FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ZILA, INC., a Delaware 

Corporation,

Plaintiff-counter-defendant- No. 05-15031

Appellee, D.C. No.  v. CV-00-01345-KJD

JAMES E. TINNELL,

Defendant-counter-claimantAppellant. 

ZILA, INC., a Delaware 

Corporation,

Plaintiff-counter-defendant- No. 05-15087

Appellant, D.C. No.  v. CV-00-01345-KJD

JAMES E. TINNELL, OPINION

Defendant-counter-claimantAppellee. 

Appeal from the United States District Court

for the District of Nevada

Kent J. Dawson, District Judge, Presiding

Argued and Submitted

December 8, 2006—San Francisco, California

Filed September 5, 2007

Before: Dorothy W. Nelson, Robert E. Cowen,* and

Marsha S. Berzon, Circuit Judges.

*The Honorable Robert E. Cowen, Senior United States Circuit Judge

for the Third Circuit, sitting by designation. 

11687
Opinion by Judge Berzon

11688 ZILA, INC. v. TINNELL
COUNSEL

Larry C. Johns and John H. Pilkington, Las Vegas, Nevada,

for the appellant. 

11690 ZILA, INC. v. TINNELL
William H. Drummond, Newport Beach, California, for the

appellee. 

OPINION

BERZON, Circuit Judge: 

Appellant James Tinnell developed a liquid solution to treat

lesions caused by the herpes virus. He applied for a patent on

the treatment and acquired a defunct corporation, now named

Zila, as a vehicle for marketing and selling the product, now

called Zilactin. Tinnell subsequently entered an agreement

with Zila that assigned all rights in his invention to the company in return for royalty payments and company stock. The

royalty payments provided for in this contract are the subject

of the present dispute. 

The contract at issue is unambiguous as to the duration of

the royalties, and the parties agree on their intent at the time

it was formed. All the evidence is thus in accord with a single

interpretation — that Tinnell would relinquish all rights to

Zilactin, patent or otherwise, and, in return, receive in perpetuity a five percent royalty on Zila’s sales of the invention.

The difficulty in this case arises because Zila asserts, and the

district court agreed, that the doctrine announced in Brulotte

v. Thys, 379 U.S. 29 (1964), displaces, because of federal

patent policy, the parties’ intent and renders the royalty obligation unenforceable, either entirely or upon the expiration of

the first patent that issued on Tinnell’s invention. We confront, consequently, not simple questions of contract law but

rather issues concerning the impact and bounds of Brulotte, in

the context of an otherwise unremarkable case. 

I.

Tinnell first developed his liquid solution to treat lesions

ZILA, INC. v. TINNELL 11691
caused by oral and genital herpes in 1976. He applied for a

patent on the treatment the following year and soon thereafter

acquired a defunct California corporation, which he renamed

Zila, Inc.,1 as a vehicle for marketing and selling the product.

The product has been improved since it was developed in

1976 and is now sold under the brand name Zilactin. 

On September 5, 1980, Tinnell and Zila entered into an

agreement (“1980 Agreement”) that began by noting that

“Tinnell has invented a treatment composition for herpes

virus infection, which is the subject of a patent application,”

and “Tinnell is desirous of assigning all of his right, title and

interest in the application and invention, improvements

thereon and Letters Patent thereon” for consideration including royalties and stock. The 1980 Agreement 

assign[ed] all of [Tinnell’s] right, title and interest in

the [patent] application and invention, improvements

thereon and Letters Patent thereon, when granted in

the United States or foreign countries, to [Zila],

including any present or future improvement

whether the same being made by Tinnell or [Zila],

and whether presently existing or made in the future,

and as may be granted in the United States or any

foreign country or otherwise, including each patent

granted on any application which is a division, substitution or continuation of any of the applications

specifically identified herein, and each reissue or

extension of any of the same. 

In return, and without any temporal or other limitation, the

contract provided Tinnell with “a five percent (5%) royalty on

gross sales of [Zila] of the invention,” as well as company

stock. Tinnell obligated himself to “cooperate with [Zila] to

1We refer to the corporation throughout this opinion as Zila, its current

name. 

11692 ZILA, INC. v. TINNELL
the extent that [Zila] may enjoy to the fullest extent the rights

conveyed hereunder . . . .” 

The officers who signed on behalf of Zila testified that

when they executed the 1980 Agreement, it was not known

whether any patents would issue on Tinnell’s invention.

According to their uncontested statements, the duration of

Zila’s obligation to pay Tinnell royalties was not related in

any way to the patents that might or might not be obtained by

the company as a result of his previously-filed patent application. Instead, the signatories understood the 1980 Agreement

to provide Tinnell with a 5% royalty on gross sales of Zilactin

for as long as the company sold his product. 

