PRECEDENTIAL 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

_______________ 

No. 23-1487 

_______________ 

ARES TRADING S.A., 

Appellant 

v. 

DYAX CORP. 

_______________ 

On Appeal from the United States District Court 

for the District of Delaware 

(D.C. No. 1-19-cv-02300) 

District Judge: Honorable Evan J. Wallach*

_______________ 

Argued: March 5, 2024 

Before: KRAUSE, PORTER, and CHUNG, Circuit Judges 

(Filed: August 14, 2024) 

* Senior United States Circuit Judge, United States Court of 

Appeals for the Federal Circuit, sitting by designation pursuant 

to 28 U.S.C. § 294(d). 
2 

Kevin J. Culligan 

John P. Hanish 

John M. Hintz 

MAYNARD NEXSEN

551 Fifth Avenue 

Suite 1600 

New York, NY 10176 

Thomas G. Saunders [Argued]

Seth P. Waxman 

WILMER CUTLER PICKERING HALE & DORR

2100 Pennsylvania Avenue NW 

Washington, DC 20037 

Counsel for Appellant

Ginger D. Anders 

MUNGER TOLLES & OLSON

601 Massachusetts Avenue NW 

Suite 500e 

Washington, DC 20001 

Kelly E. Farnan 

RICHARD LAYTON & FINGER

920 N King Street 

One Rodney Square 

Wilmington, DE 19801 
3 

Chelsea A. Loughran [Argued]

Michael N. Rader 

Suresh Rav 

Stuart D. Smith

WOLF GREENFIELD & SACKS

600 Atlantic Avenue 

Boston, MA 02210 

Counsel for Appellee 

_______________ 

OPINION OF THE COURT

_______________ 

PORTER, Circuit Judge. 

Dyax Corporation performed research for Ares Trading

S.A. It also licensed patents to Ares, including some held by 

Cambridge Antibody Technology (the “CAT Patents”). Ares 

used the fruits of Dyax’s research to commercialize a cancer 

drug. In exchange, Ares agreed to pay royalties to Dyax based 

on the drug’s sales. Under the parties’ agreement, Ares’ royalty 

obligation to Dyax has outlasted the lifespan of the CAT 

Patents. 

The District Court held that Ares’ royalty obligation is not 

unenforceable under Brulotte v. Thys Co., in which the 

Supreme Court declared unenforceable a royalty obligation 

because it conflicted with federal policy favoring limited 

patent duration. 379 U.S. 29, 30 (1964). We will affirm. Under 

Brulotte, a patent licensee’s royalty obligation is unenforceable 

only if it is calculated based on activity requiring use of inventions after their patents expire. Ares’ obligation is not calculated based on activity requiring use of inventions covered by 
4 

the CAT Patents after their expiration, so it does not improperly prolong the CAT Patents’ duration and thus does not 

implicate Brulotte. 

I. FACTS AND PROCEDURAL BACKGROUND

A. Phage Display 

The research that Dyax performed for Ares involved 

“phage display,” a laboratory process used to develop medications. The process begins with the identification of a “target” 

that contributes to disease. The target is screened against a 

phage display “library,” which is a large collection of antibody 

fragments. During this screening process, some fragments in 

the library may “bind” with the target. The fragments that bind 

best with the target are then developed with the ultimate goal 

of formulating medications that neutralize the target in the 

human body.

Take the development of Bavencio, the cancer drug at issue 

in this case. Bavencio’s development began with Ares identifying a target molecule known as PD-L1. PD-L1 prevents the 

immune system from attacking cells to which it is attached. 

When PD-L1 is attached to cancer cells, it shields them from 

attack. Ares delivered PD-L1 to Dyax as a target for phage display, seeking “an antibody that would . . . inhibit it.” Opening 

Br. 8. Dyax performed phage display and identified 167 antibody fragments that bind to PD-L1. Ares used one of those 

fragments to develop Bavencio. 

B. Dyax-CAT Contracts 

Dyax is a biotechnology company that specializes in phage 

display. It obtained many patents in the phage display field, 
5 

covering both phage display libraries and methods of using 

those libraries. But there were (and are) other players in the 

phage display field who obtained their own patents. See App. 

3167 (describing phage display as a “patent minefield”). To 

achieve “freedom to operate” while performing phage display, 

Dyax obtained licenses for these other phage display patents.1

As relevant to this dispute, Dyax obtained licenses for 

phage display patents owned by CAT. Like Dyax, CAT 

obtained patents covering both phage display libraries and 

methods of using those libraries. Under one of Dyax’s agreements with CAT, signed in 2003, Dyax is entitled to obtain 

“product licenses” for specific targets and “practice” the inventions covered by the CAT Patents in relation to those targets.

2

1 “Freedom to operate” means that a “firm can employ the 

patented technology without having to be concerned about 

being sued for infringement.” Jonathan S. Masur & Lisa 

Larrimore Ouellette, Patent Law: Cases, Problems, and 

Materials 530 (3d ed. 2023). 

2

 Here, we must briefly define the term “practice.” A patent is 

a “right to exclude others from making, using, offering for sale, 

or selling [an] invention.” 35 U.S.C. § 154(a)(1). So if someone “makes, uses, offers to sell, or sells [an] invention” without 

the patent holder’s authorization, he “infringes the patent.” Id. 

§ 271(a). We understand the term “practice” to denote acts that 

would constitute infringement of a valid patent if unauthorized. 

Compare id., with Practice, Black’s Law Dictionary (9th ed. 

2009) (“To make and use (a patented invention)[.]”). Whether 

someone practices a patented invention depends on the invention’s scope, which is defined by the patent’s “claims.” See
6 

Once it obtains a product license, Dyax is free to commercially 

“exploit” the target-related antibodies discovered while practicing the inventions covered by the CAT Patents (or allow a 

sublicensee to do the same). App. 4305 (capitalization altered). 

In exchange, it owes royalties to CAT based on that commercialization. Under the Product License for PD-L1, for example, 

Dyax owes CAT a percentage of Bavencio’s sales. 

For each product license, Dyax must continue paying royalties to CAT “until the last Valid Claim expires or ten (10) 

years from the date of First Commercial Sale” of the product 

derived from the target-related antibody, “whichever occurs 

later.” App. 4316. A “Valid Claim” is a claim covered by 

CAT’s “Antibody Phage Display Patents,” which are the same 

CAT Patents that Dyax licensed to Ares. App. 4296. This 

means that Dyax’s royalty obligations to CAT may extend 

beyond the lifespan of the CAT Patents: Bavencio was first 

sold in 2017, so Dyax’s royalty obligation to CAT on 

Masur & Ouellette, supra, at 24 (“The claims are the fence 

posts that mark out the metes and bounds of a patent owner’s 

intellectual property.”). Each claim is divided into “claim elements.” Id. at 27. So a claim may be composed of elements A, 

B, C, and D. See id. (using the example of the Swiffer Mop, 

which includes “a handle, a mop head, a liquid delivery system, 

and a disposable cleaning pad”). Someone practices this

claimed subject matter if he makes, uses, or sells a product that 

includes these elements. So if he makes a product that includes 

elements A, B, C, D, and E, he practices the invention (and 

infringes the patent if he lacks the patent holder’s authorization). Id. at 27–28. But if he makes a product that includes 

elements A, B, C, and F, but not element D, he does not practice the invention. Id.
7 

Bavencio’s sales will last into 2027, but the last of the CAT 

Patents expired in 2018.

C. Ares-Dyax Contracts

Because of its licenses with companies like CAT, Dyax has 

freedom to operate in the phage display field. Dyax used its 

freedom to perform phage display for Ares under the Amended 

and Restated Collaboration and License Agreement (“CLA”), 

which Dyax and Ares signed in 2006. Massachusetts law governs the CLA.

1. Dyax’s Obligations, Ares’ Benefits 

Under the CLA, Dyax’s primary obligation was to use 

phage display to screen targets and provide the resulting antibody fragments to Ares. See App. 4159 (“Dyax shall use commercially reasonable efforts to identify Dyax Antibodies that 

bind to the Licensee Targets provided to Dyax under the terms 

of the Research Plan for each Research Campaign.”); see also

App. 4190 (identifying PD-L1 as a target in the first Research 

Campaign under the CLA). Ares never performed phage display in connection with the development of Bavencio. Instead, 

Ares provided targets and Dyax performed phage display. 

There is no dispute that Dyax performed the work required of 

it under the CLA. 

Despite never performing phage display, Ares negotiated 

for and received licenses to certain phage display patents under 

the CLA. First, Dyax granted Ares a research license to the 

“Dyax Patent Rights.” The CLA defines “Dyax Patent Rights” 

as any “patent application and patent . . . related to the use of 

the Dyax Libraries to conduct antibody phage display.” App. 

4153. It is undisputed that this phrase covers some patents that 
8 

will not expire until after Ares’ royalty obligation on sales of 

Bavencio terminates. 

