GRANT PRIDECO INC v. SCHLUMBERGER TECHNOLOGY CORPORATION (2025)

SEALED ORDER

Pending before the Court are multiple dueling motions for summary judgment on the question of whether the License Agreement in this case violates the principle laid out in Brulotte v. Thys Co., 379 U.S. 29, 85 S.Ct. 176, 13 L.Ed.2d 99 (1964). NOV filed its Motion for Summary Judgment, (Doc. No. 205), to which Ulterra Drilling Technologies, LP (“Ulterra”) and Rockbit International Subsidiaries, LLC (“Rockbit”) responded, (Doc. No. 231), with Defendant Varel International Industries, LP (“Varel”) joining their response. (Doc. No. 234). NOV filed a reply. (Doc. No. 243). Ulterra and Rockbit then filed their Motion for Summary Judgment, (Doc. No. 210), followed by Varel that filed a substantively identical motion. (Doc. No. 213). NOV filed a joint response, (Doc. No. 225), and Ulterra and Rockbit replied, (Doc. No. 246), with Varel joining their reply. (Doc. No. 249). NOV's Motion for Summary Judgment is DENIED. (Doc. No. 205). Ulterra, Rockbit, and Varel's (collectively, “Defendants”) Motions for Summary Judgment are GRANTED in part and DENIED in part. (Doc. Nos. 210; 213).

I. Background

The dispute in these motions boils down to one ultimate question: do the License Agreements require royalties to be paid for the practice of expired patents in violation of Brulotte v. Thys Co., 379 U.S. 29, 85 S.Ct. 176, 13 L.Ed.2d 99 (1964)?¹ NOV argues that Brulotte does not prohibit the royalty payments required by the License Agreements because the existence of unexpired patents, whether practiced or not, supports the payment of the royalties until all Licensed RH Patents have expired. Conversely, Defendants argue that the License Agreements require them to pay a royalty for the practice of expired patents because the unexpired patents are not practiced in the manufacturing and sale of the drill bits covered by the License Agreements. All parties seem to agree that, for the purpose of these motions, there is no evidence showing that the Defendants practice any Licensed RH Patent other than those known as the “12 Core Patents.”² The parties also agree that all of the 12 Core Patents have expired. As such, the parties’ sole disagreement in this motion is whether the existence of unexpired, but unpracticed, Licensed RH Patents exempts a continuing royalty obligation from violating the principle of patent misuse laid out by the United States Supreme Court in Brulotte.

In summary, the License Agreements grant blanket licenses allowing Defendants to use NOV's leaching technology in exchange for a royalty throughout the duration of the Agreements. The License Agreements’ duration provisions state that the Agreements terminate “upon the expiration date of the last of the Licensed RH Patents.” (Doc. No. 205-2 at 20); (Doc. No. 205-3 at 18). Since the License Agreements were executed, NOV obtained two additional patents (the “ ’534 patent” & the “ ’752 patent”). While these two patents did not exist at the time the License Agreements were signed, the definition of “Licensed RH Patents” that appears in all the agreements contemplates patents with applications pending and any later issued patents that contained independent claims relating to the leaching of PCD elements. (Doc. No. 205-2 at 5); (Doc. No. 205-3 at 5). Thus, while the original category of Licensed RH Patents included only the 12 Core Patents, the portfolio of Licensed RH Patents may now include patents beyond the original 12 Core Patents.³ All parties agree that the last of the 12 Core Patents expired in October of 2021 and that the ’534 Patent and ’752 Patent expire in 2025 and 2031 respectively.

In this case, Ulterra and Rockbit seek: (1) a declaratory judgment of non-infringement of the ’534 patent; (2) a declaratory judgment of non-infringement of the ’752 patent; (3) a declaratory judgment that they do not owe any royalties after October 22, 2021 under the License Agreement; (4) a declaratory judgment that the Asserted Claims are not infringed after October 22, 2021, because they are expired; (5) a declaratory judgment of no breach of contract; and (6) a declaratory judgment of non-infringement of the ’730 patent. Varel brought counterclaims for declaratory judgment that (1) Varel's licenses under the License Agreement were terminated as of October 22, 2021; (2) no go-forward royalties are owed to Plaintiffs after October 22, 2021; (3) the ’534 and ’752 patents are not related patents and are not Licensed RH Patents; (4) Varel does not infringe the ’534 and ’752 patents; (5) the ’534 and ’752 patents are unenforceable for at least illegal tying, anti-trust, and/or patent misuse; (6) the License Agreement constitutes an unlawful patent tying scheme to extract go-forward royalties from Defendants for undesired, unpracticed, and unwanted patents after the expiration of the Core Patents; and (7) Plaintiffs’ actions constitute per se patent misuse rendering the ’534 and ’752 patents unenforceable and voiding the License Agreement.

Here, the motions primarily concern the Court's interpretation of the License Agreements’ royalty provisions and how their royalty structure comports (or does not comport) with the United States Supreme Court's opinion in Brulotte that delineated a category of patent misuse. See (Doc. No. 210 at 8); (Doc. No. 213 at 6); (Doc. No. 205 at 6). Defendants seek declarations that they do not owe any royalties based on the License Agreements after the expiration of the 12 Core Patents because such a royalty would violate the dictates of Brulotte. Now that the 12 Core Patents—the only subset of Licensed RH Patents that Defendants practice based on the evidence presented in the motions—have all expired, Defendants argue that any royalty obligations under the License Agreements that survive the expiration of the 12 Core Patents are per se patent misuse.

NOV filed a Motion for Summary Judgment on Defendants’ claims for declaratory relief. (Doc. No. 205). NOV argues that the License Agreements do not violate Brulotte primarily because the royalty provisions are fully supported by both foreign patents and Licensed RH Patents referenced in the License Agreements. The existence of these patents, NOV contends, is more than sufficient to justify the continuation of the royalty obligation. If Defendants agreed to pay a certain royalty for the ability to use any of the patents, the argument goes, Defendants cannot object to the royalty because it simply chooses not to practice the unexpired Licensed RH Patents that remain.

Defendants’ responses and opposing motions for summary judgment argue that the License Agreements here present the impermissible extension of the monopoly power created by patent rights that Brulotte specifically sought to prohibit. First, Defendants argue that it is undisputed that the trigger for the royalty is a product that infringes the 12 Core Patents. Second, they contend that it is also undisputed that Defendants do not practice any of the remaining U.S. patents that fall under the License Agreements’ definitions of Licensed RH Patents. Based on those facts alone, Defendants argue, the royalty provisions are predicated entirely on the practice of patents that have since expired and constitute patent misuse.⁴

II. Legal Standard

Summary judgment is warranted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “The movant bears the burden of identifying those portions of the record it believes demonstrate the absence of a genuine issue of material fact.” Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 261 (5th Cir. 2007) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322–25, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).