Zila subsequently secured patents in the United States and

Canada.2 The first of these patents, U.S. Patent ‘934, was

issued in August 1981. Zila also secured a continuation

patent, ‘236, for the 1981 patent and, in December 1985,

Canadian Patent ‘494. The primary improvement that transformed Tinnell’s original solution into the present-day Zilactin was the addition of a thickener that made the product into

a gel. The patent for the addition of this thickener was

approved as U.S. Patent ‘158 in January 1992. 

There is a dispute as to who invented the 1992 patent. In

1987, Zila filed a patent application which described an

improvement to the original chemical compound and named

Tinnell as the inventor. Because Zila’s patent counsel erred in

the technical description of the chemical compounds

involved, however, the company withdrew the application.

When the company resubmitted the application, it inexplicably named Edwin Pomerantz, Zila’s regulatory specialist, as

the inventor. The patent office subsequently issued the patent

2The record does not establish whether a patent was obtained in any

other country. 

ZILA, INC. v. TINNELL 11693
in 1992 to Zila, crediting Pomerantz rather than Tinnell with

the invention.3

Zila’s royalties to Tinnell grew exponentially from 1987 to

2000. In 1987, gross sales of Zilactin amounted to only

$321,000, which pegged royalties at $6,426. By 2000, however, Zilactin had gross sales of over $8 million, and Zila

owed Tinnell half a million dollars in royalties annually. 

In July 2000, Zila’s patent counsel advised the company to

terminate Tinnell’s royalties, on the grounds that, under Brulotte, Tinnell’s right to royalties expired on August 1998,

when the 1981 patent expired. Two months later, Zila stopped

making royalty payments on all sales of Zilactin. Although

the Canadian patent did not expire until December 2002, Zila

justified its withholding of the Canadian royalties on the

ground that it had overpaid Tinnell nearly a million dollars in

American royalties over the previous two years. 

Shortly after it stopped paying royalties, Zila filed a twocount complaint in federal court requesting a declaratory

judgment that Tinnell’s right to royalties under the 1980

Agreement ceased after August 25, 1998. The suit also sought

reimbursement for the royalties paid to Tinnell for the two

years after the 1981 patent expired. Tinnell filed a counterclaim for declaratory relief, contending that his entitlement to

royalties under the Agreement did not terminate with the

expiration of the 1981 patent but, instead, continued in perpetuity. He added counterclaims for breach of contract, fraud,

and other state law claims.

After discovery, the parties made cross-motions for sum3Section 111 of the Patent Act, 35 U.S.C. § 1 et seq., requires inventors

either to apply for the patent or to authorize the application. When the

patent issues, however, the Patent and Trademark Office can grant it under

§ 152 to an assignee, such as Zila, and name both the inventor and the

assignee on the patent that issues, see § 154(a)(1). 

11694 ZILA, INC. v. TINNELL
mary judgment on the over-arching question of whether royalties were owed after August 1998. Applying Brulotte, the

district court held that the 1980 Agreement was “unlawful per

se under federal patent law,” because it “project[ed] beyond

the expiration date of the patent.” Accordingly, the district

court granted summary judgment “to the extent that Zila

requests declaratory relief from liability under the Agreement.” The court explained that, “[s]ince the Agreement is

unenforceable after the expiration of the patents on August

25, 1998, Zila cannot be forced to pay royalties after that

date.” Zila subsequently filed a further motion for summary

judgment on its demand that Tinnell repay royalty payments

from 1998 to 2000, arguing that the payments amounted to

unjust enrichment. The district court denied summary judgment to Zila on this claim and, instead, dismissed it. 

Tinnell did not sit idle after the district court’s first order.

He filed his own demand for entry of judgment, arguing that

Zila owed him at least $56,753 in royalties for Canadian sales

of Zilactin from August 2000, when he stopped receiving payments, until December 3, 2002, when the Canadian patent

expired. Zila admitted to owing the money but claimed it was

entitled to offset the amount against the American royalties it

paid Tinnell from September 1998 through August 2000. The

district court agreed with Zila’s bottom line and went further:

Tinnell had no rights to royalties in the United States or Canada, the district court held, because, although the 1980 Agreement “purports to require the payment of royalties based upon

the Canadian patent, that agreement is unenforceable.” The

court noted that this result appeared inequitable but read Brulotte to require it. 

On December 1, 2004 the parties stipulated to dismissal of

Tinnell’s outstanding counterclaim for breach of contact. The

district court then declared all previous orders and the judgment ripe for appeal, and this timely appeal followed. 

