Marvel No Longer Pays Royalties to Inventor of a Spider-Man Toy

Newsflash from your Hollywood Attorney:

Marvel Enterprises will no longer have to pay royalties to Stephen Kimble, the inventor of a Spider-Man toy called the Web Blaster that allows users to mimic the character's web-shooting abilities with a foam string.

the Ninth Circuit Court of Appeals begrudgingly gave Marvel a victory on the basis that the Supreme Court has restricted the kinds of contracts that can be made with patent owners.

Real money was at stake here. Since the product's invention in 1990, Kimble has earned $6 million in royalties from an agreement with Marvel that allowed him three percent of net product sales.

Read Full Ruling here.... http://cdn.ca9.uscourts.gov/datastore/opinions/2013/07/16/11-15605.pdf

In 1990, after Kimble patented his idea for a toy that was activated via a trigger attached to a valve in the palm of a glove, the inventor met with the president of one of Marvel's predecessor companies.
Marvel passed on the idea, and after the company began manufacturing a similar Spider-Man role-playing toy, Kimble sued in 1997 for patent infringement and a claim that the company had breached a contract to pay him for use of his idea. The patent claim was dismissed, but a judge ruled there were genuine issues of fact precluding summary judgment on the contract claim, entering a judgment that awarded him 3.5 percent of sales. Both sides appealed.
In 2001, the parties came to a settlement agreement. As part of the deal, Marvel purchased the patent for more than $516,000 and also agreed to give him 3 percent of net product sales. (Kimble later sold an interest in his property to Robert Grabb, a co-appellant.)

Kimble then filed a new lawsuit for breach of contract, and Marvel submitted counterclaims that sought a declaration that it was no longer obligated to pay Kimble based on the sale of products after the expiration of his patent.

That has the Ninth Circuit reviewing Brulotte v. Thys Co., a 1964 Supreme Court decision which forbids patent holders from collecting royalties after the expiration date of the patent. Where it gets tricky is so-called "hybrid agreements" that allow for payments during the patent period and non-patent period. In baseball, this would be equivalent to the Los Angeles Dodgers agreeing to lock up a young superstar beyond his early restricted free agent years.
Courts around the nation have been dubious about royalty payments under hybrid agreements, not wishing to allow patent holders to use their leverage in the early years of a patent's issuance. The Ninth Circuit has been more careful on this topic, reviewing a later 1979 Supreme Court case and holding that there should at least be a discount in the post-expiration period.

On appeal, Kimble argued that the settlement agreement with Marvel distinguishes between patent and non-patent rights and that Brulotte did not apply.
Ninth Circuit Judge Consuelo Callahan writes, "We cannot agree because the agreement plainly involved one royalty rate for both patent and Web Blaster rights, with no discount or other clear indication that the Web Blaster royalties were not subject to patent leverage."

Read More.... http://www.hollywoodreporter.com/thr-esq/appeals-court-frees-marvel-spider-586148

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