Once a movant submits a properly supported motion, the burden shifts to the non-movant to show that the court should not grant the motion. Celotex, 477 U.S. at 321–25, 106 S.Ct. 2548. The non-movant then must provide specific facts showing that there is a genuine dispute. Id. at 324, 106 S.Ct. 2548; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). A dispute about a material fact is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court must draw all reasonable inferences in the light most favorable to the nonmoving party in deciding a summary judgment motion. Id. at 255, 106 S.Ct. 2505. The key question on summary judgment is whether there is evidence raising an issue of material fact upon which a hypothetical, reasonable factfinder could find in favor of the nonmoving party. Id. at 248, 106 S.Ct. 2505. It is the responsibility of the parties to specifically point the Court to the pertinent evidence, and its location in the record, that the party thinks are relevant. Malacara v. Garber, 353 F.3d 393, 405 (5th Cir. 2003). It is not the duty of the Court to search the record for evidence that might establish an issue of material fact. Id.

III. Analysis

Despite the fact that these motions present a single question of law, the complexity of the parties’ arguments, the unstable nature of the case law applying Brulotte, and the wording of the License Agreements all coalesce to form a fairly complicated set of issues for the Court. For simplicity's sake, the Court's analysis will proceed in five parts. First, the Court walks through the current legal landscape of Brulotte and the cases interpreting and applying its holdings. Second, the Court revisits the important provisions of the License Agreements. These provisions were previously analyzed in detail in the Court's previous summary judgment order in the affiliated case. See (4:23-cv-1789, Doc. No. 199). Third, the Court addresses whether the License Agreements’ continuing royalty structures violate Brulotte. This section applies an objective inquiry into the License Agreements’ operations as laid out by the Ninth and Sixth Circuits and addresses whether the existence of unexpired patents places the Agreements outside the application of Brulotte and/or whether the exceptions described by the Supreme Court in Kimble apply in this case. See Kimble v. Marvel Entertainment, LLC, 576 U.S. 446, 135 S.Ct. 2401, 192 L.Ed.2d 463 (2015). Fourth, the Court addresses the issues raised by the possible existence of foreign patents that could support a foreign royalty. Finally, the Court explains the evidentiary burdens of each party in their respective motions and finds that the dispute concerning foreign patents raises fact issues that the Court cannot decide based on the record currently before it.

A. The Controlling Precedents

The Constitution empowers Congress to “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” U.S. Const. art. I, § 8, cl. 8. Under 35 U.S.C. § 154(a)(1) (“The Patent Act”), “[e]very patent shall contain ․ a grant to the patentee ․ of the right to exclude others from making, using, offering for sale, or selling [his] invention.” This right to exclude is limited in important respects. As relevant here, the right lasts for a limited duration—20 years—after which the public is free to use the invention. Id. § 154(a)(2).

1. Brulotte

The first, and most crucial, Supreme Court opinion relevant here is Brulotte v. Thys Co., 379 U.S. 29, 85 S.Ct. 176, 13 L.Ed.2d 99 (1964). In Brulotte, the Supreme Court held that patent holders may not contract for royalties on the use of a patented invention that occurs after the patent has expired. Id. at 32, 85 S.Ct. 176. In that case, purchasers had each acquired a hop-picking machine in exchange for both a “flat sum” and a seasonal “license for its use.” Id. at 29, 85 S.Ct. 176. The seasonal license payment was calculated as the greater of either “a minimum royalty of $500 for each hop-picking season or $3.33 1/3 per 200 pounds of dried hops harvested by the machine.” Id. The licenses referred to twelve patents, only seven of which “were incorporated into the machines.” Id. at 30, 85 S.Ct. 176. “Of those seven all expired on or before 1957. But the licenses ․ continued for terms beyond that date.” Id. The purchasers “refused to make royalty payments accruing ․ after the expiration of the patents.” Id. The Supreme Court held that “any attempted reservation or continuation in the patentee ․ after the patent expires, whatever the legal device employed, runs counter to the policy and purpose of the patent laws.” Id. at 31, 85 S.Ct. 176 (quoting Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249, 256, 66 S.Ct. 101, 90 L.Ed. 47 (1945)). Thus, the agreements were invalidated, “insofar as it allow[ed] royalties to be collected which accrued after the last of the patents incorporated into the machines had expired.” Id. The Court reasoned that “there is intrinsic evidence that the agreements were not designed” merely to “spread the payments for the use of the patent” over “a reasonable amount of time.” Id. (quotation marks omitted). The Court explained that, because the licenses drew “no line between the term of the patent and the post-expiration period,” the “contracts [were] ․ on their face a bald attempt to exact the same terms and conditions for the period after the patents have expired” as it did for the period before the patents expired. Id. at 32, 85 S.Ct. 176.

2. Post-Brulotte

The Supreme Court's opinion in Brulotte was immediately and almost universally maligned.⁵ Nevertheless, forty years later, it rejected an attempt to overturn Brulotte in Kimble, 576 U.S. at 446, 135 S.Ct. 2401. Acknowledging a “broad scholarly consensus” against the economic assumptions made in Brulotte, id. at 461, 135 S.Ct. 2401, the Court nevertheless concluded that overruling Brulotte was not justified—primarily based on the doctrine of stare decisis. Id. at 465, 135 S.Ct. 2401. The Court in Kimble stated that one reason not to overturn Brulotte was that the rule it created “is simplicity itself to apply. A court need only ask whether a licensing agreement provides royalties for post-expiration use of a patent. If not, no problem; if so, no dice.” Id. at 459, 135 S.Ct. 2401.

The Kimble Court, nevertheless, recognized the limits of Brulotte and noted that sophisticated “parties can often find ways around Brulotte.” Id. at 453, 135 S.Ct. 2401. Parties may, for example, “defer payments for pre-expiration use of a patent into the post-expiration period” because “all the [Brulotte] decision bars are royalties for using an invention after it has moved into the public domain.” Id. at 453–54, 135 S.Ct. 2401. For instance, parties may agree to royalties “equal to 10% of sales during the 20-year patent term,” paid over 40 years. Id. at 454, 135 S.Ct. 2401. “[P]arties have still more options when a licensing agreement covers either multiple patents or additional non-patent rights. Under Brulotte, royalties may run until the latest-running patent covered in the parties’ agreement expires.” Id. The parties may agree to continuing royalties on non-patent rights that are “closely related to a patent,” such as “a license involving both a patent and a trade secret” that sets “a 5% royalty during the patent period (as compensation for the two combined) and a 4% royalty afterward (as payment for the trade secret alone).” Id.

