Intellectual Property-Royalties-Arbitration

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7^th Circuit Court of Appeals

Case Name: Zimmer Biomet Holdings, Inc. v. Mary Insall

Case No.: 23-1888

Officials: St. Eve, Lee, and Pryor, Circuit Judges.

Focus: intellectual Property-Royalties-Arbitration

Dr. John Insall, an orthopedic surgeon who developed and patented knee replacement devices, licensed these patents to Zimmer Biomet Holdings, Inc. In exchange, Zimmer agreed to pay royalties to Insall and, following his death, to his estate. However, when Insall’s last patent expired in 2018, Zimmer stopped the royalty payments, claiming that their obligation had ended. This led to an arbitration, in which the Estate won. Zimmer then challenged the arbitration award in district court, arguing that continuing royalty payments violated public policy. The district court upheld the arbitration award.

The case was reviewed by the Northern District of Illinois. Zimmer contended that the arbitration award should be overturned on public policy grounds, referencing Supreme Court rulings in Brulotte v. Thys Co. and Kimble v. Marvel Entertainment, LLC, which prohibit royalties on expired patents. The district court rejected this argument and confirmed the arbitration award, prompting Zimmer to appeal.

The Seventh Circuit noted the narrow scope of judicial review for arbitration awards under the Federal Arbitration Act (FAA). The court found that the arbitration panel had accurately interpreted the 1998 amendments to the agreement, which had separated the royalty payments from the patents themselves, linking them instead to the marketing and branding of the NexGen Knee products. As a result, the court determined that the arbitration award did not contravene public policy as defined in Brulotte and Kimble. The Seventh Circuit upheld the arbitration award in favor of Insall’s Estate.

Affirmed.

Decided 07/12/24

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