Second, Dyax granted Ares a research sublicense to the 

“CAT Patent Rights.” This phrase covers the same CAT 

Patents that are covered in the 2003 Dyax-CAT agreement. 

Ares admits that it did not practice the inventions covered by 

the CAT Patents while developing Bavencio. In its opening 

brief, Ares suggests that it practiced those inventions while 

performing certain Bavencio-related work. But Ares provides 

no evidence to support this suggestion, and the District Court 

did not clearly err in adopting Ares’ admission “that the manufacture and sale of Bavencio[] does not practice subject matter 

claimed in the CAT Patents.” Ares Trading S.A. v. Dyax Corp., 

No. 19-cv-02300, 2023 U.S. Dist. LEXIS 40484, at *41 (D. 

Del. Mar. 10, 2023) (internal quotation marks and citation 

omitted). 

Dyax’s phage display work for Ares under the CLA implicated Dyax’s upstream obligations to CAT under the 2003 

Dyax-CAT agreement. Before Dyax could identify (and Ares 

could commercialize) the antibody fragments that bound to 

PD-L1, Dyax was required under the 2003 Dyax-CAT agreement and the CLA to obtain a Product License from CAT. To 

obtain a Product License, Dyax was required to submit PD-L1 

to CAT for a “gatekeeping” procedure (“CAT Gatekeeping”). 

PD-L1 passed successfully through CAT Gatekeeping, so 

Dyax received a Product License. Dyax then transferred its 

rights under the Product License to Ares in a Product 

Sublicense, as required under the CLA. Under the Product

Sublicense, Ares is entitled to sell products derived from PDL1 binders that Dyax identified through phage display, such as 

Bavencio. 
9 

Along with the right to develop and sell Bavencio, the 

Product Sublicense conferred additional patent rights on Ares. 

Recall that under the CLA, Ares received “research licenses” 

to the Dyax and CAT Patents. This meant that Ares could use 

the inventions covered by the Dyax and CAT Patents to perform phage display. Under the Product Sublicense, Ares 

received “commercial licenses” to the Dyax and CAT Patents. 

A commercial license covers the “commercialization of an 

antibody,” which a research license does not. Ares, 2023 U.S. 

Dist. LEXIS 40484, at *24. 

2. Ares’ Obligations, Dyax’s Benefits 

In exchange for these benefits, Ares agreed to compensate 

Dyax in a variety of ways under the CLA, including making 

payments upon Dyax’s achievement of research milestones. 

Ares also agreed to pay royalties to Dyax, calculated based on 

a percentage of “Net Sales for Therapeutic Antibody Products 

commercialized by” Ares. App. 4172. The CLA defines a 

“Therapeutic Antibody Product” as “any preparation which is 

intended . . . for the treatment or prevention of disease, infection or other condition in humans, which contains, comprises, 

or the process of development or manufacture of which utilizes 

a Dyax Antibody.” App. 4158. “Dyax Antibody” refers to 

antibody fragments that Dyax “identifie[s]” using phage display and “deliver[s]” to Ares. App. 4153. Under these definitions, Bavencio qualifies as a Therapeutic Antibody Product 

because Ares developed it from an antibody fragment that 

Dyax discovered using phage display. Ares agreed to pay royalties for Therapeutic Antibody Products like Bavencio: 

on a country-by-country and Product-by-Product 

basis for a period commencing with the First 

Commercial Sale in the relevant country and 
10 

ending ten (10) years after First Commercial 

Sale; provided, however, in the event that such 

ten (10) year period for a Product in a particular 

country ends prior to the expiration of the last 

CAT Valid Claim in such country, then royalties 

shall be payable in such country until the expiration of last CAT Valid Claim. 

 

App. 4172–73 (emphasis omitted). 

It is crucial to notice that the duration of Ares’ obligation 

to Dyax mirrors the duration of the royalty that Dyax owes 

upstream to CAT. And both obligations are triggered by the 

same condition—sales of Bavencio. When Ares sells 

Bavencio, it owes a percentage of Bavencio’s sales to Dyax, 

and Dyax owes a smaller percentage of Bavencio’s sales 

upstream to CAT. As previously mentioned, the last CAT 

Patent expired in 2018, but the first commercial sale of 

Bavencio occurred in 2017. Thus, the two royalty obligations 

on Bavencio’s sales will last until 2027, long after the CAT 

Patents’ expiration.

D. Negotiations Regarding Brulotte

Ares first learned of Brulotte in 2013, well after the parties 

signed the CLA and agreed to Ares’ royalty obligation. In 

2017, Ares attempted to use Brulotte as a “negotiating tool” to 

reduce its royalty obligation to Dyax. Ares, 2023 U.S. Dist. 

LEXIS 40484, at *48. Dyax responded in an email, arguing 

that Brulotte did not apply. In this same email, Dyax questioned the inventorship of U.S. Patent No. 9,624,298 (the “’298 

Patent”). “The ’298 Patent covers Bavencio, . . . meaning that 

Ares Trading practices the ’298 Patent” when it sells Bavencio. 

Id. at *40. Dyax suggested that its scientists should be named 

12 

Dyax answered, denying Ares’ four claims and bringing six 

counterclaims. Dyax’s first counterclaim was for a declaratory 

judgment that Brulotte does not apply to Ares’ royalty obligation. Its second counterclaim was for correction of the ’298 

Patent’s inventorship under 35 U.S.C. § 256. Its third counterclaim was for a declaratory judgment that if Ares’ royalty 

obligation is unenforceable under Brulotte, Ares must agree to 

amend the CLA to restore its original obligation. Its fourth 

counterclaim was for reformation of the CLA to restore the 

obligation. Its fifth counterclaim was for breach of the CLA

based on Ares’ potential refusal to pay full royalties. And its 

sixth counterclaim was for a declaratory judgment that Ares 

violated the implied covenant of good faith and fair dealing

based on the same. 

After a bench trial, the District Court found that Ares’ royalty obligation was not unenforceable under Brulotte, denying 

Ares’ first claim on the merits and granting Dyax’s first counterclaim. The District Court described Brulotte as prohibiting 

“royalties . . . for practicing . . . licensed patents after they have 

expired.” Ares, 2023 U.S. Dist. LEXIS 40484, at *65. It concluded that Ares’ royalties are not charged “for post-expiration 

use of” the inventions covered by the CAT Patents for three 

reasons. Id. at *67. First, Ares conceded that it did not practice 

those inventions while developing Bavencio. Second, while 

“Dyax did likely use the CAT Patents, that use was entirely 

before expiration.” Id. at *69. And third, the District Court 

observed that “any use of the CAT Patents by Ares Trading, 

before or after their expiration, would not have incurred any 

royalty obligation to Dyax under the CLA.” Id. at *70. Instead, 

the District Court characterized Ares’ royalty obligation as

deferred compensation for Dyax’s pre-expiration research 

involving phage display. In the alternative, the District Court 
13 

found that Ares’ royalty obligation is not unenforceable 

because “[u]nder Brulotte, royalties may run until the latestrunning patent covered in the parties’ agreement expires.” 

Kimble v. Marvel Ent., LLC, 576 U.S. 446, 454 (2015). Dyax 

licensed patents other than CAT’s to Ares, including one patent 

that “will not expire until . . . 2028[,] . . . after the end of Ares 

Trading’s ten-year royalty obligation to Dyax on sales of 

Bavencio.” Ares, 2023 U.S. Dist. LEXIS 40484, at *72–73. 

Because the District Court found that Ares’ royalty obligation is not unenforceable under Brulotte, it denied as moot 

Ares’ second claim and Dyax’s third, fourth, fifth, and sixth 

counterclaims. It denied as moot Ares’ fourth claim for a similar reason: Ares did not prove that Dyax’s royalty obligation 

to CAT is unenforceable under Brulotte. Separately, it denied 

on the merits Ares’ claim for a declaratory judgment that Dyax 

violated (or would violate) the covenant of good faith and fair 

dealing. And it denied on the merits Dyax’s counterclaim 

regarding the ’298 Patent’s inventorship. 

Ares now appeals the District Court’s denial of its first and 

third claims on the merits, arguing that its royalty obligation is 

unenforceable under Brulotte and that Dyax has violated the 

covenant of good faith and fair dealing. It also asks us to 

remand for reconsideration of its second and fourth claims, 

which the District Court denied as moot. Dyax did not appeal 

from the denial of its counterclaim regarding the ’298 Patent’s 

inventorship. 

II. JURISDICTION AND STANDARD OF REVIEW

We have a duty to determine whether an appeal falls within 

our jurisdiction. So we asked the parties to show cause why 

this appeal should not be transferred to the United States Court 
14 

of Appeals for the Federal Circuit. The Federal Circuit has 

“exclusive jurisdiction” over “appeal[s] from a final decision 

of a district court . . . in any civil action arising under, or in any 

civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to 

patents.” 28 U.S.C. § 1295(a)(1). After reviewing the parties’ 

letter briefs, we hold that we have jurisdiction because the parties did not bring any claims or compulsory counterclaims arising under the federal patent laws. 