Numerous circuit courts have addressed Brulotte, albeit with some inconsistency. In Scheiber, the Seventh Circuit considered a license agreement that involved both American and Canadian patents. Scheiber v. Dolby Labs., Inc., 293 F.3d 1014, 1016 (7th Cir. 2002). There, the agreement “provide[d] that royalties on all the patents would continue until the Canadian patent expired, including, therefore, patents that had already expired.” Id. The Seventh Circuit held that Brulotte rendered unenforceable a contract provision requiring Dolby to pay royalties on domestic sales past the expiration of the last-to-expire United States patent, even though a Canadian patent remained in force. Id. at 1023. Later, in Zimmer Biomet Holdings, Inc. v. Insall, the Seventh Circuit declined to apply Brulotte because Zimmer involved a “question of contract interpretation” and the court had “no power to unwind” the arbitration panel's decisions interpreting the agreement. 108 F.4th 512, 519–20 (7th Cir. 2024). Nevertheless, the court noted that Brulotte only bars the enforcement of royalty obligations when the royalty is based exclusively on patent rights and not a joint agreement supporting non-patent rights as well. Id. at 518.

Prior to Kimble, the Ninth Circuit reviewed a Brulotte challenge to a license agreement that “provide[d] [appellee] with ‘a five percent (5%) royalty on gross sales ․ of the invention.’ This provision ha[d] no sunset clause, time limit, or territorial limitation.” Zila, Inc. v. Tinnell, 502 F.3d 1014, 1024 (9th Cir. 2007). Though an unexpired Canadian patent existed, the Ninth Circuit held that a claim for the domestic royalties would be unenforceable after the expiration of the last licensed United States patent. Id. at 1027. Following its reasoning in Zila, and post-Kimble, the Ninth Circuit held that a royalty agreement did not violate Brulotte because there was a clear demarcation between the royalties owed under United States patents, the royalties owed under Canadian patents, and the imposition of a minimum royalty until all patents expired. C.R. Bard, Inc. v. Atrium Medical Corp., 112 F.4th 1182, 1192–93 (9th Cir. 2024), cert. denied, ––– U.S. ––––, 145 S.Ct. 2771, 222 L.Ed.2d 1064 (2025). Specifically, the Ninth Circuit said that the agreement unambiguously based a portion of the royalty on the practice of United States patents and terminated that portion of the royalty at the expiration of those patents. Id. at 1192. It effectively held that the minimum royalty for the duration of all patents and the royalty based on the Canadian patents did not violate Brulotte. Id.

The Third Circuit recently came to a similar conclusion, though notably employing a different analytical approach. See Ares Trading S.A. v. Dyax Corp., 114 F.4th 123 (3d Cir. 2024). In upholding a royalty provision, the Third Circuit reasoned that the royalty was “not calculated based on activity requiring postexpiration use of” the patents. Id. at 143. The contract in that case confirmed, and the licensee conceded, that “the definition of what products the royalty is owed on ․ does not depend in any way on using” the patents and, crucially, that any use of the patents occurred “entirely before expiration.” Id. (emphasis added).

As noted, the Third Circuit analyzed the Brulotte issue somewhat differently than other circuits. For example, the Ninth Circuit stated that the proper approach was a formal inquiry into the terms of the agreement—that the result “does not depend on the parties’ motivations, the course of their negotiations, or the consideration received by either party in exchange for the inclusion of a particular contractual term.” C.R. Bard, 112 F.4th at 1186. The Third Circuit, however, announced a fact-intensive, three-part test:

We understand Kimble’s definition of Brulotte’s rule as follows: (i) “post-expiration use” refers to practicing inventions after their patents expire—acts that would have infringed the patents pre-expiration; (ii) to determine whether a royalty is “provided for” post-expiration use, courts must determine whether the royalty is calculated based on activity requiring post-expiration use; and (iii) a royalty may be calculated based on activity requiring post-expiration use even if the royalty's value does not vary with that use.

Ares Trading, 114 F.4th at 140. The Third Circuit's approach may suggest a departure from the “formal inquiry” approach that the Ninth Circuit described in C.R. Bard. Rather than an objective inquiry into the agreement's operation, the Ares test places the focus on findings of infringement, when infringement occurred, and then it turns to the interpretation of the contract at issue.

Most recently, the Sixth Circuit reviewed a similar license agreement. See Lavery v. Pursuant Health, Inc., 126 F.4th 1170 (6th Cir. 2025). In an opinion by Chief Judge Sutton, that court reviewed a royalty agreement that gave the licensee rights to the inventor's “intellectual property” “in exchange for a 1% cut on domestic sales of its ‘vision screening kiosks and any derivative or complementary applications,’ to be bumped to 3% if [licensee] sold kiosks with [an additional patent].” Id. at 1173. The Sixth Circuit held that the license created a perpetual royalty based on the use of the patented device. Id. at 1176. Further, the Court noted that while the agreement made reference to “other intellectual property,” it did not reference any specific IP or non-patent rights. Id. Citing Kimble, the Sixth Circuit held that, “[w]hile inventors remain free to seek compensation for non-patent rights that extend beyond a patent's expiration date ․ they must identify them in the contract. In this instance, however, the contract does not contain any cognizable indication that the royalty covered anything other than [the licensor's] patent.” Id. Determining that the agreement created a perpetual royalty for the use of a product embodying the licensor's patent, the Sixth Circuit held that the agreement violated Brulotte and Kimble, and thus constituted patent misuse. Id. at 1178.

While the Fifth Circuit has not substantively considered Brulotte since 1976—and even then only gave it four sentences of dicta—several district courts within the Fifth Circuit have addressed it since Kimble.⁶ Most of these cases are factually distinguishable and, consequently, provide little guidance here. See, e.g., Sunoco Partners Mktg. & Terminals L.P. v. U.S. Venture, Inc., 598 F. Supp. 3d 520, 530 (S.D. Tex. 2022) (denying summary judgment because insufficient evidence supported a finding that all relevant patents had actually expired). One case, however, aligned itself with the Ninth Circuit's analytical approach to Brulotte. See Nautilus, Inc. v. ICON Health & Fitness, Inc., 304 F. Supp. 3d 552, 568 (W.D. Tex. 2018), amended, No. SA-16-CV-00080-RCL, 2018 WL 2107729 (W.D. Tex. May 7, 2018), and aff'd, 754 Fed. Appx. 292 (5th Cir. 2019) (“This Court wholly agrees with the Ninth Circuit's reasoning. Texas contract law is fully competent to dispose of the rights and obligations owing under the contract as it pertains to the Chinese patent. Brulotte has nothing to say on the matter.”). In Nautilus, the court considered a challenge to a license agreement that required a royalty when certain products were sold in the United States based on a Chinese patent. Id. at 567. The Nautilus court rejected that argument, citing Zila. because Brulotte does not preclude parties from contracting to pay royalties based on foreign patents after they expire. Id. at 568.

