Ninth Circuit Allows Enforcement of Agreement to Pay Royalties on Invention and Its Improvements
Case: Zila, Inc. v. Tinnell, No. 05-15031, 05-15087 (9th Cir. 9/7/07)
The One Sentence Summary: The Ninth Circuit panel held that a contract of indefinite term for the payment of royalties on a herpes treatment invention and its improvements could be enforceable while any of the patents on the invention and its improvements remained in force, and remanded for a determination of whether the plaintiff should have been named as the inventor on a 1992 patent for a gel delivery method.
What They Were Fighting About: Tinell had invented a treatment for herpes lesions and applied for a patent. and then assigned his rights in the invention and improvements to Zila in exchange for five percent of Zila's royalties on the invention and improvements in perpetuity. Zila stopped paying after the first patent on the invention lapsed even though other patents remained in force. The district court ruled for Zila based upon Brulotte v. Thys, 379 U.S. 29 (1964) which held a contract for royalties past the expiration of a patent was unenforceable as an invalid extension of the limited monopoly granted by the patent.
Ninth Circuit Holdings:
The One Sentence Summary: The Ninth Circuit panel held that a contract of indefinite term for the payment of royalties on a herpes treatment invention and its improvements could be enforceable while any of the patents on the invention and its improvements remained in force, and remanded for a determination of whether the plaintiff should have been named as the inventor on a 1992 patent for a gel delivery method.
What They Were Fighting About: Tinell had invented a treatment for herpes lesions and applied for a patent. and then assigned his rights in the invention and improvements to Zila in exchange for five percent of Zila's royalties on the invention and improvements in perpetuity. Zila stopped paying after the first patent on the invention lapsed even though other patents remained in force. The district court ruled for Zila based upon Brulotte v. Thys, 379 U.S. 29 (1964) which held a contract for royalties past the expiration of a patent was unenforceable as an invalid extension of the limited monopoly granted by the patent.
Ninth Circuit Holdings:
- Brulotte is a matter of federal preemption of state law, and did not extend to an agreement to pay royalties for Canadian sales while a Canadian patent remained in force.
- Brulotte did not prevent an agreement such as that here for payment of royalties while any patent on the invention or its improvements was still in effect.
- The district court should determine whether Tinnell should have been named as an inventor on a 1992 patent that remained in force.
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