A. The Parties’ State Law Claims Do Not Raise “Substantial” Patent Issues. 

Nine out of the parties’ ten claims and counterclaims—each

of Ares’ claims, and each of Dyax’s counterclaims except 

regarding inventorship of the ’298 Patent—arise from 

Massachusetts contract law.

3 Three of Ares’ claims are for 

declaratory judgment, “seek[ing] in essence to assert a 

defense” to an anticipated lawsuit for failing to pay royalties to 

Dyax. Pub. Serv. Comm’n of Utah v. Wycoff Co., 344 U.S. 237, 

248 (1952). Dyax’s “threatened cause of action” for Ares’ failure to pay royalties, which is what counts for determining our 

jurisdiction, would be for common-law breach of contract. Id.

Two of Dyax’s counterclaims are also for declaratory judgment, mirroring Ares’ state law claims. Finally, Ares and Dyax 

seek reformation of the CLA, and Dyax asserts counterclaims 

for breach of contract and breach of the implied covenant of 

3 Although not all ten claims and counterclaims are before us, 

we must examine all ten here. That is because we lack appellate 

jurisdiction “if either basis for the Federal Circuit’s exclusive 

jurisdiction was present in the district court, regardless of the 

claims brought on appeal.” ABS Glob., Inc. v. Inguran, LLC, 

914 F.3d 1054, 1063 (7th Cir. 2019). 
15 

good faith and fair dealing, which are all “common-law causes 

of action.” Dufficy Enters., Inc. v. Berarducci, No. 

1784CV03292, 2020 Mass. Super. LEXIS 1629, at *1 (June 7, 

2020). Altogether, federal patent law does not create causes of 

action for these nine claims and counterclaims. So these claims 

and counterclaims “arise” under federal patent law only if the 

claimant’s “right to relief necessarily depends on resolution of 

a substantial question of federal patent law.” Christianson v. 

Colt Indus. Operating Corp., 486 U.S. 800, 809 (1988). 

In Gunn v. Minton, 568 U.S. 251 (2013), the Supreme Court 

clarified that a patent law question is “substantial” only if it is 

“importan[t] . . . to the federal system as a whole.” Id. at 260; 

see FTC v. AbbVie Inc., 976 F.3d 327, 349–51 (3d Cir. 2020) 

(applying Gunn in determining whether an appeal fell under 

§ 1295(a)(1)). The Gunn plaintiff brought a legal malpractice 

claim in state court, for which the cause of action was created 

by state law. 568 U.S. at 255. His claim arose from a patent 

infringement case that he lost. Id. Its resolution required a 

“case-within-a-case” patent law analysis because he argued 

that he “would have prevailed in his federal patent infringement case if only [his lawyers] had timely made an 

experimental-use argument on his behalf.” Id. at 259, 262. The 

Supreme Court held that this patent law issue was not substantial “to the federal system as a whole,” regardless of its 

importance to the parties. Id. at 260. “Because of the backwardlooking nature of a legal malpractice claim,” the resolution of 

the issue would not affect the validity of any patents, nor would 

it alter the judgment in the prior infringement case. Id. at 261; 

see AbbVie, 976 F.3d at 349 (considering whether resolving a

patent law issue would “change [a] settlement that resulted” 

from infringement lawsuits). And the resolution of the issue 

would have no effect on the uniformity of federal patent law 
16 

because the resolution would bind only the parties, not the federal courts. Gunn, 568 U.S. at 263. 

By this logic, none of the parties’ state law claims or counterclaims raise a “substantial” patent law issue. Some of their 

claims and counterclaims depend on the resolution of a patent 

law issue: whether Ares’ royalty obligation is unenforceable 

under Brulotte because it prolongs the duration of the CAT 

Patents. See Kimble, 576 U.S. at 462 (“Brulotte is a patent . . . 

case[.]”). To resolve this issue, courts must “ask whether” the 

CLA “provides royalties for post-expiration use of” the inventions covered by the CAT Patents. Id. at 459. Ares and Dyax 

offer two competing “choices” for interpreting Brulotte “in this 

appeal.” AbbVie, 976 F.3d at 350. Regardless of which interpretation we choose, the enforceability of Ares’ royalty obligation under Brulotte is not a “substantial” patent law issue for 

both “general and case specific” reasons. Id. at 349. 

First, Ares’ interpretation of Brulotte does not require a 

case-within-a-case patent law analysis. Ares interprets Brulotte

as applying where (1) a royalty obligation is exchanged for a 

patent license, and (2) the obligation continues undiminished 

after the licensed patent expires. According to Ares, Brulotte

applies here because (1) Ares’ royalty obligation was 

exchanged for licenses to the CAT Patents, and (2) it continued 

undiminished after the last CAT Patent expired. This proposed 

analysis sounds in contract law, not patent law. It does not 

require, for example, construing the CAT Patents’ claims or 

determining whether Ares has practiced the CAT Patents. 

Instead, it requires only interpreting the CLA’s terms and

determining what Ares’ royalty obligation was exchanged for.

See Opening Br. 28–29 (emphasizing that Ares’ test would not 

require a “complicated infringement case that could include 

extensive factual development, claim construction, and expert 
17 

testimony” that could be “the equivalent of a patent infringement trial”). Thus, resolving this appeal according to Ares’ 

interpretation would not affect patent rights retroactively or 

“undermine the uniformity of federal patent law” prospectively 

because it would not require any analysis of the CAT Patents 

qua patents.4 AbbVie, 976 F.3d at 349. 

Second, Dyax’s interpretation of Brulotte likewise does not 

require a case-within-a-case patent law analysis in this appeal. 

According to Dyax, Brulotte prohibits charging royalties that 

“arise from practicing” inventions after their patents expire. 

Answering Br. 38. So Brulotte is implicated only if Ares’ royalty obligation arises from post-expiration use of the inventions 

covered by the CAT Patents. Ares’ obligation arises from sales 

of “Therapeutic Antibody Products.” Based only on that 

phrase’s definition in the CLA and “the definitions that flow 

from it,” Ares, 2023 U.S. Dist. LEXIS 40484, at *28, the 

4 The District Court found, in the alternative, that Dyax would 

prevail under Ares’ interpretation. Specifically, it found that 

Ares’ royalty obligation was exchanged for licenses to both the 

CAT and Dyax Patents and that one of the Dyax Patents will 

expire after Ares’ royalty obligation terminates. Because “royalties may run until the latest-running patent covered in the parties’ agreement expires,” the District Court concluded that the 

royalty obligation was not unenforceable even under Ares’ 

interpretation. Kimble, 576 U.S. at 454. If we were to address 

this alternative argument, it would require only contract law 

analysis, not patent law analysis. It would turn on what Ares’ 

royalty obligation was exchanged for—licenses to only the 

CAT Patents, or licenses to both the CAT and Dyax Patents—

not on construing claims or determining the validity of the 

Dyax Patents.
18 

District Court found that “any use of the CAT Patents by Ares 

Trading, before or after their expiration, would not have 

incurred any royalty obligation to Dyax under the CLA,” id. at 

*70 (emphasis added). Ares does not dispute this finding on 

appeal. So if we apply Dyax’s interpretation of Brulotte, we 

need not engage in any patent law analysis of the CAT Patents. 

It is undisputed that Ares’ royalty obligation does not arise

from its post-expiration use of the inventions covered by the 

CAT Patents. 

However, Dyax’s interpretation of Brulotte may require 

complicated infringement-style analyses in future cases. If parties dispute whether a royalty obligation arises from practicing 

an invention, courts may be required “to conduct a burdensome 

trial-within-a-trial on infringement of expired patents to determine whether Brulotte applies.” Reply Br. 10. But that possibility does not affect our jurisdiction over this appeal. We must 

determine our jurisdiction only over this appeal, not over every 

possible case raising Brulotte issues. See AbbVie, 976 F.3d at 

350 (holding “that our decision in this appeal will have limited 

effect on the uniformity of patent law” (emphasis added)); 

Xitronix Corp. v. KLA-Tencor Corp., 882 F.3d 1075, 1078 

(Fed. Cir. 2018) (anticipating whether “[p]atent claims will . . . 

be invalidated or revived based on the result of this case”

(emphasis added)). 

Ultimately, the only patent law issue raised on appeal is 

whether Ares’ royalty obligation conflicts with the federal 

patent laws under Brulotte. The result of resolving this issue 

will be that Ares’ obligation is or is not enforceable, affecting 

only the operation of state contract law. Thus, the Brulotte

issue here is not sufficiently important “to the federal [patent] 

system as a whole” to trigger the Federal Circuit’s jurisdiction. 