While each of the varied approaches appear to have some merit, the Court determines that the “formal inquiry,” legal-question approach used by the Ninth and Sixth Circuits is more aligned with the language in Brulotte and Kimble. As such, this Court will consider whether the License Agreements here objectively require the payment of a royalty based on the practice of an expired patent.

B. The License Agreements’ Royalty Structures

Applying Brulotte here requires a review on how exactly the License Agreements operate. As the Court noted in its earlier summary judgment order in the affiliated case, (4:23-cv-1789, Doc. No. 199), the principal provision is § 6.01(b)—titled “Go-Forward Royalty Beginning on July 1, 2008.” (Doc. No. 205-2 at 13); (Doc. No. 205-3 at 12). This provision has been recognized by all parties as being the most crucial for determining whether royalty payments were tied to the practice of specific patents or not. This provision, in full, reads as follows in the Ulterra License Agreement:

Subject to Section 6.01(g) below, beginning on September 1, 2009, Ulterra will owe to ReedHycalog, on a quarterly calendar basis, a go-forward royalty based upon Ulterra's Net Price of Licensed Ulterra Drill Bits invoiced on a worldwide basis to a third party customer during the reported quarter. The Parties agree that the royalties Ulterra is to pay to ReedHycalog depends upon the Leach depth of the PDCs Ulterra employs on its Licensed Ulterra Drill Bits ․

§ 6.01(b) (Doc. No. 205-2 at 13) (emphasis added).⁷ As “Licensed Ulterra Drill Bits,” as used in the royalty provision, is a defined term under the Ulterra License Agreement, a full understanding of § 6.01(b) also requires consideration of the provision's antecedent definition, provided in § 2.04. (Doc. No. 205-2 at 3); (Doc. No. 205-3 at 4). Section 2.04, in relevant part, reads as follows:

Licensed Ulterra Drill Bits. “Licensed Ulterra Drill Bits” means any and all PDC Bits (as defined herein) manufactured, sold, used, rented, leased and/or marketed by or for Ulterra ․ containing at least one PCD element and/or PDC Cutter (which are considered separately licensed as well) which further contains:

(a) a non-Leached region that is not substantially free of catalyzing material; and

(b) any one or more of the following characteristics ․

The latter half of the § 2.04 definition, omitted here, is lengthy and technical, but, in essence, states that Licensed Ulterra Drill Bits are those that contain non-leached regions and other regions leached to varying depths. It then provides four other sets of technical characteristics that would qualify a product as a “Licensed Ulterra Drill Bit.”

The next provision of some importance here is § 2.05, which defines what constitutes a Licensed RH Patent. According to the Ulterra License Agreement, a Licensed RH Patent means:

[A]ll U.S. patents and patent applications listed on Exhibit C and all foreign counterpart patents and patent applications, and all continuations, continuations-in-part, divisionals, reissues, reexaminations, and term extensions thereof ․ Licensed RH Patents also includes any current or later-issued ReedHycalog patent (i) having an independent claim relating to the Leaching of PCD elements or (ii) having a dependent claim relating to the Leaching of PCD elements, which was filed on or before the Effective Date of this Agreement or claims a priority date on or before the Effective Date of this Agreement (in which case any license granted hereunder shall be limited to such dependent claims provided all claims from which such claims depend are invalid or unenforceable), in each case which was filed on or before the Effective Date of this Agreement or claims a priority date on or before the Effective Date of this Agreement.

(Doc. No. 205-2 at 5) (emphasis added); see (Doc. No. 205-3 at 5). The import of this provision is that “Licensed RH Patents” can include patents that were not listed in the Ulterra License Agreement because they had not yet been granted. Thus, the “12 Core Patents” refers to the United States patents explicitly listed in the License Agreements, but the License Agreements contemplate that later-issued patents could be added to the Agreement as well. This language is the basis for NOV's argument that the ’534 and ’752 patents—which were issued after the Licensed Agreements were signed and are, therefore, not included in the 12 Core Patents—are nevertheless unexpired Licensed RH Patents.

Finally, the termination provisions of the License Agreements state that the License Agreements unambiguously remain in effect until the “expiration date of the last of the Licensed RH Patents,” not the expiration of the 12 Core Patents. (Doc. No. 205-2 at 20); (Doc. No. 205-3 at 18); § 8.02. Thus, the License Agreements guarantee Defendants the power to manufacture and sell licensed drill bits in exchange for a royalty and requires that royalty on each licensed drill bit until all of the Licensed RH Patents have expired.

After analyzing a similar contract in the Halliburton – NOV License Agreement, this Court held that “the trigger of the royalty obligation is whether the product sold is a ‘Licensed Halliburton Drill Bit,’ and the depth of the leaching serves to determine the royalty rate applied to each sale.” (Doc. No. 199 at 9). The Court then noted that no language in the License Agreement could reasonably be construed to expressly tie the royalty obligation to the practice of patents. Rather, the royalty obligation was tied to the sale of Licensed Halliburton Drill Bits, which practiced some, but not necessarily all, of the Licensed RH Patents. (Id. at 12). Finally, the Court held that, under the License Agreement, royalties are owed until all Licensed RH Patents expire. (Id. at 13).

This Court found that the License Agreement tied the royalty obligation to the sale of Licensed Halliburton Drill Bits rather than the practice of any particular patent. While the Licensed Halliburton Drill Bits are defined as practicing certain claims of the 12 Core Patents, the language of the royalty provision only references the sale of the drill bits themselves. (Id. at 14).

The Court sees no reason to vary this interpretation in the Ulterra – NOV License Agreement or the Varel – NOV License Agreement. The products are the same, the patents are the same, and for all relevant purposes, the contracted language is basically the same.

C. Do The License Agreements Violate Brulotte?

The question the Court answers here requires a substantively different inquiry than the one it addressed in its earlier order in the companion case. See (4:23-cv-1789, Doc. No. 199). There, the Court determined how the License Agreement defined Halliburton's royalty obligation and the termination thereof by its own terms. Specifically, the Court asked whether the License Agreement terminated Halliburton's royalty obligation upon the expiration of the 12 Core Patents. The Court found that the royalty obligation was triggered any time a Licensed Halliburton Drill Bit was sold, regardless of the status of the relevant patents, and therefore the expiration of the 12 Core Patents had no impact on the royalty obligation based on the language of the License Agreement.

