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Aronson v Quick Point Pencil Co

Case Name: Aronson v. Quick Point Pencil Co. (Licensing)

Citation: Aronson v. Quick Point Pencil Co., 440 U.S. 257 (1979). 1979 U.S. LEXIS 64

Facts: In October 1955, Aronson filed for a patent for a new form of keyholder. In June 1956, while the patent was still pending, Aronson negotiated a contract with Quick Point Pencil. This contract required Quick Point to pay Aronson a 5% royalty fee in return for exclusive right to make and sell the keyholder and the contract also required the parties to consult each other in the event of an infringement. If Aronson could not get the patent within five years her royalties would be cut to 2 ½% of sales. Aronson failed to get the patent and did not appeal the board’s decision. Quick Point reduced her royalties and paid them for fourteen years.

Procedural History: In 1975, Quick Point commenced an action to US District Court for a declaratory judgment to determine if the royalty agreement was unenforceable. Both parties moved for summary judgment. The District Court concluded that the agreement was clear and had nothing to do with a patent being granted and therefore, Quick Point was obliged to continue to pay royalties. The Court of Appeals reversed and held that since the parties contracted with reference to a pending patent application, Aronson was estopped from denying that patent law principles governed her contract.

Holding: The keyholder ceased to have any secrecy once it was first marketed. Therefore, when the contract was negotiated the inventiveness and novelty were sufficiently apparent to induce a novelty manufacturer to agree to pay for the opportunity to be the first in the market. Federal patent law is not a barrier to such a contract. The Supreme Court reversed the Court of Appeals decision.

Important Dicta: In evaluating the importance of the contract, the Court reviewed three policy concerns. (1) patent law seeks to reward and foster invention; (2) promotes disclosure; and (3) the stringent requirements for patent protection seek to assure that ideas in the public domain remain there for the free use of the public. The Court determined that enforcement of the contract would not be inconsistent with any of these policies.

Likely Future Importance: By enforcing this contract, the Court discusses two points that would affect future agreements involving pending patents. (1) The Court explains that this will give the applicant some additional bargaining power to negotiate a royalty agreement. The amount of leverage depends on how likely the parties believe the patent will issue. (2) The Court also mentions that enforcement of these contractual agreements will encourage invention in areas where patent law does not reach. The Court compared this idea with trade secrets and its analysis in Kewanee Oil Co.

Critical Analysis: I think the determining factor to this case was public policy. It has been very important, throughout all the cases read this semester, not to take something out of public use. Also, the Court encourages invention in areas where patents may not protect such as trade mark and through royalty agreements.

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