SW Legal studies in Business

Patent License Agreements Must End When Patent Expires
Description Appeals court held that patent license agreements may not be enforced beyond the expiration date of the patent. The Supreme Court has made it clear that to allow royalties to be paid to patent owners beyond the expiration date is an extension of the monopoly privilege granted by patent that will not be allowed.
Topic Intellectual Property
Key Words Patents; Licensing; Expiration
C A S E   S U M M A R Y
Facts Scheiber, an inventor, held patents on the audio system known as "surround sound." He sued Dolby in 1983 for infringing on his patents. The parties settled that suit; Scheiber agreed to license his patents to Dolby for royalties. His last U.S. patent expired in 1993, while a Canadian patent did not expire until 1995. Dolby agreed to pay royalties on all patents until the last Canadian patent expired in 1995; they agreed on a lower royalty rate than would have been paid had the agreement expired in 1993 when the U.S. patents expired. Once the U.S. patents expired, Dolby refused to pay more royalties; Scheiber sued. The trial court dismissed the suit; Scheiber appealed.
Decision

Affirmed. A patent license agreement that extends beyond the life of the patent is unenforceable. The date set in the agreement is not relevant. The date of the expiration of the patent controls the length of licensing agreements. The fact that Scheiber agreed to accept a lower royalty rate in exchange for a longer licensing agreement does not matter. Patent monopolies expire when the patent expires.

Citation Scheiber v. Dolby Laboratories, Inc., 293 F.3d 1014 (7th Cir., 2002)

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