ZILA, INC. v. TINNELL 11695
II.

We first consider Brulotte. The case involved various patents held by the Thys Company, which sold farmers a hoppicking machine for a flat sum but required them to purchase

a license for the patents on the machines in order to use the

product. Id. at 29. The license contract demanded that, in

addition to the initial purchase price of the machines and

onerous restrictions on their assignment or use, the farmers

pay the larger of a $500 annual royalty or a set royalty rate

tied to the amount of hops they harvested each year. Id. The

last patent incorporated into the machines expired in 1957. Id.

at 30. When the farmers subsequently refused to pay the royalty, the Thys Company sued to enforce the licensing contract. Id. 

The Supreme Court ruled for the farmers, holding that the

royalty agreements were unenforceable to the extent that they

extended “beyond the expiration date of the patent[s].” Id. at

32. The Court explained its holding in part by noting that 

[t]he present licenses draw no line between the term

of the patent and the post-expiration period. The

same provisions as respects both use and royalties

are applicable to each. The contracts are, therefore,

on their face a bald attempt to exact the same terms

and conditions for the period after the patents have

expired as they do for the monopoly period. 

Id. As a result, the Court “conclude[d] that a patentee’s use

of a royalty agreement that projects beyond the expiration

date of the patent is unlawful per se,” and held the farmer’s

royalty obligation under the license unenforceable. Id. 

[1] Simply put, Brulotte indicates that under some circumstances patent owners cannot exact royalties for use of patented devices beyond the duration of their patents. Id. at 33-

34. The doctrine appears straightforward enough, but its

11696 ZILA, INC. v. TINNELL
application runs counter to the usual task in a contract case —

to interpret the terms agreed to by the parties. That is, Brulotte

renders unenforceable some aspects of an otherwise valid

contract. And it does so for a reason that many courts and

commentators have found economically unconvincing,

namely, that “the free market visualized for the postexpiration period would be subject to monopoly influences”

if “a royalty agreement [was allowed to] project[ ] beyond the

expiration date of the patent.”

4

Id. at 32-33. No matter how

unconvincing Brulotte’s foundation may be, however, we are

bound to apply its holding if it applies to the case before us.

See, e.g., Agostini v. Felton, 521 U.S. 203, 237 (1997)

(“Court[s] of Appeals should follow the [Supreme Court] case

which directly controls, leaving to this Court the prerogative

of overruling its own decisions.”); Scheiber v. Dolby Labs.,

Inc., 293 F.3d 1014, 1018 (applying Brulotte despite stinging

criticism of its logical underpinnings because “we have no

authority to overrule a Supreme Court decision no matter how

dubious its reasoning strikes us.”). At the same time, our task

is not to expand Brulotte’s holding beyond its terms. So,

4Reading Brulotte to create a bright line rule that always bars all royalties after a patent expires — no matter how clearly the underlying agreement states otherwise or covers non-patented intellectual property rights

as well — courts and commentators have criticized roundly the fears that

they believe led to that rule. The Seventh Circuit called them simply “not

true,” Scheiber v. Dolby Labs., Inc., 293 F.3d 1014, 1017 (7th Cir. 2002),

and several commentators similarly suggest that they “lack . . . economic

or logical sense,” Note, Michael Koenig, Patent Royalties Extending

Beyond Expiration: An Illogical Ban from Brulotte to Scheiber, 2003

Duke L. & Tech. R. 5, ¶ 19; see also, Harold See & Frank M. Caprio, The

Trouble with Brulotte: The Patent Royalty Term and Patent Monopoly

Extension, 1990 UTAH L. R. 813, 846 (“In no way . . . can the patent

monopoly be extended beyond its term by the use of a royalty.”); John W.

Schlicher, 2 PATENT LAW, LEGAL AND ECONOMIC PRINCIPLES § 13:192 (2d

ed.) (“The use of the longer royalty term does not permit the patent owner

to turn a patent with a 20 year term into a patent with a 30 year term . . . .

The market power existing during the term patent can only be exploited

once.”); Raymond T. Nimmer & Jeff Dodd, MODERN LICENSING LAW

§ 13:31 (noting that post-expiration royalties do not “expand the claims or

the scope of the patent”). 

ZILA, INC. v. TINNELL 11697
except as required by Brulotte and its progeny, we shall

endeavor to give effect to the intent of the parties and the bargain that they struck. 

[2] A central difference between this case and Brulotte is

that here, although the contracting parties contemplated the

possible future issuance of a patent, the royalty provision did

not depend on it, either on its face or as reported by the contracting parties. Whether that difference is material is a difficult question that largely turns on the interpretation of a postBrulotte Supreme Court case that had this same feature, Aronson v. Quick Point Pencil Co., 440 U.S. 257 (1979), and that

enforced the contract’s royalty provision. 