Gunn, 568 U.S. at 260. Our resolution will not affect core sub-
19 

stantive areas of patent law like patentability, infringement, or 

remedies. See Merrell Dow Pharms. Inc. v. Thompson, 478 

U.S. 804, 814 n.12 (1986) (suggesting that the “nature of the 

federal interest at stake” governs whether a legal question is 

important to the federal system as a whole); see also Xitronix 

Corp. v. KLA-Tencor Corp., 916 F.3d 429, 441 (5th Cir. 2019) 

(observing that Gunn illustrated its concept of “substantial” 

federal issues by citing to cases that “put the legality of a federal action in question,” such as “the validity of a foreclosure 

. . . by the IRS” and “the constitutionality of” federal bonds).

So these nine claims and counterclaims, for which the federal 

patent laws do not create causes of action, do not divest us of 

jurisdiction. 

B. Dyax’s Counterclaim Regarding the ’298 Patent Was 

Not Compulsory. 

Dyax’s counterclaim regarding the ’298 Patent’s inventorship clearly arises under the federal patent laws, which create

the cause of action for this claim. See 35 U.S.C. § 256(b) (“The 

court before which such matter is called in question may order 

correction of the patent on notice and hearing of all parties concerned[.]”). When a cause of action is created by the federal 

patent laws, the claim it supports arises under them. Cf. Gunn, 

568 U.S. at 257 (“[A] case arises under federal law when federal law creates the cause of action asserted.”). 

However, this counterclaim does not defeat our jurisdiction 

because it was not “compulsory.”5 28 U.S.C. § 1295(a)(1). A 

5 Because we conclude that this counterclaim was not compulsory, we need not address Ares’ alternative argument that this 

claim was not a true “counterclaim,” insofar as it was brought 
20 

compulsory counterclaim “arises out of the transaction or 

occurrence that is the subject matter of the opposing party’s 

claim.” Fed. R. Civ. P. 13(a)(1)(A). We have held that a 

defendant’s counterclaim arises out of the same transaction or 

occurrence as a plaintiff’s claim if the two have a “logical 

relationship.” M.R. v. Ridley Sch. Dist., 744 F.3d 112, 121 (3d 

Cir. 2014). We introduced this standard in Great Lakes Rubber 

Corp. v. Herbert Cooper Co., stating that “a counterclaim is 

logically related to the opposing party’s claim where separate 

trials on each of their respective claims would involve a substantial duplication of effort and time by the parties and the 

courts.” 286 F.2d 631, 634 (3d Cir. 1961). This standard is satisfied “[w]here multiple claims involve many of the same factual issues, or the same factual and legal issues, or where they 

are offshoots of the same basic controversy between the parties.” Id.

A separate trial on Dyax’s counterclaim regarding the ’298 

Patent would not have required a substantial duplication of 

effort and time because it raised different factual and legal 

issues than the enforceability of Ares’ obligation under 

Brulotte. As Ares noted in its letter brief, Dyax had a legal theory that connected the ’298 Patent to Brulotte. Dyax’s theory 

was that the ’298 Patent is “covered” by Section 5.1(e) of the 

CLA, which states that Ares “shall own all inventions, discoveries and results made by or on behalf of [Ares] in exercising 

its rights under this Agreement.” App. 4176. The “Product 

Inventions” covered by Section 5.1(e) include “any Dyax 

Antibodies,” a Dyax Antibody being “any Antibody or [fragagainst a third party that was not named in Ares’ complaint.

See Fed R. Civ. P. 13(a)(1) (defining a compulsory counterclaim as one brought against an “opposing party”). 
21 

ment] that is delivered by Dyax to [Ares] . . . and any variant, 

modification or derivative of such Antibody or [fragment] that 

is identified or developed by [Ares].” App. 4176, 4153. Dyax 

argued that Section 5.1(e) covers the ’298 Patent because the 

patent “encompasses” Dyax Antibodies, including both “parent antibodies that Dyax provided Ares” and “the modified 

antibody that Ares purports to have derived from the parent 

antibodies.” App. 3916. Because the ’298 Patent will not 

expire before Ares’ royalty obligation terminates, Dyax concluded that the obligation was not unenforceable under 

Brulotte, which “permits royalties to ‘run until the latestrunning patent covered in the parties’ agreement expires.’” Id.

(emphasis added) (quoting Kimble, 576 U.S. at 454). 

But Dyax’s theory did not depend on whether a Dyax scientist should have been credited as an inventor of the ’298 

Patent. Section 5.1(e) covers “all inventions” made solely “by” 

Ares “in exercising its rights under” the CLA, not only inventions made “on behalf of” Ares by Dyax scientists. App. 4176

(emphasis added). So Section 5.1(e) “covers” the ’298 Patent

in Kimble’s sense regardless of its inventorship. Indeed, the 

District Court found that “[t]he inventions claimed in [the ’298 

Patent] are Product Inventions as defined in Section 5.1(e)” 

and that “Dyax granted to Ares Trading an irrevocable assignment of all of its right, title and interest in” the ’298 Patent 

thereby, Ares, 2023 U.S. Dist. LEXIS 40484, at *59, despite 

concluding that Dyax did not carry its burden of showing that 

its scientist should be named as an inventor. Thus, the question 

of whether Dyax’s scientist should be named as an inventor 

involved wholly different “factual and legal issues” than the 

enforceability of Ares’ royalty obligation under Brulotte. 

Great Lakes Rubber, 286 F.2d at 634. The former depended on 

the minute details of a Dyax scientist’s “choices or inventive 
22 

acts,” Ares, 2023 U.S. Dist. LEXIS 40484, at *87, and the significance of her “contributions . . . when ‘measured against the 

dimension of the full invention,’” id. at *88 (quoting Fina Oil 

& Chem. Co. v. Ewen, 123 F.3d 1466, 1473 (Fed. Cir. 1997)). 

The latter did not depend on these factual and legal issues 

because whether Section 5.1(e) “covered” the ’298 Patent in 

Kimble’s sense did not depend on Dyax’s contributions to 

Bavencio’s invention. 

Altogether, there may be a “logical relationship” between 

the parties’ Brulotte arguments and the ’298 Patent generally. 

But there is no such relationship between their Brulotte arguments and Dyax’s correction-of-inventorship counterclaim. 

The factual and legal issues underlying the latter are unrelated 

to those underlying the former, such that separate trials would 

not have resulted in a “substantial duplication” of the parties’

efforts. Great Lakes Rubber, 286 F.2d at 634. So Dyax’s counterclaim was not “compulsory” and does not divest us of jurisdiction under § 1295(a)(1). 

* * * 

We therefore have appellate jurisdiction under 28 U.S.C. 

§ 1291.6 We review the District Court’s “determin[ation] [of] 

the meaning of . . . contract language” for clear error. In re 

Nat’l Collegiate Student Loan Trusts 2003-1, 2004-1, 2004-2, 

2005-1, 2005-2, 2005-3, 971 F.3d 433, 443 (3d Cir. 2020). But 

6 The District Court, for its part, had jurisdiction over the parties’ state law claims and counterclaims under 28 U.S.C. 

§ 1332(a)(2), and over Dyax’s patent law counterclaim under 

28 U.S.C. §§ 1331 and 1338(a). 
23 

we review its “determin[ation] [of] the legal effect and consequences of [the] contractual provisions” de novo. Id. 

Under Massachusetts law, which governs the CLA, Ares 

bears the burden of proving that its royalty obligation is unenforceable. See TAL Fin. Corp. v. CSC Consulting, Inc., 844 

N.E.2d 1085, 1092 (Mass. 2006) (“The burden of proof regarding the enforceability of a . . . clause . . . rest[s] squarely on the 

party seeking to set it aside.”). Ares must show that its obligation conflicts with the federal patent laws, such that “enforcement of [its] contract to pay royalties” is preempted. Aronson 

v. Quick Point Pencil Co., 440 U.S. 257, 258–59, 262 (1979). 

But the Supreme Court has cautioned “that a court should not 

find pre-emption too readily in the absence of clear evidence 

of a conflict.” Geier v. Am. Honda Motor Co., 529 U.S. 861, 

885 (2000).

III. DISCUSSION

A. Brulotte’s “Simple” Rule Does Not Apply to Ares’ 

Royalty Obligation. 

Brulotte was based on federal policy favoring limited durations for patent monopolies. Royalty obligations that conflict 

with this policy—by restricting a patent licensee’s use of 

inventions after their licensed patents expire—are unenforceable due to “obstacle” preemption. If a royalty obligation is calculated based on activity requiring such post-expiration use, it 

restricts such use on its face and Brulotte applies. Ares’ royalty 

obligation is not calculated based on activity requiring postexpiration use of inventions covered by the CAT Patents, so 

Brulotte does not apply. 
24 

1. Federal Policy, Obstacle Preemption, and Scott 

Paper

The Constitution empowers Congress to “secur[e] for limited Times to . . . Inventors the exclusive Right to their . . . 