In this order, on the other hand, the Court (while considering two different agreements) must determine the objective effect, and legal consequences of, the continuing royalty obligations in light of Brulotte. Put another way, the Court must determine whether requiring Defendants to pay royalties on all licensed drill bits until the “expiration date of the last of the Licensed RH Patents” effectively requires the payment of a royalty based on the practice of an expired patent. (Doc. No. 205-2 at 20, 22); (Doc. No. 205-3 at 18, 20); § 8.02; § 8.04(a). As explained in detail below, the Court finds that the structure of the License Agreements’ royalty provisions does require Defendants to pay royalties for the post-expiration practice of expired patents.

1. Brulotte Squarely Applies to the Royalty Obligations

As stated above, the application of Brulotte “does not turn on the parties’ motivations, the course of their negotiations, or the consideration received by either party in exchange for the inclusion of a particular contractual term.” C.R. Bard, Inc. v. Atrium Med. Corp., 112 F.4th 1182, 1191 (9th Cir. 2024). Rather, the Court performs a “formal inquiry” that is “simplicity itself to apply.” Id. at 1186, 1189 (citing Kimble, 576 U.S. at 459, 135 S.Ct. 2401).

To start, all parties seem to agree that the licensed drill bits practice various claims found in the 12 Core Patents. While the defined drill bits may not necessarily practice all of the claims disclosed in the 12 Core Patents, Defendants have proffered undisputed expert evidence that each licensed drill bit practices at least some of the now-expired 12 Core Patents. See (Doc. No. 233-2 at 42) (Expert Report of John P. Hayes). If every licensed drill bit practices some element of the expired 12 Core Patents, and the royalty obligation is tied solely to the sale of licensed drill bits, then there can be little doubt that Defendants are effectively paying a royalty based on the postexpiration use of expired patents. This is, undoubtedly, the sort of agreement contemplated by the Supreme Court in Brulotte.

A factual comparison to Brulotte buoys this conclusion. In Brulotte, there were 12 patents listed in the license agreement related to hop-picking. Brulotte, 379 U.S. at 30, 85 S.Ct. 176. Here, the License Agreements include the 12 Core Patents and—arguably—at least two other Licensed RH Patents.⁸ In Brulotte, the royalty-triggering product was a hop-picker that only practiced seven of the patents. Id. Here, the royalty-triggering product is the sale of a licensed drill bit. Further, there is undisputed evidence that the drill bits practice the 12 Core Patents but do not practice any of the unexpired Licensed RH Patents. See (Doc. No. 233-2 at 42) (Expert Report of John P. Hayes). In Brulotte, the seven patents incorporated in the hop-picking machine—and only those patents—had expired, but the royalty obligation for using the hop-picker continued. Brulotte, 379 U.S. at 30, 85 S.Ct. 176. Likewise, here, the 12 Core Patents have expired, but the License Agreements require the royalty for the use of licensed drill bits to continue during the life of the ’534 and ’752 patents. In Brulotte, just as here, the mere existence of live patents was inconsequential because the only patents practiced by the royalty-triggering product (the hop-picker) had expired. Id. The similarity of the facts here to those in Brulotte therefore becomes clear: all license agreements charged a royalty tied solely to a product that only practiced expired patents for the duration of non-practiced, unexpired patent terms.⁹

2. Unexpired Licensed RH Patents Do Not Support the Royalty

Having concluded that Brulotte applies to the License Agreements, the next question is whether there is any reason to conclude that there is an interest in an unexpired patent, or a non-patent right, that legally supports the continuation of the royalty obligation. NOV argues that the existence of unexpired Licensed RH Patents gets the License Agreements “around” Brulotte as a matter of law. Specifically, NOV argues that the inclusion of unexpired and expired patents together in a portfolio license is precisely the kind of “way around” Brulotte that the United States Supreme Court approved in Kimble, as well as two other Supreme Court cases.¹⁰ Defendants obviously disagree and argue that unexpired patents support a continued royalty only where the interest in the unexpired patents constituted part of the royalty itself.

a. Kimble Does Not Insulate the License Agreements

In Kimble, the Supreme Court noted that there were limits to Brulotte and stated that sophisticated “parties can often find ways around Brulotte.” 576 U.S. at 453, 135 S.Ct. 2401. These “ways around” included “defer[red] payments for pre-expiration use of a patent into the post-expiration period,” or recognition that the licensing agreement “covers either multiple patents or additional non-patent rights,” such as trade secrets or trademarks. Id. at 453–54, 135 S.Ct. 2401. The Kimble Court also said, “royalties may run until the latest-running patent covered in the parties’ agreement expires.” Id.

These general statements describing potential exceptions must be understood, however, with one overriding and governing caveat—namely, that, in Kimble, the Supreme Court explicitly affirmed Brulotte. As such, when one applies Kimble, one is faced with the conclusion that the fact pattern in Brulotte still necessarily constitutes patent misuse.¹¹ As laid out in detail above, the facts of Brulotte closely track the facts of this case. For example, in Brulotte, there were unexpired patents covered by the license agreement, but not incorporated into the actual hop-picking machine that the license covered, and the Court found patent misuse. Brulotte, 379 U.S. at 30, 85 S.Ct. 176. Thus, when Kimble makes the broad statement that “royalties may run until the latest-running patent covered in the parties’ agreement expires,” 576 U.S. at 454, 135 S.Ct. 2401, that statement must be understood in the context of Brulotte itself.

The Brulotte Court's finding of patent misuse was not precluded because unexpired patents existed within the license portfolio. Rather, the Court noted that the royalty obligation was for the use of the hop-picking machine, and that machine only included seven patents—all of which had expired. Brulotte, 379 U.S. at 31, 85 S.Ct. 176. It is not surprising that NOV points to the existence of unexpired patents as a “way[ ] around” Brulotte. Kimble, 576 U.S. at 453, 135 S.Ct. 2401. This approach was arguably approved in Kimble, but such a conclusion fails to analyze that exception within the context of Brulotte. Patents that were unexpired, but unrelated to the royalty obligation, existed in Brulotte, and those unexpired patents did not prevent the Supreme Court from finding patent misuse. Thus, the mere existence of unexpired patents does not “get around” Brulotte when the License Agreements charge a royalty based solely on the sale of licensed drill bits, which incorporate only expired patents. The facts of Brulotte, itself, and the affirmance of Brulotte in Kimble make this clear. See Brulotte, 379 U.S. at 32, 85 S.Ct. 176 (noting that because the licenses drew “no line between the term of the patent and the post-expiration period,” the “contracts [were] ․ on their face a bald attempt to exact the same terms and conditions for the period after the patents have expired” as for the period before the patents expired). Thus, the mere existence of unexpired patents cannot avoid Brulotte as a matter of law.

