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Sounds like Brulotte of nonsense to me
Brulotte v. Thys is a contracts case – not a patents case. Brulotte – both because the Court granted certiorari at all and due to the Court’s ultimate holding in the case – is problematic because it conflicts with principles of federalism, with federal judicial self-limitation, and with traditional notions of American contract law.
The grant of certiorari in Brulotte violates the federalist principle that reserves to the states the authority to govern those issues of law which are not (enumerated) federal questions. The Supreme Court should not have granted certiorari to Brulotte, which disguised a contract law complaint – an issue traditionally governed by state law – as an issue of patent law. So doing, Brulotte artificially crafted an issue of not just federal law but federal constitutional law. That is, the appellant couched an essentially state law issue in federal law terms and, despite the transparency of that tactic (even to a 2L), lured the Court into addressing the issue. The result was an unnecessary discussion of patent law that established a per se rule of contracts: “a patentee's use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se.”
First, the principle that contract law is traditionally an area of state law is inarguable. Even the adoption by most states of a version of the UCC was a voluntary action. Thus decisions regarding licensing and royalty agreements – which are nothing but contracts – are properly left in the hands of the Supreme Court of Washington, which the Court overturned. [The Supreme Court of the state, notably, seemed to recognize Brulotte as a contracts case and treat it as such, finding the period during which royalties were required was only “a reasonable amount of time over which to spread the payments for the use of the patent.”] The majority of the U.S. Supreme Court betrays an awareness of the inappropriateness of its grant of certiorari in needlessly citing Art. I § 8 – presumably to underscore the basis for federal jurisdiction of the case. This constitutional citation, however, worsens the effect of the Court’s needless consideration of the case.
The Court’s decision to treat the case as involving a federal constitutional question is also highly problematic according to Frankfurter’s very defensible contention in (his dissent in) Monroe v. Pape (decided three years earlier) that the power of the Supreme Court should be reserved for those cases in which its interference is necessary.
"Relevant also are the effects upon the institution of federal constitutional adjudication of sustaining under § 1979 [precursor to § 1983] damage actions for relief against conduct allegedly violative of federal constitutional rights, but plainly violative of state law. Permitting such actions necessitates the immediate decision of federal constitutional issues despite the admitted availability of state-law remedies which would avoid those issues. This would make inroads, throughout a large area, upon the principle of federal judicial self-limitation which has become a significant instrument in the efficient functioning of the national judiciary. Self-limitation is not a matter of technical nicety, nor judicial timidity. It reflects the recognition that to no small degree the effectiveness of the legal order depends upon the infrequency with which it solves its problems by resorting to determinations of ultimate power."
365 U.S. 167, 240-41 (1961). As Frankfurter emphasized, the Court should be particularly willing to avoid the decision of constitutional issues given other grounds to settle a case.
First, Supreme Court decisions, because of the Court’s position within the judiciary and because its decisions are reserved for issues granted cert., carry much greater weight in the public consciousness than other judicial decisions. In order for the Court’s opinions to retain this impact, argues Frankfurter, it must reserve its judgment for the most important of issues.
Second, Supreme Court decisions are rarely overruled – particularly if those decisions touch on constitutional issues. These decisions supply precedent for similar cases that arise in the future anywhere in the nation. (Although the error of a bad decision may eventually become clear – when the application of the holding leads to poor outcomes in later cases – we cannot necessarily depend upon, for example, a circuit split to highlight the error of a Supreme Court decision.)
Third, accepting my contention that the constitutional issue didn’t really exist, the Court is necessarily deciding that issue in the abstract – rather than according to a specific set of facts that clarify the issue. The likelihood of a wrong decision in such a case is much greater because the Court is not provided with an adequate outline of the real and practical implications of its decision. If a case later arises in which the constitutional issue is implicated, the issue will have already been decided, perhaps badly, based on an irrelevant (or less relevant) fact pattern – likely preventing the Court from considering the issue in light of the newly arisen and more pertinent set of facts. (This is particularly true given the adoption of a per se rule such as that in Burlotte. The inflexibility of such a holding is more likely to preclude its application to a new set of facts from highlighting the error of the decision.)
Finally, the Frankfurtian notion of avoiding the unnecessary consideration of constitutional issues informs the Court’s jurisprudence even today (and is a necessary component of important judge-made doctrines such as Pullman and Younger abstention). Accordingly, the Brulotte Court erred not only in agreeing to hear this case but in treating the complaint unnecessarily as involving an issue of federal constitutional law.
Even accepting arguendo that the Court had some reason to hear the case, they decided Brulotte badly. The case involved Brulotte’s breach of a contract for the use of Thy’s hop-picking machines. Brulotte voluntarily entered into the licensing contract. There is no evidence that Brulotte was coerced into accepting the agreement. The facts of the case suggest just the opposite. Given that Brulotte and patentee Thys are in the same industry, they likely have access to similar information. Informational access is arguably the most crucial element of bargaining power. Thus, the facts support a presumption that the parties were contracting on a level playing field.
[I reject the defense of Brulotte proffered in Aronson v. Quick Point. The Court defended Brulotte as narrowly holding that “the monopoly granted under a patent cannot lawfully be used to negotiate with the leverage of that monopoly.” Even that narrow holding is problematic given that, at the time of the contract, Brulotte believed that the cost of the contract was worth its benefits. Brulotte voluntarily agreed to accept that cost because it was worth it to the company at the time. The company should not be able to back out of that contract without any liability by lassoing the patent law – which Aronson delineates from contract law governing patentable goods. Blackmun notes in his Aronson concurrence the difficulty of distinguishing the case from Brulotte.]
Moreover, were the playing field not level, Brulotte had several options short of seeking a declaration that Thys had violated the federal Constitution. Brulotte could have chosen not to contract with Thys in the first place. Given that information regarding the expiration date of Thys’ patents is publicly available, Brulotte could have investigated the term of the patents and contracted accordingly for a shorter term (i.e., through 1957). If Brulotte didn’t uncover the date of patent expiration until after it had contracted with Thys, the company could have sought to renegotiate the terms of the contract with Thys – rather than resorting to a judicial remedy. Finally, were Thys unwilling to renegotiate, Brulotte could have breached the contract (as it did), and agreed to pay damages to Thys. Notably, a court determining the damages would very likely have considered the impending expiration of Thys’ patents in that calculation, and reduced the amount of damages payable to the patentee accordingly. (Such a determination still falls short of creating an issue of patent law.)
Instead, Brulotte stopped paying on a contract to which it had voluntarily bound itself. In fact, the company refused to pay even the monies due under the contract prior to patent expiration. Given the discussion of the clean hands doctrine earlier in this chapter, Brulotte seems a particularly unlikely candidate for the sympathy of an equity court sitting on this contracts case.
In sum, Brulotte v. Thys presents an issue of state contract law in which patent law plays an ancillary role. Accordingly, the case should have been decided in a state court (given the lack of diversity between the parties) and according to state law. As a party voluntarily contracting to use Thys’ machine – and, until 1957, his patented idea (see Harlan’s dissent) – Brulotte should be held responsible for its agreements.
Posted by kdsiegel at March 27, 2005 10:06 PM in Commentary Posts
Comments
While Kara is undoubtedly right in much of her argument, I think she overstates the case somewhat for entirely divorcing patent licensing agreements from federal jurisdiction. Going beyond the notion that antitrust intervention is generally deemed appropriate at a federal level, patents in particular are, after all, federal grants of these bundles of rights that confer some monopolistic-type power, and it makes some sense for the outer bounds of these rights to be defined uniformly at the federal level.
Posted by: Kevin Goldman at March 29, 2005 10:14 AM