Discoveries.” U.S. Const. art. I, § 8, cl. 8. Congress has exercised that power by enacting federal patent laws. Under 35 

U.S.C. § 154(a)(1), “[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). This temporal limitation is critical to federal patent policy. “From their 

inception, the federal patent laws have embodied a careful balance between the need to promote innovation and the recognition that imitation and refinement through imitation are both 

necessary to invention itself and the very lifeblood of a competitive economy.” Bonito Boats, Inc. v. Thunder Craft Boats, 

Inc., 489 U.S. 141, 146 (1989). By granting inventors a 

monopoly over the use of their inventions, Congress encourages inventors to innovate. By limiting the duration of that 

monopoly, Congress allows members of the public to compete 

with and improve upon the works of inventors, using formerly 

patented inventions “as the building blocks of further innovation.” Id. at 151. Thus, a central objective of the federal patent 

laws is “that after the expiration of a federal patent, the subject 

matter of the patent passes to the free use of the public.” Id. at 

152. 

The Supreme Court has declared that a state law is 

preempted if it “stands as an obstacle to the accomplishment 

and execution of the full purposes and objectives of Congress.” 

Hines v. Davidowitz, 312 U.S. 52, 67 (1941). This doctrine of 
25 

“obstacle” preemption applies to the patent laws, just as it does 

“in other fields” of federal law. Aronson, 440 U.S. at 262. Consistent with this doctrine, the Supreme Court has repeatedly 

declared unenforceable state law restrictions on the free use of 

formerly patented and unpatentable inventions, insofar as they 

conflict with congressional objectives like temporally limiting 

patent monopolies. See Kimble, 576 U.S. at 451–52 (collecting 

cases). 

For example, the Supreme Court “carefully guarded [the] 

cut-off date” of a patent monopoly, id. at 451, in Scott Paper

Co. v. Marcalus Mfg. Co., 326 U.S. 249 (1945). There, the 

assignee of a patent sued its assignor’s company for using a 

machine that allegedly infringed the patent. Id. at 250–51. The 

assignor’s company responded that its machine was an identical copy of an invention covered by a different, expired patent, 

such that it could not infringe the assigned patent. Id. at 251. 

The assignee argued that the assignor’s company was estopped 

from raising that defense based on the fact of the assignment. 

Id. at 251–52. The Court disagreed, holding that applying the 

common-law doctrine of estoppel would “penalize the [company’s] use of the invention of an expired patent.” Id. at 254. 

The Court emphasized that the patent laws are designed such 

“that members of the public shall be free to manufacture the 

product . . . disclosed by the expired patent” and “that the consuming public at large . . . receive[s] the benefits of the unrestricted exploitation” of the formerly patented invention. Id. at 

255. Thus, the Court concluded that no one can lawfully 

“restrict himself, by express contract, or by any action which 

would give rise to an ‘estoppel,’ from using the invention of an 

expired patent.” Id. at 255–56. Allowing even one member of 

the public to restrict himself in this way would “deprive the 

public of the benefits of the free use of the invention,” thereby 
26 

conflicting with “the policy and purpose of the patent laws.” 

Id. at 256. Given the strength of the federal policy favoring 

limited patent duration, the Court clarified that “any attempted 

reservation or continuation in the patentee . . . of the patent 

monopoly[] after the patent expires, whatever the legal device 

employed,” conflicts with that policy and is unenforceable. Id.

2. Brulotte

The Supreme Court’s decision in Brulotte “was brewed in 

the same barrel” as decisions like Scott Paper. Kimble, 576 

U.S. at 452. The Brulotte Court declared a royalty obligation 

unenforceable because it conflicted with the federal policy 

favoring limited patent duration. 379 U.S. at 29–34. 

Respondent Thys owned twelve patents, seven of which covered inventions that were incorporated into a machine for picking hops. Id. at 29–30. It licensed the twelve patents and the

right to use the machine to farmers. Id. at 29. In exchange, the 

farmers agreed to pay an annual royalty, calculated based on 

the amount of hops harvested with the machine but subject to 

a mandatory minimum. Id. (“Under [the] license there is payable 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, whichever is greater.”). Before the license and its 

royalty obligation terminated, the patents covering the seven 

inventions incorporated into the machine expired. Id. at 30. But 

one of the five licensed “patent[s] whose mechanism was not 

incorporated in the[] machines” had not expired. Id. at 30 n.2. 

The Supreme Court held that the royalty obligation was 

unenforceable “after expiration of the last of the patents incorporated in the machines” because it restricted the farmers’ free 

use of those formerly patented inventions. Id. at 33–34. The 

Court justified its holding by observing that the Constitution 
27 

empowers Congress “to secure ‘for limited times’ to inventors 

‘the exclusive right’ to their discoveries” and that Congress had 

exercised its power by granting patents to inventors for limited 

durations. Id. at 30 (quoting U.S. Const. art. I, § 8, cl. 8). After 

a patent expires, members of the public are free to use the formerly patented invention without restriction. Id. at 31. The 

farmers’ royalty obligation conflicted with that policy because

it was calculated based on the “use of a machine . . . after 

expiration of the last of the patents incorporated” therein. Id. at 

33–34. On its face, the obligation hindered the farmers from 

using the incorporated inventions after their patents expired. 

Id. at 31 (“The royalty payments due for the post-expiration 

period are by their terms for use during that period.” (emphasis 

added)). 

The Court cited Scott Paper in describing the strength of 

the federal policy that inventions “become public property 

once” their patents expire. Id. at 31. It described this policy as

so weighty that it conflicts with “attempt[s]” to prolong patent 

monopolies, not only royalties that hinder post-expiration use 

in practice. Id. (quoting Scott Paper, 326 U.S. at 256). Thereafter, the Court twice described the farmers’ royalty obligation 

as an “attempt” to extract payments for the post-expiration use 

of the inventions incorporated into the hop-picking machine. 

Id. at 32, 34. 

3. Kimble

Brulotte was “severely . . . criticized” by lower courts. 

Scheiber v. Dolby Lab’ys, Inc., 293 F.3d 1014, 1017 (7th Cir. 

2002). In Kimble, the Supreme Court granted certiorari solely 

to determine whether to overrule Brulotte. 576 U.S. at 449. The 

Court upheld Brulotte on stare decisis grounds. Id. In doing so, 

it clarified the scope of Brulotte’s rule. 
28 

Kimble received a patent on a toy that allowed users to 

shoot foam string from their hands. Id. He sued Marvel for 

patent infringement after it marketed a “Web Blaster” that 

allowed users to shoot “webs” from their hands like SpiderMan. Id. at 450. Kimble and Marvel settled their dispute, with 

Kimble selling his patent to Marvel in exchange for a 3% royalty on Marvel’s sales of the Web Blaster and any other products that would infringe the patent. Id. The Ninth Circuit held 

that this royalty was unenforceable under Brulotte after the 

expiration of Kimble’s patent. Id. at 450–51. 

The Kimble Court characterized Brulotte as involving a 

conflict between federal patent policy and agreements that 

restrict the use of inventions after their patents expire. Under 

the patent laws, “[w]hile a patent lasts, the patentee possesses 

exclusive rights to the patented article—rights he may sell or 

license for royalty payments if he so chooses.” Id. at 451. But 

after “the patent expires, the patentee’s prerogatives expire too, 

and the right to make or use the article, free from all restriction, 

passes to the public.” Id. A corollary of that principle is that a 

member of the public cannot agree to limit his use of an invention after its patent expires. See id. at 453 (noting that “[a]ny 

attempt to limit a licensee’s post-expiration use of the invention” is unenforceable); see also id. (“[E]very person can make 

free use of a formerly patented product.”); id. at 458 (“[T]his 

Court has continued to draw from [35 U.S.C. § 154] a broad 

policy favoring unrestricted use of an invention after its 

patent’s expiration.”). According to the Kimble Court, Brulotte

“is simplicity itself to apply.” Id. at 459. “A court need only 

ask whether a licensing agreement provides royalties for postexpiration use of a patent. If not, no problem; if so, no dice.”

Id. 
29 

4. Three Observations About Brulotte’s Simple Rule

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. These three observations are 

well-supported in Scott Paper, Brulotte, and Kimble. 

 i. “Post-expiration use” denotes the practice of formerly 

patented inventions. As the Brulotte Court noted, “[t]he right 

to make, the right to sell, and the right to use” an invention pass 

to the public when the invention’s patent expires. 379 U.S. at 

31. Collectively, these rights constitute the broader right to 

practice an invention—to use it in ways that would have 

infringed its patent pre-expiration. See 35 U.S.C. §§ 154(a)(1), 

271(a). According to the Kimble Court, Brulotte applies to royalty obligations that restrict this right because such royalties 

extend a patent holder’s monopoly beyond the life of the 

patent. 576 U.S. at 458 (“Scott Paper—the decision on which 

Brulotte primarily relied—remains good law. So too do this 

Court’s other decisions refusing to enforce either state laws or 

private contracts constraining individuals’ free use of formerly 

patented . . . discoveries.”). So when the Court speaks of federal policy favoring unrestricted “post-expiration use,” it refers 

to the practice of inventions after their patents expire. 

 ii. Royalties are “provided for” post-expiration use when 

they are calculated based on activity requiring that use. A 

“royalty” is “[a] payment . . . made to an author or inventor for
30 

each copy of a work or article sold under a copyright or patent.” 