This Court recognizes that several courts have tended to interpret the holding in Brulotte narrowly and Kimble’s exception examples broadly, likely due to the widespread distaste for the former. See, e.g., Ares Trading S.A. v. Dyax Corp., 2023 WL 2456437 at *23–24 (D. Del. Mar. 10, 2023). Nevertheless, narrowing the scope of binding Supreme Court precedent without explicit permission to do so is not within this Court's power. As such, this Court applies Brulotte as written (and as affirmed in Kimble) by simply asking “whether a licensing agreement provides royalties for post-expiration use of a patent. If not, no problem; if so, no dice.” Kimble, 576 U.S. at 459, 135 S.Ct. 2401.¹² This approach is also in line with the trend in other circuits. See, e.g., C.R. Bard, 112 F.4th at 1194 (“The parties’ agreement provides for U.S. royalties only through the expiration of the U.S. patent, so it does not constitute patent misuse under Brulotte.”); Lavery, 126 F.4th at 1177 (“While Kimble leaves inventors with plenty of options to defer compensation or to compensate an inventor for non-patent property, it does not permit courts to re-write a contract to create a form of compensation not identified in it.”).

The Court's holding here is reinforced by the Ninth Circuit's analysis in Kimble itself. In Kimble, the patent-holder settled an infringement suit with a settlement agreement, which provided that the licensee would purchase the patent in exchange for a lump sum and an ongoing royalty of 3% on both “product sales that would infringe the Patent ․ as well as sales of the [product].” Kimble v. Marvel Enterprises Inc., 727 F.3d 856 (9th Cir. 2013), aff'd sub nom. Kimble, 576 U.S. at 465, 135 S.Ct. 2401.¹³ The Ninth Circuit held that under Brulotte, royalties on sales of a product that embodies both a patented invention and an additional interest or right, must “provide[ ] a discount for the non-patent rights from the patent-protected rate” after the patent expires. Id. at 863. “This is because—in the absence of a discount or other clear indication that the license was in no way subject to patent leverage—we presume that the post-expiration royalty payments are for the then-current patent use, which is an improper extension of the patent monopoly under Brulotte.” Id. at 863–64; see also C.R. Bard, 112 F.4th at 1190 (citing the Ninth Circuit analysis in Kimble). The Ninth Circuit noted that the royalty rate did not decrease upon expiration of the patent and applied to the additional rights granted in the agreement “with no discount or other clear indication that the [product] royalties were not subject to patent leverage.” Kimble, 727 F.3d at 864. The Ninth Circuit concluded that the “rights were intertwined and could not be separated in any principled manner” such that it rejected the argument that the license agreement was a “hybrid” agreement. Id. at 865.

As mentioned above, C.R. Bard’s analysis supports this Court's conclusion. In C.R. Bard, the Ninth Circuit effectively held that the minimum royalty provision for the duration of all patents did not violate Brulotte, despite seemingly being conditioned on expired and unexpired patents, because the minimum royalty payment provision did not determine the duration of the agreement, rather it only determined the minimum royalty owed on any unexpired patents. The duration of the obligation to pay royalties was still determined by the expiration of the U.S. patents. See C.R. Bard, 112 F.4th at 1192 (“The licensing agreement terms unambiguously require a 15% per-unit royalty on U.S. sales until the expiration of the U.S. patent.” (emphasis added)). Effectively, the minimum royalty provision only functioned as a minimum standard to meet during any period of payment on an unexpired patent. It did not extend payment of royalties into a period of “post-expiration use” of the U.S. patent. Id. The Ninth Circuit therefore noted that, because Licensee still owed royalties on other unexpired patents, the minimum royalty still applied. Id. Rather than a continuing royalty on expired parents, the minimum royalty was just that—a minimum that had to be paid so long as some valid royalty was owed.

In contrast, here, the License Agreements terminate upon the “expiration date of the last of the Licensed RH Patents,” which are defined to include both “current or later-issued ReedHycalog patent[s].” (Doc. No. 205-2 at 5, 20); (Doc. No. 205-3 at 5, 18) (emphasis added). Thus, because the duration of the royalty obligation is conditioned on both “current” (expired) and “later-issued” (unexpired) patents, payment of royalties under the License Agreement is extended into a “post-expiration” period in violation of Brulotte. Unlike in C.R. Bard where the royalty obligation terminated upon the expiration of the last practiced patent, here the royalty obligation extends until the expiration of the last “later-issued,” but unpracticed, Licensed RH Patent.

The Sixth Circuit's application of Brulotte and Kimble also reinforces this Court's analysis. In Lavery, the Sixth Circuit addressed the argument that the royalty could have included other intellectual property and non-patent rights like trade secrets. Lavery, 126 F.4th at 1176. Noting that, while “inventors remain free to seek compensation for non-patent rights that extend beyond a patent's expiration date” the Court held that “they must identify them in the contract.” Id. Further, because the contract at issue did “not contain any cognizable indication that the royalty covered anything other than [inventor's patent]” the Sixth Circuit held that the royalty was based solely on the practice of the expired patent. Id. at 1176–77.

Likewise, the License Agreements base the royalty solely on the product using the expired patents and includes no adjustment to the royalty amount after the expiration of the patents incorporated in the product. While certainly “a discounted [post-expiration] rate may not be necessary to avoid Brulotte in every case,” the Ninth Circuit's analysis has required that “in the absence of a discounted rate, there must be some other clear indication” that the royalty was not for use of the patent after its expiration. C.R. Bard, 112 F.4th at 1190. (citing Kimble, 727 F.3d at 865). Here, there is no clear indication that the royalty is not for the sale of the licensed drill bits—which practice only the expired patents. As such, the Court does not find these License Agreements to be “hybrid” licenses where the royalty turns on both practiced and non-practiced patent rights. For similar reasons, as explained below, the Court does not find the other cases cited by NOV to be particularly applicable here.

b. The Other Cases Cited by NOV are Substantively Distinguishable

NOV points to two other Supreme Court cases—one before and one after Brulotte—to support its argument. Nevertheless, this Court finds Zenith Radio and Automatic Radio to be distinguishable and providing only general guidance at best for the Court's analysis here. First, in Automatic Radio, the Supreme Court held that if the licensee bargains for the privilege of using the patent in all of his products and agrees to a lump sum or a percentage-of-total-sales royalty, he cannot escape payment on this basis by demonstrating that he is no longer using the invention disclosed by the patent. Automatic Radio Mfg. Co. v. Hazeltine Research Inc., 339 U.S. 827, 833, 70 S.Ct. 894, 94 L.Ed. 1312 (1950). Here, the royalty is predicated solely on the sale of licensed drill bits, and those drill bits are defined. Certainly, the use of other patents in additional products could support continued royalty obligations until the License Agreements terminate—but the royalty obligations at issue here do not contemplate any product other than the licensed drill bits.