[3] Aronson concerned an inventor who filed an application for a patent on a design for a keyholder. Id. at 259. While

the patent application was pending, she negotiated a contract

with a manufacturer to make and sell the product. Id. The

agreement between the inventor, Aronson, and the manufacturer, Quick Point, consisted of two documents. Id. In the

first, Quick Point agreed to pay a 5% royalty in return for an

exclusive license to sell the invention described in the patent

application; the duration of the royalty was not detailed. Id. In

the second, the parties agreed that if the patent application

“was not allowed” within five years, Quick Point would pay

a 2.5% royalty so long as it sold the invention. Id. After five

years passed and Aronson had failed to obtain a patent, Quick

Point reduced its royalties to the lower rate, which it paid for

14 years. Id. at 260. As sales of the keyholder rose and competitors entered the market, Quick Point sought a declaratory

judgment that the royalty agreement was unenforceable. Id. at

260-61. Although Quick Point persuaded the appeals court,

the Supreme Court disagreed, holding that the Brulotte doctrine and similar federal patent principles “do not bear on a

contract that does not rely on a patent, particularly where, as

here, the contracting parties agreed expressly as to alternative

obligations if no patent should issue.” Id. at 262. 

11698 ZILA, INC. v. TINNELL
In so holding, the Court stated that enforcing the perpetual

royalty of 2.5% was “consistent with the principles treated in

Brulotte.” Id. at 264. The distinction between the contract in

Brulotte and the one in Aronson rested, according to the

Court, on the fact that the extended royalty term in Aronson

was not “negotiated ‘with the leverage’ of a patent [but]

rested on the contingency that no patent would issue within

five years.” Id. at 265. The Court recognized that “a pending

patent application gives the applicant some additional bargaining power for purposes of negotiating a royalty agreement,” but observed that “the amount of leverage arising from

a patent application depends on how likely the parties consider it to be that a valid patent will issue.” Id. Because the

parties in Aronson negotiated a two-tier royalty, with a contingency for the acceptance or rejection of the patent application,

the court concluded that “[i]t is clear that whatever role the

pending application played in the negotiation of the 5% royalty, it played no part in the contract to pay the [2.5%] royalty

indefinitely.” Id. 

Aronson thereby added an additional wrinkle to the Brulotte analysis and has been read to create two bright-line rules:

(1) If a patent ever issues on an invention, Brulotte applies,

and no contract can properly demand royalty payments after

the patent expires; and (2) a contract that provides for royalties either when a patent expires or when it fails to issue cannot be upheld unless it provides a discount from the

alternative, patent-protected rate. See Meehan v. PPG Industries, Inc., 802 F.2d 881, 884-85 (7th Cir. 1986); Boggild v.

Kenner Products, 776 F.2d 1315, 1319-20 (6th Cir. 1985);

Pitney Bowes, Inc. v. Mestre, 701 F.2d 1365, 1372-74 (11th

Cir. 1983). This understanding, however, may well overread

both Brulotte and Aronson, by glossing over the unique and

onerous contractual restrictions at issue in Brulotte and relying on a sentence in Aronson that is really only dicta. 

Brulotte indicates that it is because of post-patentexpiration contractual restrictions other than royalties that the

ZILA, INC. v. TINNELL 11699
Thys Company could not collect the royalties after the patents

expired. Specifically, the Court in Brulotte noted that,

although the farmers bought the hop-picking machines outright and title transferred, they were forced to obtain a license

to actually use the machines; the licenses could not be

assigned, making the machines the farmers purchased worthless for subsequent sales; the farmers were forbidden from

moving their machines out of the county, whether or not they

intended to use them elsewhere; and the license charged both

a sliding royalty rate and a minimum fee, depending on use.

379 U.S. at 29.5 It is only “in view of [these] other provisions

of the license agreements” that the Court found the unchanging royalty rate to be “peculiarly significant.” Id. at 31-32

(emphasis added). The Court emphasized that the presence of

“[t]hose restrictions,” rather than the royalty alone, in the

“post-expiration period [was] a telltale sign that the licensor

was using the licenses to project its monopoly beyond the

patent period.” Id. at 32 (emphasis added). In other words, the

Thys Company was not simply attempting to charge a royalty

after the patent expired; it was acting in all respects as if the

patent remained in place. See id. (“The same provisions as

respects both use and royalties are applicable [during the term

of the patent and the post-expiration period] . . . . We are,

therefore, unable to conjecture what the bargaining position

of the parties might have been . . . .”) (emphases added). 

