are due under Article 101(1) of the Treaty on the Functioning of the European Union as long as the license agreement is effective and the licensee can terminate the agreement with reasonable notice. Kimble v. Marvel teaches that patent-related royalties cannot be charged for use occurring after the patent's expiration. These judgments provide a helpful guidance for future negotiations and the drafting of cross-border license agreements.

Available at Social Science Research Network (SSRN): https://ssrn.com/abstract=2896187


  1. See Cour d’appel de Paris, Présentation de la Cour d’appel, http://www.ca-paris.justice.fr/index.php?rubrique=10977.
  2. See Case C-567/14, Genentech Inc. v. Hoechst GmbH, ECLI:EU:C:2016:526, Opinion of Advocate General Wathelet at paras. 28-29 (Mar. 17, 2016). The original language of the case   is French.
  3. See C-567/14, Genentech Inc. v. Hoechst GmbH, ECLI:EU:C:2016:526, Judgment of the Court at para. 43.
  4. See id. at para. 3.
  5. Id.
  6. Sanofi-Aventis Deutschland GmbH v. Genentech, Inc., 716 F.3d  586, 588 (Fed. Cir.  2013).
  7. Id.
  8. Id. at para. 6; Sanofi-Aventis, 716 F.3d at 588-89.
  9. Case C-567/14, Judgment of the Court at para. 4.
  10. Id. at para. 8.
  11. Sanofi-Aventis, 716 F.3d at 589.
  12. Case C-567/14, Judgment of the Court at para. 8; Sanofi- Aventis, 716 F.3d  at 589.
  13. Case C-567/14, Judgment of the Court at para. 8; Sanofi- Aventis, 716 F.3d  at 589.
  14. Case C-567/14, Opinion of Advocate General Wathelet at para. 6.
  15. Case C-567/14, Judgment of the Court at para. 9.
  16. See Case C-567/14, Opinion of Advocate General Wathelet at n. 4.
  17. Case C-567/14, Judgment of the Court at para. 10.
  18. Id. at para. 11; Sanofi-Aventis, 716 F.3d at 589.
  19. Case C-567/14, Judgment of the Court at para. 11.
  20. Id. at para. 12; Sanofi-Aventis, 716 F.3d at 589.
  21. Case C-567/14, Judgment of the Court at para. 12; Sanofi- Aventis, 716 F.3d  at 589.
  22. 22. Id. at 588.
  23. Id.; Sanofi-Aventis Deutschland GMBH v. Genentech, Inc., Nos. C 08–4909 SI, C 09–4919 SI, 2011 WL 839411, at *4-*7, *10-*11, *13-*14 (N.D. Cal. Mar.  7,  2011).
  24. The United States Patent No. 5,849,522 was issued on December 15, 1998. The United States Patent No. 6,218,140 was issued on April 17, 2001.
  25. Case C-567/14, Judgment of the Court at para. 14; Case C-567/14, Opinion of Advocate General Wathelet at para. 20.
  26. Id. at paras. 4-5; See C. CIV.,  art. 1518; C. CIV.,  art. 1520.
  27. Case C-567/14, Judgment of the Court at para. 15; Case C-567/14, Opinion of Advocate General Wathelet at para. 26.
  28. Case C-567/14, Judgment of the Court at para. 18.
  29. Dubowski, Tomasz. Constitutional Law Of The European Union 76 (Temida 2 2011).
  30. See Id.
  31. Court of Justice of the European Union, References for preliminary rulings, http://curia.europa.eu/jcms/jcms/Jo2_7024/en/; JEFF KENNER, EUROPEAN UNION LEGISLATION 2011- 2012 254 (Routledge 2012).
  32. See Case C-567/14, Judgment of the Court at para. 35.
  33. The Treaty on the Functioning of the European Union art. 101(1), May 9, 2008, 2008/C  115/01.
  34. Case C-567/14, Judgment of the Court at para. 37.
  35. Case C-567/14, Opinion of Advocate General Wathelet at para. 82.
  36. See Case C-567/14, Opinion of Advocate General Wathelet at para. 89.
  37. Case320/87,Ottungv.Klee&WeilbachA/S,ECLI:EU:C:1989:195, Judgment of the Court atpara. 1 (May 12, 1989).
  38. See Case C-567/14, Judgment of the Court at para. 39 (citing Case 320/87, Judgment of the Court at para. 11); See also Case 320/87, Judgment of the Court at para. 13.
  39. See Case C-567/14, Judgment of the Court at para. 40, “Aussi longtemps que le contrat de licence concerné demeure en vigueur et peut être librement résilié par le licencié, le paiement de la redevance est dû, et ce quand bien même les droits de propriété industrielle issus des brevets concédés à titre exclusif ne peuvent être mis en œuvre à l’encontre du licencié en raison de l’expiration de leur terme.” (“As long as the licence agreement at issue is still valid and can be freely terminated by the licensee, the royalty payment is due, even if the industrial-property rights derived from patents which are granted exclusively cannot be used against the licensee due to the fact that the period of their validity has expired.”)
  40. Id.
  41. Id. at paras. 40, 43.
  42. SeeCase C-567/14, Judgment of the Court at para. 40, “…cette redevance constitue le prix à payer pour exploiter commercialement la technologie sous licence avec l’assurance que le concédant n’exercera pas ses droits de propriété industrielle.” (“…that royalty is the price to be paid for commercial exploitation of the licensed technology with the guarantee that the licensor will not exercise its industrial- property rights.”)
