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Patent licensing agreements are essential tools for technology transfer, drug development, and commercialization. But as the dispute Acorda v Alkermes shows, even well-established partnerships can unravel when legal, contractual, and jurisdictional issues collide. At its core, this case was about post-expiration royalty payments, arbitration outcomes, and the boundaries of federal appellate jurisdiction. The Federal Circuit ultimately decided it had no authority to hear the appeal, transferring it to the Second Circuit—a result that underscores the importance of careful legal planning from the licensing stage through dispute resolution.
Case Background
Acorda Therapeutics developed Ampyra®, a drug designed to improve walking ability in patients with multiple sclerosis. Alkermes, the original owner of U.S. Patent No. 5,540,938, had created a sustained-release formulation of the active ingredient, dalfampridine. In 1998, Alkermes licensed the patent to Acorda and agreed to supply the active ingredient, receiving an 18% royalty on net sales.
The arrangement evolved in 2003 when regulatory concerns led to the dissolution of the original joint venture. Two new contracts emerged:
- A License Agreement providing for a 10% royalty.
- A Supply Agreement with an additional 8% royalty.
When the FDA approved Ampyra in 2010, Acorda began marketing the drug, paying royalties under both agreements.
On July 30, 2018, the ’938 patent expired. Generic versions entered the market, but Alkermes continued to collect royalties. For nearly two years, Acorda paid without formal protest. Only in July 2020 did Acorda begin explicitly challenging the payments tied to the License Agreement, while still paying unprotested royalties under the Supply Agreement.
Why the Royalties Were Disputed?
Under the U.S. Supreme Court’s ruling in Brulotte v. Thys Co. (1964), a patentee cannot collect royalties for sales made after the patent expires. This principle was reaffirmed in Kimble v. Marvel Entertainment, LLC (2015). Acorda argued that the royalty obligations after July 2018 were unenforceable as a matter of federal patent law.
However, Alkermes relied on two key defenses:
- A contractual no-refund clause in the agreements.
- The New York Voluntary Payment Doctrine (NYVPD), which bars recovery of payments voluntarily made with full knowledge of the facts, even if the payer later claims a legal error.
These competing positions set the stage for arbitration.
The Arbitration Decision
The arbitration tribunal agreed with Acorda on the main patent law question: after expiration of the ’938 patent, the License Agreement’s royalty provision was unenforceable. It also treated the License and Supply Agreements as a single economic arrangement, making the Supply Agreement’s royalty unenforceable for the same reason.
The dispute shifted to remedies. Applying the NYVPD, the tribunal concluded Acorda could only recover payments made under formal protest. That meant Acorda was entitled to roughly $16.5 million for protested payments after July 2020 but not to the more than $65 million in unprotested payments made between July 2018 and July 2020. For the Supply Agreement, the lack of any protest meant no recovery at all.
District Court Review
In January 2023, Acorda petitioned the Southern District of New York to confirm the tribunal’s rulings in part but to modify the award to allow full recoupment of post-expiration royalties, whether protested or not. The petition claimed “manifest disregard of the law,” a judicial standard allowing modification or vacatur of arbitration awards in rare circumstances.
Acorda advanced two arguments:
- Patent Law Preemption – That Brulotte preempted any state law doctrine limiting recovery of unlawful post-expiration royalties.
- Illegal Contracts Doctrine – That courts cannot enforce or allow retention of benefits from contracts deemed illegal, citing Kaiser Steel Corp. v. Mullins.
The district court rejected both. It found that Brulotte and related cases did not clearly address refund rights for voluntarily paid royalties, meaning the tribunal acted within its discretion by applying state law. It also held that limiting recovery to protested payments did not amount to enforcing an illegal contract. The court confirmed the award in full.
The Jurisdictional Question on Appeal
Acorda appealed to the Federal Circuit, asserting the case fell within its jurisdiction because it involved substantial issues of patent law. Alkermes countered that the appeal belonged in the Second Circuit, as the Federal Circuit’s appellate authority under 28 U.S.C. § 1295(a)(1) is limited to cases “arising under” patent law.
The Federal Circuit focused on the Supreme Court’s Gunn v. Minton framework, which asks whether a federal patent law issue is:
- Necessarily raised.
- Actually disputed.
- Substantial to the federal system as a whole.
- Capable of resolution in federal court without upsetting the federal-state balance.
While patent law was part of Acorda’s argument, it was not “necessarily raised.” Acorda had offered an alternative, non-patent-law path to the same relief. This meant the appeal could be resolved without deciding any patent law issue, placing it outside the Federal Circuit’s jurisdiction.
The case was transferred to the Second Circuit.
Why This Was a Jurisdictional Trap
The “trap” in the Acorda v. Alkermes case lay in the difference between disputes that involve patent law and those that truly “arise under” it for jurisdictional purposes. Acorda’s claim for additional recovery relied partly on patent principles, but because there was an alternative argument grounded entirely in state contract law, the Federal Circuit concluded it lacked authority. This procedural nuance can surprise parties who assume any patent-related dispute will go to the specialized patent appeals court.
For companies and lawyers, the lesson is that the choice of forum—and the path an appeal will take—can be determined by how arguments are framed in the initiating court documents, not just by the subject matter of the dispute.
Practical Lessons for Patent Licensing
This case offers several takeaways for drafting, managing, and enforcing patent licensing agreements:
First, when a patent is near expiration, licensees should review payment obligations promptly and consider whether continued royalties are permissible. Failing to object in writing can have significant financial consequences, as seen with Acorda’s lost claim for over $65 million.
Second, contracts should anticipate the expiration issue. Clauses specifying post-expiration obligations and refund rights—or disclaiming them—can help avoid later disputes.
Third, in arbitration agreements, parties should understand the legal standards for modifying or vacating awards. “Manifest disregard” is a high hurdle, especially when federal and state law intersect.
Finally, when preparing to challenge an arbitration award, parties should consider how their legal theories affect appellate jurisdiction. Mixing patent and non-patent arguments can alter which court will hear the appeal.
Relevance to Intellectual Property Counsel
For a firm like Stevens Law Group, which focuses on intellectual property, copyright, and trademark matters, Acorda v. Alkermes underscores the importance of front-end contract strategy and back-end dispute planning. Whether representing licensors or licensees, IP counsel must ensure agreements align with both federal IP law and applicable state doctrines. They must also prepare clients for procedural complexities that can shape the outcome as much as the substantive law.
Guidance from experienced IP attorneys can help avoid costly surprises—both in terms of financial exposure and litigation pathways.
Conclusion
Acorda v. Alkermes is a cautionary tale about the intersection of patent law, state contract doctrines, and arbitration review standards. It shows that even when a patent issue appears central, it may not drive jurisdiction or the final outcome. The case reinforces the need for careful contract drafting, timely payment protests, and strategic litigation planning.
Contact Stevens Law Group
If you are engaged in a patent licensing arrangement or face a dispute over royalties, the experienced attorneys at Stevens Law Group can help protect your interests. From structuring agreements that withstand legal scrutiny to guiding clients through arbitration and court review, our team delivers focused intellectual property counsel to avoid the legal and jurisdictional traps that can derail a case.
References:
U.S. Court of Appeals – Acorda Therapeutics, Inc. v. Alkermes PLC
JD Supra – Federal Circuit Denies Appellate Jurisdiction Based on Alternative Ground for Relief