Royalty, Black’s Law Dictionary (9th ed. 2009) (emphasis 

added). That is, a royalty is commonly understood as a payment for the right to engage in the activity on which the payment is calculated (“often” for the right to “ma[ke], use[], or 

s[ell]” an “item”). Id. So to determine whether royalties are 

“provided for” post-expiration use, courts must determine 

whether payments are calculated based on activity requiring 

post-expiration use. This understanding of what royalties are 

“provided for” fits the facts in Brulotte, where royalties were 

calculated based on the amount of hops harvested with “the 

machine,” not based on hops harvested by other means. 379 

U.S. at 29. The royalties were therefore calculated based on 

activity requiring post-expiration use of the seven inventions 

incorporated into the machine. They were calculated based on 

the harvesting of hops, which required using the machine, 

which in turn required practicing the formerly patented inventions incorporated into the machine. 

This understanding of what royalties are “provided for”

also coheres with federal patent policy. Brulotte applies to royalty obligations that “restrict free access to formerly patented 

. . . inventions” and conflict with federal policy thereby.

Kimble, 576 U.S. at 451. If a royalty obligation is calculated 

based on activity requiring post-expiration use, it restricts postexpiration use on its face by requiring payment for that use, 

conflicting with federal policy favoring unrestricted postexpiration use and thus implicating Brulotte. Insofar as the royalties in Brulotte were calculated based on hops harvested with 

the machine, they restricted use of the seven inventions incorporated into the machine “for the post-expiration period.” 379 

U.S. at 31. But if royalties are not calculated based on activity 

requiring post-expiration use, they do not hinder post-
31 

expiration use “on their face” and Brulotte is not implicated.

Id. at 32.7

iii. A payment may be calculated based on post-expiration 

use on its face, even if its value does not vary with that use in 

practice. Royalties that are calculated based on activity requiring post-expiration use will typically vary with the extent of 

that use in practice. In part, that was the case in Brulotte. If a 

farmer used his hop-picking machine more often and picked 

more hops, thereby using the inventions incorporated into the 

machine more often, his royalty obligation increased. Id. at 29.

7 Dyax would not use the word “calculated” to define 

Brulotte’s rule. That is because the farmers’ royalty obligation 

was not calculated directly based on their use of the hoppicking machine. It was calculated indirectly based on that use, 

insofar as it was calculated based on the amount of hops they 

harvested with their machines. Our description of Brulotte’s 

rule captures this distinction, despite using the word “calculated,” because it turns on whether royalties are calculated 

based on activity requiring post-expiration use, regardless of 

whether they are calculated directly based on that use. Consider an example that Ares uses in its brief: “a patent owner . . . 

say[s] that in exchange for a license to a patent covering tires, 

a company has to pay it one dollar for every car sold with windshield wipers for the next 30 years.” Opening Br. 23. Assuming 

that the cars sold with windshield wipers require use of an 

invention covered by the tire patent, this royalty would fall 

under our definition of Brulotte’s rule, even if it would not be 

calculated directly based on tire sales. It would be calculated 

based on activity requiring patent usage, insofar as the cars sold 

with windshield wipers are necessarily sold with the patented 

tires. 
32 

But a payment may also be calculated based on activity 

requiring post-expiration use even if its value does not vary 

with the extent of that use. That was also the case in Brulotte. 

A farmer’s annual payment varied with post-expiration use 

only if it exceeded a $500 minimum. Id. For one farmer, 

Charvet, the payment obligation for the post-expiration period 

consisted entirely of $500 minimums. Id. at 37 n.2 (Harlan, J., 

dissenting) (“Petitioner Charvet was indebted to Thys only to 

the extent of the minimums.”). Thus, his obligation did not 

vary with his post-expiration use of the inventions incorporated 

into the machine. 

Nevertheless, Charvet’s payment obligation was calculated 

based on post-expiration use. The $500 minimum was 

expressly designed to approximate the minimum value of using 

the hop-picking machine for one year, regardless of the amount 

of hops harvested. See Thys Co. v. Brulotte, 382 P.2d 271, 272 

(Wash. 1963) (“[A] minimum royalty of $500 per year was to 

be paid for the use of each machine.” (emphasis added)), rev’d, 

379 U.S. 29; Brulotte, 379 U.S. at 31 (“The royalty payments 

due for the post-expiration period are by their terms for use 

during that period, and are not deferred payments for use during the pre-expiration period.” (emphasis added)). This understanding of the $500 minimums—that they were calculated ex 

ante based on the value of using the machine, including in the 

post-expiration period—is confirmed by the text of the contract. See Appendix to Petition for Writ of Certiorari at 44a, 

Brulotte, 379 U.S. 29 (No. 20). The contract permitted “equitable adjustment[s]” to the $500 minimums “if it shall be 

impossible . . . to use any such machine during any part of a 

particular picking season because of a serious breakdown.” Id.

This provision confirms that the $500 minimums were calculated based on the value of using the “machines for [each] pick-
33 

ing season,” including post-expiration seasons, because the 

minimums could be reduced if the machines were unusable.8

Id.

Thus, the farmers’ contracts were unenforceable “insofar as 

[they] allow[ed] royalties to be collected which accrued after 

the last of the patents incorporated into the machines ha[d] 

expired.” Brulotte, 379 U.S. at 30. Regardless of whether a 

farmer’s payment obligation varied based on his postexpiration use of his machine, it was calculated based on 

activity requiring that use. Such obligations are unenforceable 

obstacles to federal patent policy because Congress intended 

for members of the public to use inventions free of all payment 

obligations after their patents expire. Id. at 31 (recognizing that 

restrictions on post-expiration use are unenforceable, “whatever the legal device employed,” including “attempted” 

restrictions (quoting Scott Paper, 326 U.S. at 256)). 

8 Ares misunderstands the significance of the $500 minimums 

in Brulotte. At oral argument, Ares compared itself to Charvet 

because just as he “could have been using [the hop-picking 

machine] and paying . . . royalties,” so “tomorrow, could 

[Ares] use the CAT patents for something.” Oral Arg. Tr. 

62:13–15. The $500 minimums were not unenforceable merely 

because post-expiration use of the machine was possible. They 

were unenforceable because their value was expressly calculated based on contemplated post-expiration use. Ares’ royalty 

obligation is comparable to Charvet’s only if it is calculated 

based on activity requiring post-expiration use of inventions 

covered by the CAT Patents. 
34 

* * * 

Combining these observations, Brulotte requires courts to

determine whether patent licensing agreements provide royalties that are calculated based on activity requiring postexpiration use of inventions covered by the licensed patents. 

Here, the CLA is the licensing agreement, Section 4.6 is the 

royalty obligation, and (according to Ares) the CAT Patents are 

the relevant licensed patents. If Ares’ payments to Dyax are

calculated based on activity requiring post-expiration use of 

inventions covered by the CAT Patents—regardless of whether 

the payments vary with that use in practice—then Brulotte may 

apply. “If not, no problem[.]” Kimble, 576 U.S. at 459. 

5. Ares’ Royalty Obligation 

Brulotte does not apply here because Ares’ royalty obligation is not calculated based on activity requiring postexpiration use of inventions covered by the CAT Patents. Ares’ 

royalty obligation is calculated based on sales of “Therapeutic 

Antibody Products.” App. 4172. That phrase covers “any preparation which is intended . . . for the treatment or prevention of 

disease, infection or other condition in humans, which contains, comprises, or the process of development or manufacture 

of which utilizes a Dyax Antibody.” App. 4158. “Dyax 

Antibody” is defined as “any Antibody or [fragment] that is 

delivered by Dyax to [Ares] in connection with the Research 

Program.” App. 4153. Combining these definitions, Ares’ royalty obligation is calculated based on sales of drugs that Ares 

develops from antibodies that Dyax discovers using phage display. 

Sales of Therapeutic Antibody Products do not require 

post-expiration use of the inventions covered by the CAT 
35 

Patents. The CLA’s definition of “Therapeutic Antibody 

Product” does not refer to the CAT Patents, nor do “any of the 

definitions that flow from it.” Ares, 2023 U.S. Dist. LEXIS 

40484, at *28. Ares’ witness, Jens Eckhardt, conceded as much

at trial. Counsel for Dyax asked Eckhardt to confirm that “the 

definition of what products the royalty is owed on . . . does not 

depend in any way on using the CAT patents.” App. 2532. 