  43. Legal Information Institute, per se, https://www.law.cornell.edu/wex/per_se.
  44. See Kimble v. Marvel Entm’t, LLC, 135 S.Ct. 2401, 2405 (2015).
  45. See U.S. Patent No. 5,072,856 (filed May 25,  1990).
  46. See Id.
  47. Kimble, 135 S.Ct. at 2406.
  48. Id.
  49. Id.
  50. Id.
  51. Id.
  52. Id. at 2407.
  53. Id. at 2406.
  54. Kimble v. Marvel Entm’t, 727 F.3d 856, 857 (9th Cir. 2013).
  55. See Trevor W. Morrison, Stare Decisis in the Office of Legal Counsel, 110 COLUM. L. REV. 1488, 1499 (2010); Martin Shapiro, Toward a Theory of Stare Decisis, 1 J. LEGAL STUD. 125 (1972); Jack Knight & Lee Epstein, The Norm of Stare Decisis, 40 AM. J. POL.  SCI.  1018, (1996).
  56. Kimble, 135 S.Ct. at 2410.
  57. Id.
  58. Id.
  59. Kimble, 135 S.Ct. at 2408.
  60. Id.
  61. Kimble, 135 S.Ct. at 2407.
  62. Kimble, 135 S.Ct. at 2407 (quoting Brulotte v. Thys Co., 379 U.S. 29, 31 (1969) (quoting Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249, 256 (1945))).
  63. Kimble, 135 S.Ct. at 2407, 2411.
  64. This may explain why the Court of Justice of the European Union applied Ottung in Genentech v. Hoechst. Unlike the patents in Genentech v. Hoechst, the patents in Ottung had expired, and post-expiration royalties were at issue. Case 320/87, Report for the Hearing, Ottung v. Weilbach A/S, 1989 E.C.R. 1177 at 1179.
  65. Kimble, 135 S.Ct. at 2407.
  66. Case 320/87, Report for the Hearing at 1179.
  67. Case 320/87, Judgment of the Court at para. 11.
  68. Case C-567/14, Opinion of Advocate General Wathelet at n. 11.
  69. Miotox LLC v. Allergan, Inc., No. 2:14-cv-08723- ODW(PJWx) (C.D. Cal. Oct. 5, 2015).
  70. Id.
  71. Id.
  72. Id.
  73. Id.
  74. Id.
  75. Case C-567/14, Judgment of the Court at para. 7.
  76. Id.
  77. C-567/14, Judgment of the Court at para. 32.
  78. Id.
  79. See Case C-567/14, Judgment of the Court at para. 40 “En effet, des circonstances de cette nature, en particulier celle selon laquelle le contrat de licence peut être librement résilié par le licencié, permettent d’exclure que le paiement d’une redevance porte atteinte à la concurrence en restreignant la liberté d’action du licencié ou en entraînant des effets de verrouillage du marché.” (“In the light of such circumstances, in particular the fact that the licence may be freely terminated by the licensee, the contention may be rejected that the payment of a royalty undermines competition by restricting the freedom of action of the licensee or by causing market foreclosure effects.”)
  80. See Kimble, 135 S.Ct. at  2413.
  81. Esoterix Genetic Labs. LLC v. Qiagen Inc., 133 F.Supp.3d 349, 361 (D. Mass. 2015) (citing Studiengesellschaft Kohle, M.B.H. v. Shell Oil Co., 112 F.3d 1561, 1567-68 (Fed.Cir.1997)). See also Go Medical Indus. v. Inmed Corp., 471 F.3d 1264, 1273 (2006).
  82. See, e.g., St. Regis Paper Co. v. Royal Indus., 552 F.2d 309, 314 (2d Cir. 1977); Troxel Mfg. Co. v. Schwinn Bicycle Co., 465 F.2d 1253 (6th Cir.1972); Transitron Elec. Corp. v. Hughes Aircraft Co., 649 F.2d  871 (1st Cir.  1981).
  83. St. Regis Paper Co., 552 F.2d at 310.
  84. Id.
  85. Id.
  86. Id.
  87. Id.
  88. Id. at 311.
  89. Id.
  90. Id.
  91. Id.
  92. Id.
  93. Id. at 312.
  94. Id. at 314.
  95. Id.
  96. Laure Marino, Droit De La Propriété Intellectuelle 89 (Presses Universitaires de France 2013).
  97. See Id. (citing Cass. com. 28 janv. 2003, n° 00-12149: Propr. industr. 2003, comm. 36, note J. Raynard).
  98. Cass. com. Jan. 28, 2003, Bull. civ. IV N° 11, p. 12.
  99. NOBUHIRO NAKAYAMA, TOKKYO-Hō 498, 508 (Kōbundō 2016) (1993).
  100. See, e.g., Nihon Sōgō Kikaku Kabushiki Gaisha v. M.F.I. Net (S) Pte Ltd., 2168 HANREI JIHŌ 74 (Tokyo D. Ct., July 18, 2012) (finding that there was no deception on the part of the patentee during the formation of a contract with the licensee when the licensed patent was later invalidated).
  101. Toyo Suisan Kabushiki Gaisha v. Nissin Food Products Co., Ltd., 1070 HANREI JIHŌ 94 (Tokyo D. Ct., Nov. 29, 1982).
  102. Kazuhiko Yoshida, 100 Kenri Mukō no Baai no Kibarai Jittshiryō Henkan no Yōhi (100 Whether Royalties Already Paid Must Be Refunded When Rights Are Invalidated), JURIST NO. 170 TOKKYO HANREI HYAKU SEN 206, 207 (Yūhikaku 3d Ed. 2004).
  103. Id.