Moreover, Brulotte involved the sale of a physical machine

along with a use license, where the machine was separately

paid for and owned outright by the farmers. Id. at 29. As the

Court noted, id. at 33 n.5, the sale of intellectual property

alone, as here, is a considerably more complex matter than the

contract at issue in Brulotte, and the concepts underlying Brulotte do not necessarily transfer to that context readily. An

invention can have value to a manufacturer as a trade secret,

or as an opportunity to exploit brand identified or market

5The dissent in Brulotte noted that the minimum fees, not dependent on

use, were primarily at stake. See 379 U.S. at 34-39 (Harlan, J., dissenting).

11700 ZILA, INC. v. TINNELL
share, quite aside from any patent that could issue on it. In

Brulotte, in contrast, the farmers had no interest in the invention other than its physical embodiment — which they owned

— and the right to use the intellectual property included in it,

which could not be exploited by the patent holder once the

patent expired. 

Aronson, on the other hand, involved a sale of purely intellectual property to a manufacturer, and recognized the value

of other intellectual property besides the patent. See 440 U.S.

at 261-62 (“Quick Point apparently placed a significant value

on exploiting the basic novelty of the device, even if no patent

issued.”); id. at 263 (noting that, even without patent rights,

the contract allowed Quick Point “to preempt the market”); id.

at 265 (“[Quick Point] agree[d] to pay for the opportunity to

be first in the market”). This recognition was both necessary

and sufficient to the holding in Aronson that Brulotte “does

not bear on a contract that does not rely on a patent,” as it was

essential to the demonstration that the “[lower] royalty was

explicitly independent of federal law.” Id. at 261-2. Although

the court stated in passing that, if Aronson had received a

patent on her keyholder, “she would have received a 5% royalty only on keyholders sold during the 17-year life of the

patent,” this example was counterfactual dicta, neither supported by any analysis nor necessary for the decision. 

In short, were we writing on a clean slate, we might be

inclined to read the dicta in Aronson as nonbinding in light of

what appears on its face to be a very limited holding in Brulotte. By doing so, we would largely avoid attributing to the

Supreme Court in Brulotte and Aronson the lack of economic

logic laid at its feet by Scheiber and a bevy of commentators.

[4] Nonetheless, every other circuit to consider Brulotte has

ignored the relevance of the restrictions on use and, in the

process, read Aronson as turning not on the absence of such

restrictions or on the fact that the agreement was enacted

before any patent issued but on the facts that (1) a patent did

ZILA, INC. v. TINNELL 11701
not issue in that case; and (2) the underlying agreement provided for a lower royalty if no patent issued than if one did.

See Meehan 802 F.2d at 884-85; Boggild, 776 F.2d at 1319-

20; Pitney Bowes, 701 F.2d at 1372-73. This consensus view

may overread both Brulotte and Aronson for the reasons we

have surveyed, and gives rise to the trenchant criticisms of the

commentators and of the Seventh Circuit in Scheiber. But the

Supreme Court opinions are sufficiently opaque that we cannot say with any certainty that the consensus view is wrong.

As patent matters give rise to particularly strong national uniformity concerns, see S. Rep. No. 97-275, at 4 (1982) (citing

the “special need for national uniformity” in the interpretation

of patent law as support for the creation of the Federal Circuit), we hesitate more than is ordinarily the case to open up

an intra-circuit conflict, see Hale v. Arizona, 993 F.2d 1387,

1393 (9th Cir. 1993) (en banc) (“For prudential reasons, we

avoid unnecessary conflicts with other circuits . . . .”). We

therefore adopt the majority approach and consider not

whether but the extent to which Brulotte preempts state law

with regard to a contract for payment of royalties on the sale

of an invention that may be patented, if a patent indeed issues

on the invention. 

III.

Applying Brulotte, the district court in this case found that

the 1980 Agreement was “unlawful per se under federal

patent law.” It therefore granted summary judgment “to the

extent Zila requests declaratory relief from liability under the

Agreement.” In the subsequent order, however, the district

court expanded its previous rulings. It interpreted Brulotte as

rendering the entire patent assignment agreement null and

void, not just its provision of royalties after 1998. Faced with

the question whether Zila must pay Tinnell royalties it admitted were due under a valid Canadian patent, the district court

determined that it need not, because, although the 1980

Agreement “purports to require the payment of royalties

11702 ZILA, INC. v. TINNELL
based upon the Canadian patent, that agreement is unenforceable.” 

[5] Contrary to the district court’s conclusions, Brulotte

does not render an entire contract void and unenforceable

merely because it includes an invalid licensing agreement.