Likewise, Zenith is distinguishable on its facts. In that case, the Supreme Court was examining the use of a patent to leverage a licensee to pay royalties on non-patented articles. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 136, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969). As such, the Supreme Court held that a licensor did not have “carte blanche authority to condition the grant of patent licenses upon the payment of royalties on unpatented articles.” Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 137, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969). In this case, there is no such allegation. Thus, the Court is convinced that the facts in this case are far more analogous to the facts of Brulotte itself than to either Automatic Radio or Zenith Radio.

Based on the above, the Court concludes that: (1) the License Agreements require a royalty based solely on the post-expiration use of expired patents; and (2) the unexpired Licensed RH Patents do not serve as a basis for the royalty obligations and therefore cannot shield the License Agreements from Brulotte’s per se prohibition against collecting “royalties which accrued after the last of the patents incorporated into the machines had expired.” Brulotte, 379 U.S. at 30, 85 S.Ct. 176.

c. The Impact of Foreign Patents

The final question is whether Brulotte’s prohibition renders the License Agreements’ royalty provisions unenforceable in their entirety, or whether it only prohibits the payment of royalties based on U.S. patents. In continuing to follow the persuasive reasoning of the Ninth and Sixth Circuits, the Court finds that the use of foreign patents in licensed drill bits could support a royalty as explained below. See, e.g., C.R. Bard, 112 F.4th at 1192 (permitting royalties based on foreign sales of products incorporating the foreign patents).

As a matter of law, Brulotte’s per se prohibition does not apply to foreign patents. Zila, Inc. v. Tinnell, 502 F.3d 1014, 1023 (9th Cir. 2007). The Court finds support for this holding from both the Ninth Circuit and Western District of Texas. First, in Zila, Inc., the Ninth Circuit analyzed a 5% perpetual royalty that continued after the U.S. patents expired. Id. at 1017. When assessing whether the royalty violated Brulotte, the Ninth Circuit held that Brulotte had no effect on Zila's obligation to pay royalties for use of the Canadian patent because Brulotte does not “extend its royalty-canceling powers to contracts for foreign patents.” Id. at 1023. The Court did hold, however, that Brulotte prohibited the payment of U.S. royalties after the expiration of the final U.S. patent and remanded for the district court to resolve a factual dispute related to whether the final U.S. patent had already expired. Id. at 1025–27. Citing Zila, Inc., the District Court for the Western District of Texas likewise held that Brulotte did not apply to foreign patents. See Nautilus, 304 F. Supp. 3d at 568. As such, if the licensed drill bits practice unexpired foreign patents, those patents could support a royalty. This question, however, raises the specter of a fact issue. While the parties do not dispute that unexpired foreign patents exist, it is unclear if the parties disagree about whether the licensed drill bits incorporate any foreign patents. The Court does not have a sufficient record to resolve any further issues involving the application of foreign patents to the disputes in this case.

Nevertheless, the Court does find it appropriate to address one more ongoing dispute. Due to the parties’ dueling motions, the question of evidentiary burdens is a little foggier than usual. Traditionally, in a summary judgment context, once the movant has sufficiently raised an issue, the burden shifts to the non-movant to demonstrate that the movant is either legally wrong or there is a genuine issue of material fact. Celotex Corp., 477 U.S. at 322–25, 106 S.Ct. 2548. Here, NOV argues that Defendants have the burden to provide evidence to show that they do not practice the foreign patents, and that Defendants have failed to meet that burden. (Doc. No. 243 at 10). Similarly, Defendants argue that NOV's failure to provide evidence that Defendants practice any foreign Licensed RH Patent is fatal to NOV's motion. (Doc. No. 231 at 23). Interestingly, both positions are partially right.

NOV moved for summary judgment on the Brulotte issue first. (Doc. No. 205). In that motion, NOV has the burden to show that, as a matter of law, Brulotte does not render the License Agreements’ royalty provisions patent misuse. See Fed. R. Civ. P. 56(a); Triple Tee Golf, 485 F.3d at 261 (“The movant bears the burden of identifying those portions of the record it believes demonstrate the absence of a genuine issue of material fact.”). The Court finds that the License Agreements violate Brulotte by charging a royalty based on the post-expiration use of U.S. patents but that live foreign patents could support a royalty based on the use of those patents. For the foreign patents to support a royalty, however, there are questions that must be resolved—for example, whether such patents fall under the License Agreements’ definitions of Licensed RH Patents, and whether any foreign patents are incorporated into the royalty triggering product—the licensed drill bits. As stated above, in NOV's motion, it has the burden to affirmatively raise issues in order for the burden to shift to the Defendants. See Anderson, 477 U.S. at 255, 106 S.Ct. 2505. As such, because NOV does not allege that any foreign patents are actually incorporated into the licensed drill bits, NOV cannot show that it is entitled to summary judgment on Defendants’ Brulotte defense as a matter of law. Thus, NOV's motion for summary judgment on Brulotte is DENIED. (Doc. No. 205).

In Defendants’ motions for summary judgment, they argue that Brulotte renders the License Agreements’ royalty provisions unenforceable. (Doc. Nos. 210, 213). In those motions, Defendants bear the burden of establishing that they prevailed on their Brulotte defense as a matter of law. To the extent the License Agreements requires royalties to be paid on licensed drill bits based on expired U.S. patents, the Court GRANTS Defendants’ motions for summary judgment on their Brulotte defense.¹⁴

Nevertheless, any foreign patents incorporated into the licensed drill bits could give rise to a royalty. The Court finds, however, that Defendants have not carried their burden to show that the foreign patents are not incorporated in licensed drill bits. Thus, the Court finds that there is a genuine issue of material fact which precludes the Court from finding the royalty obligations unenforceable as to the foreign patents. Defendants’ motions for summary judgment are therefore, DENIED in part on the question of whether they owe royalties based on the practice of foreign patents.

IV. Conclusion

Based on the foregoing analysis, the Court DENIES NOV's Motion for Summary Judgment. (Doc. No. 205). Further, Defendants’ Motions for Summary Judgment are GRANTED in part and DENIED in part. (Doc. Nos. 210, 213).

