By: Shashank Upadhye
Introduction
The right to repair emerged as a crucial issue in U.S. patent law, as manufacturers increasingly leverage patents to control post-sale repairs. This analysis delves into the legal framework, examining key court decisions, relevant statutes, and pending legislation that shape this right, with a focus on the court cases recent guidance on the distinction between permissible repair and impermissible reconstruction.
Patent Exhaustion Doctrine and the Right to Repair
The doctrine of patent exhaustion is central to understanding the right to repair. Under this doctrine, once a patented item is sold, the patentee’s rights over that specific item are exhausted, in other words, the seller forfeits any further control over the product or its use. The Supreme Court’s 2017 ruling in Impression Products v. Lexmark International, 137 S. Ct. 1523 (2017), clarified that after a sale, the purchaser is free to use, repair, or resell the item without infringing the patent, rejecting any attempt by patent holders to enforce post-sale restrictions. This ruling effectively prohibits patentees from using patent law to control the repair of products after their sale, thereby reinforcing the broad scope of the right to repair. In its ruling, the Supreme Court made it clear that once a patented product is sold, the patent owner cannot enforce post-sale restrictions through patent infringement lawsuits. But the Court recognized two routes for patentees to maintain some downstream control: (i) first, by imposing restrictions on licensees’ rights to use and sell the patented items; and (ii) second, by potentially enforcing post-sale restrictions through contract law rather than patent law.
Impression Products reaffirmed that patentees can limit a licensee’s rights to use or sell a patented product. This creates a potential strategy for controlling downstream use by licensing rather than selling the product outright. However, this raises the critical question of how to differentiate between a “license,” which avoids patent exhaustion, and a “sale,” which triggers it. Determining the nature of the transaction is crucial, as it dictates whether the patent rights are exhausted or remain enforceable.
When a patent owner seeks to license a product or sell it with enforceable restrictions under contract law, the challenge is to draft a contract that holds up with consumers. One common approach, especially in the software industry, is the use of shrinkwrap licenses. These licenses, which bind users upon opening or using the product’s wrapper, have been subject to frequent litigation over their enforceability, highlighting the complexity of ensuring such contracts are legally binding.
Distinguishing A Permissible Repair vs. Impermissible Reconstruction
The distinction between a permissible repair and an impermissible reconstruction is a critical aspect of this doctrine. Repair refers to the restoration of a product to its original condition, while reconstruction is treated as the creation of a new product, which can infringe on the original patent. The Federal Circuit has maintained that repairs, even if extensive, are permissible as long as they do not amount to the creation of a new article.
There is no bright line whether something is a repair versus a reconstruction. Sandvik Aktiebolag v. E.J. Co., 121 F.3d 669, 674 (Fed. Cir. 1997). Repair is an affirmative defense to a patent infringement claim. So, a defendant raising the repair defense has the burden of proof at trial to establish that its activities constitute permissible repair and not impermissible reconstruction. Moreover, as long as reconstruction does not occur or a contract is not violated, nothing in the law prevents a purchaser of a device from prematurely repairing it or replacing an unpatented component. Premature repair is the business of the purchaser of the product, who owns it, rather than the patentee, who sold it. Kendall Co. v. Progressive Medical Technology, Inc., 85 F.3d 1570, 1575 (Fed. Cir. 1996).
There are a number of factors to consider in determining whether a defendant has made a new article, after the device has become spent, including: (i) the nature of the actions by the defendant; (ii) the nature of the device and how it is designed (namely, whether one of the components of the patented combination has a shorter useful life than the whole); (iii) whether a market has developed to manufacture or service the part at issue; and (iv) objective evidence of the intent of the patentee. Sandvik Aktiebolag v. E.J. Co., 121 F.3d 669, 673 (Fed. Cir. 1997). Other factors include whether the part being repaired is an easily replaceable part; Husky Injection Molding Systems Ltd. v. R & D Tool Engineering Co., 291 F.3d 780, 787 (Fed. Cir. 2022); that the part need not be completely spent before it is repaired because it is enough that the part “it is neither practical nor feasible to continue using an element that is intended to be replaced.” Sage Products, Inc. v. Devon Indus., Inc., 45 F.3d 1574, 1578 (Fed. Cir. 1995); and that repairing the most important part or the part that forms the “heart of the invention” does not make it impermissible reconstruction. Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 346 (1961). Even if the owner sequentially replaces all the worn-out parts of a patented combination, this sequential replacement does not constitute reconstruction. Husky Injection Molding Systems Ltd. v. R & D Tool Engineering Co., 291 F.3d 780, 786 (Fed. Cir. 2022). The courts have repeatedly held that the right to repair is broadly construed. That means it’s more likely that the activity will be a permissible repair versus an impermissible reconstruction.
Karl Storz v. IMS: Reinforcing the Right to Repair
The Northern District of Alabama district court in Karl Storz Endoscopy-America Inc. v. STERIS Instrument Management Services Inc. serves as a recent reaffirmation of the broad right to repair. Karl Storz Endoscopy-America, Inc. v. STERIS Instrument Management Services, Inc., 603 F.Supp.3d 1111 (N.D.Ala., 2022), appeal dismissed, 2023 WL 8366211 (Dec. 2023).
In this case, the court addressed whether the repair of surgical endoscopes by IMS, an independent repair company, infringed on Karl Storz’s patents. Karl Storz argued that the replacement of broken lenses and the breaking of bonds in the endoscopes constituted impermissible reconstruction.
However, the court rejected these arguments, reaffirming that the right to repair allows for significant repairs, including replacing essential parts, without infringing on the patent. The court emphasized that as long as the repairs did not result in the creation of a new product, they fell within the legal right to repair. The court also rejected arguments that the repair was limited to consumable parts.
Guidance for Product Owners and Repair Companies
For product owners and independent repair companies, the right to repair offers significant legal protections against patent infringement claims. The key is to avoid crossing the line into reconstruction, which is prohibited. The courts have clarified that sequential repairs over time are permissible, but replacing all components of a patented product in one instance could be considered impermissible reconstruction, as noted in cases like Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 346 (1961) and Husky Injection Molding Systems Ltd. v. R & D Tool Engineering Co., 291 F.3d 780, 786 (Fed. Cir 2002).
The key consideration is to contact patent counsel for advice on repair versus reconstruction.
Pending Legislation and Broader Implications
Conclusion
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