Rather, Brulotte renders unenforceable only that portion of a

license agreement that demands royalty payments beyond the

expiration of the patent for which the royalties are paid. See

379 U.S. at 30 (reversing the judgment below only “insofar

as it allows royalties to be collected which accrued after the

last of the patents . . . had expired”) (emphasis added); id. at

33-34 (holding unenforceable “an attempt to project” the payment monopoly into a term “after the expiration of the last of

the patents”) (emphasis added). We previously referenced this

interpretation of Brulotte’s scope in passing, see Atlas-Pacific

Eng’g Co. v. Geo. W. Ashlock Co., 339 F.2d 288, 289 n.1 (9th

Cir. 1965), and it is not seriously in dispute. The parties agree,

as has every appellate court to consider the question. See, e.g.,

Scheiber v. Dolby Labs., Inc., 293 F.3d 1014, 1022 (7th Cir.

2002); Pitney Bowes, Inc. v. Mestre, 701 F.2d 1365, 1373

n.13 (11th Cir. 1983); Modrey v. American Gage & Machine

Co., 478 F.2d 470, 474 (2d Cir. 1973). 

[6] The district court, however, read Scheiber to support its

conclusion that Brulotte can render void contractual obligations to pay royalties on valid patents. In Scheiber, the plaintiff owned a U.S. patent and a Canadian patent. 293 F.3d at

1016. As part of a settlement agreement with the defendant,

Scheiber agreed to receive royalties on both patents through

the end of the Canadian patent’s term, which ended two years

after the U.S. patent. Id. The defendant, however, “refused to

pay royalties on any patent after it expired.” Id. at 1016

(emphasis added). The Seventh Circuit, applying Brulotte,

found the contract unenforceable to the extent that the “patentee extends the patent beyond the term fixed in the [U.S.]

patent statute.” Id. at 1017; see also id. at 1022 (describing

Brulotte as “refusing enforcement to contracts for the payZILA, INC. v. TINNELL 11703
ment of patent royalties after expiration of the patent”)

(emphasis added). Accordingly, the relief granted by the court

was not voiding the entire contract but rather a “partial rescission of the license agreement.” Id. at 1021 (emphasis added).

Although Scheiber states later in the opinion that the contract

is “voided on grounds of illegality,” id. at 1022, and “unenforceable,” id. at 1023, the context provided by the previous

lengthy discussion, as well as the limited relief sought, makes

clear that this is true only of the portion of the contract “seeking to ‘extend’ [the] patent,” id. at 1021, and not anything

else. There is thus no support that for the notion that Brulotte

erects a general barrier to the enforcement of otherwise valid

contract terms unless and until that last applicable patent

expires. 

A. Unpaid Canadian Royalties

[7] Nor does Brulotte extend its royalty-cancelling powers

to contracts for foreign patents. Brulotte concerned patent

rights in the United States, 379 U.S. at 30 (citing 35 U.S.C.

§ 154, which grants rights “throughout the United States”),

and reflected the Court’s fear that a patent holder would abuse

his federally-bestowed monopoly to extract payments beyond

the term of that patent. 379 U.S. at 32-33. The “patent” at

issue in Brulotte is an American one, and its dispositive effect

on state contract law is a consequence of the Supremacy

Clause. See id. at 32 (“[P]atents are in the federal domain.”).

“State law is not displaced merely because the contract relates

to intellectual property which may or may not be patentable;

the states are free to regulate the use of such intellectual property in any manner not inconsistent with federal law.” Aronson, 440 U.S. at 262 (emphasis added). The rights and

obligations bestowed by the international patent regime

played thus no role in Brulotte. 

Nor should they. The Canadian patent is an entirely separate asset from the U.S. patent. See Paris Convention for the

Protection of Industrial Property, July 14, 1967, Art. 4bis, 21

11704 ZILA, INC. v. TINNELL
U.S.T. 1583, (“Patents applied for in the various countries of

the Union . . . shall be independent of patents obtained for the

same invention in other countries . . . .” ). The fact that the

asset is a foreign patent, as opposed to foreign real estate or

other real property held outside the country, does nothing to

change the propriety and competency of state contract law to

dispose of it. Brulotte has no self-executing international

effect and only displaces state contract law with respect to

royalty obligations related to federally-bestowed patent rights.