Eckhardt responded “[r]ight,” without qualification. App. 

2533. This testimony was consistent with Eckhardt’s deposition, along with the testimony of other witnesses at trial. See

App. 7083 (responding that it is “correct” that Ares’ “royalties 

. . . don’t depend on using the CAT patents”); App. 3224; App. 

3619. Eckhardt’s testimony is further corroborated by Ares’ 

admission that “it never practiced the expired CAT Patents to 

develop Bavencio” and the fact that Dyax’s “use [of] the CAT 

Patents” under the CLA occurred “entirely before expiration,” 

which together confirm that sales of Therapeutic Antibody 

Products do not require post-expiration use of inventions covered by the CAT Patents.9 Ares, 2023 U.S. Dist. LEXIS 40484, 

9

 Ares concedes that the manufacture and sale of Bavencio do 

not practice the inventions covered by the CAT Patents, so we 

need not consider whether Bavencio practices those inventions 

merely because it was discovered using phage display. In any 

event, we doubt that it does. The Federal Circuit has held that 

a “drug product” like Bavencio infringes patents covering 

“research processes” like phage display only if the relevant 

process is “used directly in the manufacture of the product, and 

not merely as a predicate process to identify the product to be 

manufactured.” Bayer AG v. Housey Pharms., Inc., 340 F.3d 

1367, 1377–78 (Fed. Cir. 2003); see 35 U.S.C. § 271(g). Ares 

has not alleged that it uses phage display directly in Bavencio’s 
36 

at *69. As a result, Ares’ royalty obligation is not calculated 

based on activity requiring such post-expiration use and 

Brulotte is not implicated.10

B. Ares’ Counterarguments Fail. 

Ares raises several counterarguments to our understanding 

of Brulotte, but none is successful. 

manufacture, so it is unlikely that Bavencio’s manufacture uses 

the inventions covered by the CAT Patents. See Part III.A.4, 

supra (defining “use” as “acts that would have infringed the 

patents pre-expiration”). 

10 Eckhardt’s testimony did not foreclose the possibility that 

Ares’ development of a Therapeutic Antibody Product other 

than Bavencio could have resulted from post-expiration use of 

inventions covered by the CAT Patents. Thus, it seems possible 

that Ares’ royalty obligation could have arisen from postexpiration use of those inventions, even though its obligation

on sales of Bavencio did not result from such use. But even so, 

Ares’ royalty obligation does not run afoul of Brulotte because 

it does not necessarily result from such use. The royalties in 

Brulotte were calculated based on activity that necessitated 

post-expiration use of the inventions incorporated into the hoppicking machines. We are bound to faithfully apply Brulotte, 

but we need not expand its sweep, nor do the parties ask us to 

do so. And under Brulotte, we do not view a remote possibility 

of restricted post-expiration use as constituting “clear evidence” that a royalty obligation conflicts with federal policy 

favoring limited patent duration, such that enforcement is 

preempted. Geier, 529 U.S. at 885. 
37 

1. Post-Expiration Use 

First, Ares proffers a different interpretation of “use” in 

Brulotte and Kimble. It interprets Brulotte as applying when a 

royalty obligation that is exchanged for a patent license survives undiminished into the post-expiration period: 

[A] royalty provision that draws no distinction 

between the royalty owed before the expiration 

of the licensed patents and the royalty payable 

after the expiration of the licensed patents is 

unlawful regardless of whether the postexpiration royalty is calculated directly based on 

activity within the scope of the patent or indirectly. 

Opening Br. 23. 

This covers Ares’ royalty obligation because, according to 

Ares, the “licensed patents” relevant to its obligation are the 

CAT Patents. First, Ares notes that to commercialize a 

Therapeutic Antibody Product, it must (through Dyax) complete CAT Gatekeeping, after which it receives a target-related 

commercial license to the CAT Patents. Thus, Ares’ royalty 

obligation is conditioned on its licensing of the CAT Patents. 

Second, the duration of Ares’ royalty obligation is expressly 

tied to the lifespan of the CAT Patents. For these reasons, Ares 

asserts that its obligation was exchanged for licenses to the 

CAT Patents. And because Ares’ obligation is identical before 

and after the CAT Patents’ expiration, Ares concludes that it is 

unenforceable under Brulotte, regardless of whether it is calculated based on Ares’ use of inventions covered by the CAT 

Patents. See Brulotte, 379 U.S. at 32 (focusing on whether contracts “exact the same terms and conditions for the period after 
38 

the patents have expired as they do for the monopoly period”).

Thus, Ares contends that Kimble uses the phrase “postexpiration use” “in the sense of the royalty being paid [postexpiration] in exchange for a license to the patent.” Opening 

Br. 24 (emphasis omitted). 

We disagree with Ares’ expansive interpretation of 

Brulotte, which is inconsistent with Brulotte’s facts and the 

federal policy that animated it.11 Ares’ interpretation is inconsistent with Brulotte’s facts because there, the farmers’ royalty 

obligations were exchanged for licenses to “various patents for 

hop-picking,” including some patents that were not “incorporated into the [hop-picking] machines.” 379 U.S. at 29–30. One 

of the licensed patents had not expired before the royalty obligation terminated. Id. at 30 n.2. Under Ares’ interpretation, this 

unexpired patent would qualify as one of the “licensed patents” 

relevant to the farmers’ royalty obligation because the latter 

was exchanged, in part, for a license to the former. But as we 

have previously mentioned, the Supreme Court has clarified 

that a royalty obligation “may run until the latest-running 

patent covered in the parties’ agreement expires.” Kimble, 576 

U.S. at 454. Ares’ interpretation implies that Brulotte was 

wrongly decided because the farmers’ royalties were paid “in 

exchange for a license to” an unexpired patent. Opening Br. 

24. To make sense of Brulotte, it is instead necessary to con11 Because we conclude that Brulotte does not apply to Ares’ 

royalty obligation, we need not address the District Court’s 

alternative finding that even under Ares’ interpretation of 

Brulotte, its royalty obligation is not unenforceable. We also 

need not address whether the District Court correctly described 

Ares’ obligation as deferred compensation for Dyax’s preexpiration performance of phage display. 
39 

sider how the farmers’ royalties were calculated: The royalties 

were unenforceable because they were calculated based on 

activity requiring use of the hop-picking machine, which 

incorporated only inventions whose patents expired before the 

royalties terminated. 

In addition, Ares’ interpretation is a poor fit for the federal 

policy on which Brulotte was based—the policy favoring temporally limited patent monopolies. Even if Ares’ royalty obligation was exchanged for licenses to the CAT Patents, it does 

not conflict with this policy. It does not prolong the duration of 

the CAT Patents because sales of Therapeutic Antibody 

Products do not require using inventions covered by the CAT 

Patents. “Indeed, any use of the CAT Patents by Ares Trading, 

before or after their expiration, would not have incurred any 

royalty obligation to Dyax under the CLA.” Ares, 2023 U.S. 

Dist. LEXIS 40484, at *70. 

Instead, Ares’ real gripe is that its royalty obligation conflicts with a different policy embodied in the federal patent 

laws—favoring limitations on the substantive “scope” of the 

patent monopoly, not only on its duration. At several points in 

its briefing, Ares suggests that Dyax leveraged the CAT 

Patents “not only beyond [their] expiration date but also 

beyond [their] scope.” Opening Br. 17. Ares’ concern is that 

Dyax has enlarged the scope of the CAT Patents’ subject matter by using its leverage to extract royalties on sales of 

Bavencio, which do not practice the inventions covered by the 

CAT Patents. But Brulotte does not apply to patent misuse 

involving the enlargement of a patent’s scope. It deals only 

with attempts to prolong a patent’s duration—its “cut-off 

date”—not attempts to defy “the patent laws’ subject-matter 

limits.” Kimble, 576 U.S. at 451. Other patent misuse doctrines 

cover the improper enlargement of a patent’s scope, such as the 
40 

doctrine of “patent tying agreements.” Id. at 458 n.4; see, e.g., 

Zenith Radio Corp. v. Hazeltine Rsch., Inc., 395 U.S. 100, 134–

38 (1969).12 As Ares conceded at oral argument, it did not 

include any such patent misuse theories in its complaint. See

Oral Arg. Tr. 11:17–23 (responding that it is “[c]orrect” that 

“[n]owhere in the complaint does it allege patent misuse on a 

physical expansion or expansion of scope of the patent”). So 

we must consider only the duration of the CAT Patents under 

Brulotte. Because Ares’ royalty obligation is not calculated 

based on activity requiring post-expiration use of inventions 

covered by the CAT Patents, we conclude that it does not 

improperly prolong the CAT Patents’ duration. 

