## Facts

- Jane Aronson designed a keyholder and had a patent application pending.
- In 1956, Aronson and Quick Point Pencil Company contracted for Quick Point to receive the exclusive right to make and sell the keyholder.
- Quick Point agreed to pay a 5% royalty while the patent application was pending.
- The contract provided that if no patent issued within five years, the royalty would drop to 2.5% of sales.
- No patent issued within five years, and Quick Point reduced payments to 2.5% as specified.
- The patent application was ultimately rejected, but Quick Point continued paying royalties for years thereafter.
- Quick Point later sought a declaratory judgment that continued royalty obligations were unenforceable because federal patent law preempted state contract enforcement.

## Issues

1. Whether federal patent law preempts state contract law so as to render unenforceable a royalty agreement requiring payments even though no patent ultimately issues.

## Decision

- The Supreme Court reversed the Eighth Circuit and upheld enforcement of the royalty agreement.
- Federal patent law did not preempt state contract law on these facts.
- Enforcing the agreement did not conflict with federal patent objectives because no patent issued and nothing was removed from the public domain.
- The Court distinguished Lear, holding that its policy concerns about challenging issued patents did not control where no patent ever issued.
- Quick Point remained obligated to pay the contractually reduced 2.5% royalty.

## Legal Principles

- State contract law may enforce private royalty agreements relating to unpatented inventions unless enforcement conflicts with the purposes of federal patent law.
- A contract requiring royalties after a patent application is denied is not preempted where it does not create patent-like exclusivity against the public or withdraw public-domain ideas from free public use.
- Lear’s rule and policy favoring challenges to issued patents does not bar enforcement of a royalty agreement when no patent has ever issued.
- Parties may allocate the economic risk of patent issuance by contract (including contingent royalty reductions), and such agreements are generally enforceable absent a direct conflict with federal patent policy.

## Conclusion

The Court held that federal patent law did not displace state contract enforcement of a royalty agreement for a patented-pending invention where no patent issued, because the contract imposed only a private payment obligation and did not restrict public access to any idea in the public domain.


Aronson v. Quick Point Pencil Co., 440 U.S. 257 (1979)