[8] In light of these observations, it is clear that summary

judgment against Tinnell on his claim for the unpaid Canadian royalties was improper. Even if the principle announced

in Brulotte were to obviate Zila’s obligation to pay royalties

on the 1981 patent once it expired, an issue we discuss below,

it neither renders the entire 1980 Agreement unenforceable

nor displaces Zila’s obligation to pay royalties on the valid

Canadian patent. Because Zila admitted in its statement of

material undisputed facts that it owed $56,753 in royalties on

the Canadian patent, there are no facts in dispute, and the district court should have entered judgment for Tinnell on this

claim.6

B. Declaratory Judgments

Both Zila and Tinnell sought declaratory judgments in district court. Zila asked for a declaration that it is relieved of liability for any royalties under the 1980 Agreement; Tinnell

desired a declaration that he is entitled to royalty payments in

perpetuity. The district court granted summary judgment for

Zila and correspondingly denied Tinnell’s motion. Because

Tinnell was entitled to at least some royalties under the 1980

Agreement, as we have established, the district court erred.

The scope of royalties he is due on domestic sales is unclear,

6Whether royalties are payable for Canadian sales once the Canadian

patent expires, a matter of Canadian law, is not before us. 

ZILA, INC. v. TINNELL 11705
however, so a remand to the district court is necessary to

resolve disputed issues of fact. 

The royalty provision in the 1980 Agreement does not reference any specific patent. Rather, it provides Tinnell with “a

five percent (5%) royalty on gross sales . . . of the invention.”

This provision has no sunset clause, time limit, or territorial

limitation. The only barrier to a perpetual royalty obligation

that Zila has suggested is that which Brulotte provides.7

Determining the reach of Brulotte’s barrier to the collection

of royalties requires us to consider the scope of the royalty

provision, as well as the impact of subsequently-issued patents on the enforceability of the royalty provision. In other

words, we have to ask both what Zila is paying royalties for

and under what conditions its obligation to do so is lawful.

We address each question in turn. 

1. The Royalty Provision 

Zila argues that the term “invention” in the royalty provision is explicitly defined in the agreement as limited to the

claims described in and identified by the 1981 patent. Tinnell

argues that the term refers, instead, to the product Zilactin,

including the later, patented improvement. 

Although the contract is ambiguous in some respects as to

7The record does not make clear whether the only sales of Zilactin outside the United States occurred in Canada and, if not, whether Zila is seeking to apply Brulotte to cut off royalties on any non-Canadian

international sales as of the expiration of the American patents. We see no

reason Brulotte would have any impact on the availability of royalties on

foreign sales — because, once again, Brulotte derives only from federal

Supremacy Clause principles and does not otherwise impair agreements to

pay royalties in exchange for the assignment of an invention. But, in light

of the ambiguity of the record and of the requests for declaratory relief,

we leave any further consideration of the matter for the district court on

remand. 

11706 ZILA, INC. v. TINNELL
the scope of the royalty provision, a remand is not necessary

to resolve its meaning.8 Even if we were to accept Zila’s interpretation, we do not read Brulotte so mechanically as to render the royalty provision here necessarily invalid as of the

expiration of the 1981 patent. Rather, we believe the parties’

intent can be best furthered, and the Brulotte doctrine implemented, by a more nuanced consideration of the contract. 

[9] If the 1980 Agreement had provided royalties only on

the 1981 patent, those royalties could not be enforced after

1998. But the contract did no such thing; it provided royalties

on “sales . . . of the invention.” (Emphasis added). Even if we

accept that this clause covers only sales of the original three

acid compound, the parties agree that the invention is

embodied in and essential to Zilactin and, thus, sales of Zilactin constitute sales of the invention. 

The invention has been improved, however, and Zila argues

that the contract does not entitle Tinnell to royalties on sales

of Zilactin in its improved form. This argument is unpersuasive. 

Consider a hypothetical: Henry Ford applies for a patent on

an inventive transport vehicle, which he calls a “car.” The

“car” has four wheels and uses a motor to propel people from

place to place. Ford subsequently signs a contract assigning

to the Motor Company his rights to the car, any patent that

might issue on it, as well as any future improvements on the

car that he may make. Every few years, Ford improves the

car, adding a roof, for example, and doors. He receives patents on these improvements, and the Motor Company incorporates them into the car. Even with these improvements,

however, the product that the Motor Company sells is nonetheless a “car,” as defined in the original patent application,

because it remains a vehicle with four wheels and a motor. 

8Zila does not argue that “invention” means the 1981 patent itself.

Rather, it contends that “invention” refers to the three acid compound

described in the patent application. 

ZILA, INC. v. TINNELL 11707
[10] Here, as in the hypothetical, the improvements to the

three acid compound do not change the fact that the resulting

product fits the definition of the original invention — “[a]

composition for the topical treatment of herpes virus lesions

comprise[d] of effective amounts of tannic acid, boric acid

and salicylic acid in a liquid carrier.” We therefore need not

consider whether Zila’s interpretation of the royalty provision

is correct. 