FOOTNOTES

1.   The Court laid out an extensive background of the issues, factual contentions, and legal claims in its prior Order granting a partial summary judgment in the affiliated case. (4:23-cv-1789, Doc. No. 199 at 1–6). While the parties here are not identical, the facts, issues, and even License Agreements are similar. Consequently, the Court will limit the background and context to that which is necessary for the analysis here.

2.   These patents include U.S. Patent Nos. 6,861,098, 6,861,137, and 6,878,447 (“Thermal Characteristic Patents”), U.S. Patent No. 6,601,662 (“Impact Strength Patent”), and U.S. Patent Nos. 6,585,064, 6,589,640, 6,749,033, 6,544,308, 6,562,462, 6,592,985, 6,739,214, and 6,797,326 (“Other Core Patents”).NOV does not outright concede that Defendants do not practice the unexpired Licensed RH Patents. Nevertheless, NOV puts forth no evidence nor does it even suggest that Defendants do practice any of the unexpired patents. As such, for the purposes of resolving these motions, NOV has effectively acknowledged that Defendants do not practice any unexpired patent.

3.   While there may be some controversy between the parties as to whether the ’534 and ’752 patents qualify as Licensed RH Patents, that question is not before the Court here and the Court presumes them to be for the narrow purpose of considering the motions for summary judgment on this claim.

4.   It is worth noting that Ulterra's motion emphasizes that this Court is faced with a different situation in this case than it faced in resolving the Halliburton – NOV Brulotte related motions because in the affiliated case it had already entered an order analyzing the controlling License Agreement. See (4:23-cv-1789, Doc. No. 199). Ulterra points out that no such “predicate” order exists with respect to it, and argues that without that foundation, NOV's motion is at best “contingent” and that contingency is based upon the Court actually ruling on NOV's similar motions in this case, see (Doc. Nos. 250, 253), in a similar matter. (Doc. No. 231 at 28). The Court recognizes that the companion case has progressed further, but finds no reason it can not move forward and resolve the Brulotte related motions in this case as this dispute is a key issue that has been properly raised and briefed, and it is one of the issues that will ultimately need resolving whether now or in the future.

5.   See Comment, Validity of Patent License Provisions Requiring Payment of Post-Expiration Royalties, 65 Colum. L. Rev. 1256, 1270 (1965) (“Notwithstanding these difficulties, the per se rule, in light of the harm sought to be redressed and the potential restraints upon common commercial practices, remains an inordinately severe judicial sanction.”); see also The Supreme Court, 1964 Term, Patent Law Royalty Agreements Projecting Beyond Expiration of Patent, 79 Harv. L. Rev. 199, 201 (1965) (“It is arguable that any royalty arrangement should be acceptable as long as no one is prevented from obtaining the idea without charge after the patent has expired.”); William F. Baxter, Legal Restrictions on Exploitation of the Patent Monopoly: An Economic Analysis, 76 Yale L.J. 267, 357 (1966) (“In a careless opinion, Mr. Justice Douglas held invalid a license under which royalties continued to accrue after the expiration of the patents. He made no attempt to reply to the dissent's plausible but erroneous assertion that the economic consequences of the two types of arrangements were the same.”).

6.   See In re Yarn Processing Patent Validity Litig., 541 F.2d 1127, 1140 (5th Cir. 1976) (comparing the royalties in the case to those in Brulotte); Pipkin v. FMC Corp., 427 F.2d 353, 357 (5th Cir. 1970); Hensley Equip. Co. v. Esco Corp., 383 F.2d 252, 264 (5th Cir. 1967).

7.   For the purposes of resolving these motions, the Court will use provisions from the Ulterra License Agreement. The Varel License Agreement contains identical language. See (Doc. No. 205-3 at 12).

8.   While the parties do not necessarily agree about whether the ’534 and ’752 patents are Licensed RH Patents under the legacy provision, that question is not before the Court here, and the Court presumes them to be Licensed RH Patents for the narrow purpose of considering this motion for summary judgment.

9.   Ulterra and Varel also argue that, similar to the license agreements in Brulotte, their Patent Licenses arguably include “restrictions” on their use of NOV's expired patents: “a telltale sign that the licensor was using the licenses to project its monopoly beyond the patent period.” Brulotte, 379 U.S. at 32, 85 S.Ct. 176; see (Doc. No. 210 at 14); (Doc. No. 213 at 12); (Doc. No. 231 at 22).

10.   Automatic Radio Mfg. Co. v. Hazeltine Research Inc., 339 U.S. 827, 833, 70 S.Ct. 894, 94 L.Ed. 1312 (1950) (rejecting an argument by a licensee that royalties should cease when it stopped using the patents); Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 137, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969) (addressing an attempt by a licensor to condition the granting of a patent license on the payment of royalties for non-patented items).

11.   To the extent that the general statements in Kimble could be construed to narrow or implicitly reject Brulotte, such an interpretation is beyond the discretion of this Court. As the Seventh Circuit noted, “the reaffirmation of Brulotte in [Kimble] tells us that the Court did not deem the cases inconsistent, and so, whether we agree or not, we have no warrant for declaring Brulotte overruled.” Scheiber, 293 F.3d at 1019.

12.   While the Kimble Court may have found the Brulotte test “simplicity itself to apply,” it also gave some of the best minds of the legal profession carte blanche to try to draft around the consequences of Brulotte. 576 U.S. at 459, 135 S.Ct. 2401. These attempts to evade Brulotte (whether successful or not) complicate the legal landscape. Moreover, each patent, license, and subsequent dispute/lawsuit has their own unique facts, background, and circumstances that also must be considered. The result is that today the test may be simple to articulate, but its application may be somewhat more difficult than the Supreme Court anticipated.

13.   In reviewing the Ninth Circuit's judgment in Kimble, the Supreme Court considered only whether to overrule Brulotte. 576 U.S. at 449, 135 S.Ct. 2401. The Supreme Court declined to do so and therefore affirmed the Ninth Circuit's judgment. Id. at 465, 135 S.Ct. 2401.

14.   Again, the Court recognizes the context of these license agreements—often the settling of lawsuits—and the valid economic reasons that might lead parties to enter an agreement such as this one. One could argue, and certainly many have, that Brulotte failed to consider common economic interests, contractual factors, and even the language of the Patent Act itself when handing down the patent misuse rule. See, e.g., 10 Phillip E. Areeda et al., Antitrust Law §§ 1782(c)(2)–(c)(3), pp. 505–11 (1996) (“[T]he Supreme Court refused to see that typically such post-expiration royalties merely amortize the price of using patented technology.”). As stated above, however, this Court is bound to follow the precedent set by the United States Supreme Court. As such, it applies Brulotte as faithfully as possible.

Andrew S. Hanen, United States District Judge