2. Kimble’s Facts 

Next, Ares contends that our understanding of Brulotte conflicts with the facts in Kimble. It argues that the royalties in 

Kimble were triggered by sales of Marvel’s Web Blaster, 

12 True, Brulotte discusses in general terms the negotiating leverage held by a patent owner. See, e.g., 379 U.S. at 32 (“We 

are . . . unable to conjecture what the bargaining position of the 

parties might have been and what resultant arrangement might 

have emerged had the provision for post-expiration royalties 

been divorced from the patent and nowise subject to its leverage.”). But we view general concerns about bargaining power 

as ancillary to Brulotte’s main policy focus—the unrestricted 

post-expiration use of patented inventions. A patent owner no 

doubt has the power to “exact [conditions] . . . with the leverage of [his] monopoly.” Id. at 33. But Brulotte deals with abuse 

of that power only through the extension of patent duration. 

Other forms of abuse, including tying, are separate issues. See 

Kimble, 576 U.S. at 458 n.4 (“[I]t is far from clear that the old 

rule of tying was among Brulotte’s legal underpinnings.”). 
41 

which did not practice the invention covered by Kimble’s 

patent. This implies, according to Ares, that Brulotte accomplished more than declaring unenforceable royalties that are 

calculated based on activity requiring post-expiration use of 

formerly patented inventions.

Ares’ interpretation of Kimble is wrong for two independent reasons. First, the Supreme Court granted certiorari in 

Kimble solely to determine whether Brulotte should be overruled. 576 U.S. at 449. It did not consider whether the Ninth 

Circuit correctly applied Brulotte below. Id. Accordingly, we 

are not bound by the Ninth Circuit’s interpretation of Brulotte. 

Cf. Nkomo v. Att’y Gen., 930 F.3d 129, 134 (3d Cir. 2019) (presuming that “the Supreme Court [does not] ma[ke] . . . dramatic . . . change[s] sub silentio”).

Second, the Ninth Circuit’s decision in Kimble is consistent 

with our interpretation of Brulotte. See generally Kimble v. 

Marvel Enters. Inc., 727 F.3d 856 (9th Cir. 2013), aff’d sub 

nom. Kimble, 576 U.S. 446. In that litigation, Kimble originally 

argued that the Web Blaster infringed his patent. Id. at 858. The 

District Court ruled in Marvel’s favor on infringement. Id.

Then the parties settled after Kimble appealed the adverse 

infringement judgment, with Marvel purchasing Kimble’s 

patent in exchange for undertaking a royalty obligation. Id. 

Marvel’s obligation was calculated based on “product sales 

that would infringe the Patent but for the purchase and sale 

thereof . . . as well as sales of the Web Blaster product.” Id. at 

859 (quoting the agreement). Thus, unlike this case, the royalty 

in Kimble was expressly calculated based on sales of infringing 

products. Id. Before the Ninth Circuit, Kimble argued “that 

both parties now agree that the Web Blaster did not infringe” 

his patent. Id. at 864. But because the royalty was expressly 

calculated based on sales of infringing products, the Ninth 
42 

Circuit “presume[d] that the post-expiration royalty payments 

[were] for the then-current patent use, which is an improper 

extension of the patent monopoly under Brulotte.” Id. at 863–

64 (emphasis added). That is, it presumed that Marvel’s royalty 

obligation was calculated based on Marvel’s post-expiration 

use of Kimble’s invention. If the Ninth Circuit’s presumption 

is credited, then its conclusion is consistent with our interpretation of Brulotte. 

3. Policy Considerations 

Finally, Ares advances several policy disagreements with 

our understanding of Brulotte. But we are required to apply 

Supreme Court precedent faithfully. Even if Ares’ policy arguments have merit, they are better addressed to Congress or the 

Supreme Court. Cf. Kimble, 576 U.S. at 456 (“Congress can 

correct any mistake it sees.”). 

Regardless, Ares’ policy arguments are unpersuasive. For 

example, it argues that our interpretation of Brulotte will be 

difficult to apply in practice. Courts will be required to determine whether a royalty is calculated based on activity requiring

post-expiration use, which may necessitate a “trial-within-atrial” on infringement. Opening Br. 28. Ares may be correct 

that Brulotte will be difficult to apply in some cases (although 

it remains simple in cases like this one). If so, that difficulty 

will be what Brulotte requires. The Supreme Court created a 

per se rule that must be rigidly applied even if its application is 

difficult. See Kimble, 576 U.S. at 468 (Alito, J., dissenting) 

(describing Brulotte as creating a “per se rule[] with . . . disruptive effects”). 

Ares also complains that Dyax’s arguments regarding 

Brulotte in this case are inconsistent with its 
43 

Even if that is true, it is irrelevant to our disposition of this 

appeal. We lack the authority to determine the enforceability 

of Dyax’s royalty obligations to CAT under Brulotte. If Dyax 

returns to court in the future and seeks a declaratory judgment 

that its obligations to CAT are unenforceable, the issue may be 

litigated then. 

C. Dyax Did Not Violate the Implied Covenant. 

Separately, Ares challenges the District Court’s judgment 

that Dyax did not violate the implied covenant of good faith 

and fair dealing. As Ares presents it on appeal, this claim does 

not depend on the alleged unenforceability of Ares’ royalty 

obligation to Dyax under Brulotte. It depends on the alleged 

unenforceability of Dyax’s royalty obligation to CAT under 

Brulotte. 

Ares’ argument proceeds as follows. Because Dyax’s royalty obligation to CAT was invalid, Dyax’s PD-L1 Product 

License terminated when the CAT Patents expired. When 

Dyax’s PD-L1 Product License terminated, Ares’ PD-L1 

Product Sublicense also terminated. But under the CLA, Dyax 

was obligated to grant a PD-L1 Product Sublicense to Ares. So 

when the Sublicense terminated, Dyax breached its obligation 

under the CLA and had a duty under the implied covenant to 

relieve Ares of its royalty obligation. 

Even accepting that Dyax’s royalty obligation to CAT is 

unenforceable, Ares’ argument fails for two independent reasons. First, Dyax did not breach its obligation to grant a 

Product Sublicense to Ares for PD-L1. It granted a PD-L1 

Product Sublicense to Ares. This Sublicense may have terminated earlier than expected: when the CAT Patents expired, not 
44 

ten years after Bavencio was first sold. But the CLA does not 

impose an obligation on Dyax to obtain a Product Sublicense 

of the latter duration. Moreover, the duration of Ares’ royalty

obligation is not linked to the duration of the PD-L1 Product 

Sublicense. Because the CLA does not require a specific duration for the Product Sublicense, Dyax satisfied its obligations 

regardless of whether the Sublicense terminated early, and 

Ares cannot identify any other obligation that Dyax violated 

under the CLA.13 The implied covenant “may not . . . be 

invoked to create rights and duties not otherwise provided for 

in the existing contractual relationship.” Uno Rests., Inc. v. 

Bos. Kenmore Realty Corp., 805 N.E.2d 957, 964 (Mass. 

2004). 

Second, even if Dyax violated a duty under the CLA, the 

implied covenant was triggered only if Dyax prevented Ares 

from “reap[ing] the benefits prescribed by the terms of the contract.” Id. That did not happen. Ares reaped every possible benefit from the CLA and the PD-L1 Product Sublicense, regardless of whether the Sublicense terminated early. Ares was able 

13 See Ares, 2023 U.S. Dist. LEXIS 40484, at *80 (“Ares 

Trading has not pointed to any existing obligation in the CLA 

that Dyax has performed unfairly or without good faith by not 

(a) seeking a reduction from CAT of Dyax’s royalty on sales 

of Bavencio, (b) sharing such a reduction with Ares Trading, 

or (c) simply giving Ares Trading a reduction regardless of 

whether Dyax obtains a reduction from CAT.”). We agree with 

the District Court that Dyax “treated Ares Trading fairly and 

with good faith at every stage of their negotiations,” id. at *81

(capitalization altered), and to the extent Dyax negotiated royalties with CAT regarding differently-situated drugs, Dyax 

also offered that opportunity to Ares, and Ares refused. 
45 

to develop and commercialize Bavencio, a drug that is now 

worth hundreds of millions of dollars. And Ares was able to 

freely use the inventions covered by the CAT Patents before 

and after their expirations. Ares cannot point to any “benefit” 

that it lost due to the Product Sublicense’s alleged early termination. Instead, Ares’ real gripe is with the royalty that it 

agreed to pay in exchange for those benefits. Unfortunately for 

Ares, the implied covenant does not redress that grievance. 

IV. CONCLUSION

Ares’ royalty obligation is not unenforceable under 

Brulotte because it is not calculated based on activity requiring 

post-expiration use of inventions covered by the CAT Patents. 

Ares’ arguments to the contrary fail because they do not cohere 

with Brulotte’s facts and the federal policy favoring limited 

durations for patent monopolies. Finally, Ares reaped every 

promised benefit under the CLA and the PD-L1 Product 

Sublicense, so Dyax did not violate the implied covenant of 

good faith and fair dealing. For these reasons, we will affirm

the District Court’s judgment in full.