2. 1992 Patent

The more pertinent question is whether the bundle of patents covered by the 1980 Agreement can be distinguished

from the patents in Brulotte. Brulotte explicitly held that royalties on a product are unenforceable only “after the last of

the patents incorporated into the machines . . . expire[s].” 379

U.S. at 30 (emphasis added). Here, as in Brulotte, the contract

at issue covers a bundle of patents that expire at different

times. See id. at 29-30. Unlike Brulotte, however, the 1980

Agreement references only prospective patents with indeterminate expiration dates.9

 In other words, although the contracts in Brulotte covered patents that expired at different

times, the expiration date for the last-expiring patent was

known at the time of the contract in Brulotte. In contrast, neither party to the 1980 Agreement knew at the time the agreement was signed which or how many patents it would cover

and, consequently, when the last of those patents would

expire. 

[11] We see no reason to treat the two cases differently.

Although the subsequent improvements to Tinnell’s invention

were contingent at the time of the contract, they were contemplated by the parties. The 1980 Agreement alluded to “improvements thereon and Letters Patent thereon . . . including

9At the time the parties signed the contract, the 1981 patent had not

issued, nor had applications been filed on the ‘236 continuation patent, the

Canadian patent, or the 1992 improvement patent. 

11708 ZILA, INC. v. TINNELL
any present or future improvement . . . whether presently

existing or made in the future . . . .” Over the next twelve

years, as patents issued, both parties operated with the understanding that the 1980 Agreement governed their relationship.

The patents that issued after the 1980 Agreement was signed

were thus part of the bundle of intellectual property rights that

the parties contracted for in the first instance. See Meehan,

802 F.2d at 884-86; Boggild, 776 F.2d at 1320-21. 

Brulotte poses no bar to the collection of royalties so long

as Zilactin incorporates a valid patent for a compound

invented by Tinnell pursuant to the 1980 Agreement. When

an inventor is listed on an application for a patent, and a

patent issues, he has — unless he has assigned it to someone

else — the right to exploit the federal patent monopoly, “empower[ing him] to exact royalties as high as he can negotiate

with the leverage of that monopoly.” Brulotte, 379 U.S. at

33; see Meehan, 802 F.2d at 885. Although Tinnell assigned

the patent to Zila before it issued, and thus held no patent

rights the 1992 patent issued, “it is the issuance of the patent

that triggers Brulotte’s application, not the transfer of the

rights.” Meehan, 802 F.2d at 885. And because Brulotte prohibits only “a projection of the patent monopoly after the

patent expires,” 379 U.S. at 32, Tinnell can receive payment

on his inventions from Zila, the party to whom he has

assigned the patent rights and who is therefore the patent

owner, so long as that monopoly is valid. Whether this

monopoly consists of one patent or a dozen, the ability to

exact royalties runs to the last of the patents providing

monopoly protection. Id. at 30. 

[12] Consequently, if Tinnell invented an improvement on

his 1981 patent, which was itself patented and provided additional monopoly protection, Brulotte cannot be applied to displace the royalty provision when the 1981 patent expires.

Instead, the royalty obligation would stand until the end of the

term of any such later patent. 

ZILA, INC. v. TINNELL 11709
Here, there is a disputed issue of fact as to whether Tinnell

did so, specifically whether he or Edwin Pomerantz invented

the improvement embodied in the 1992 patent. Despite the

fact that the patent listed Pomerantz as the inventor, Tinnell

produced extensive evidence that the idea originated with

him: Zila named him as the inventor on the first application;

Pomerantz told Zila’s patent counsel that Tinnell first had the

idea; another witnesses so testified; and Zila’s patent counsel

told Tinnell that he would be named the inventor. 

[13] We therefore remand to the district court for a determination whether Tinnell should be credited with invention of

the 1992 patent.10 If he should be, summary judgment in his

favor is appropriate to the extent that it declares him entitled

to domestic royalties until the 1992 patent expires. If not,

summary judgment in Zila’s favor is appropriate to the extent

that it declares the company released from liability for any

domestic royalties after the 1981 patent expired in 1998.11

REVERSED and REMANDED for proceedings consistent with this opinion. 

10Section 256 of the Patent Act permits a court to correct the name of

an inventor on an issued patent when “through error an inventor is not

named in an issued patent and such error arose without any deceptive

intention on his part.” 

11We do not address Zila’s unjust enrichment claim, as it may never

arise on the view we take of the case. If Zila is found on remand to owe

Tinnell royalties on American sales of Zilactin through 2009, its earlier

payments would be consistent with that obligation, and no unjust enrichment issue could arise. 

11710 ZILA, INC. v. TINNELL