German Supreme Court, 17 July 2012, docket no. X ZR 97/11 - "Palettenbehälter II"
The decision “Pallet Container II” deals with the important distinction between the permissible “repair” of a patented product and the impermissible “renewed-manufacturing” of this product. From a practical point of view, the decision addresses the legal boundaries to aftersales competition regarding “wear-and-tear-parts” and consumables (e.g. coffee pads or ink cartridges). As will be detailed below, in the future the “end customer’s perception and understanding” will play an important role in order to decide whether these boundaries are crossed or not.
Whereas in Germany a “repair” of a patented product is considered as its “intended use” and therefore warranted under the principle of exhaustion, the “renewed-manufacturing” is considered as a further commercial exploitation of the patented invention which is only permissible with the patentee’s consent.
The decision “Pallet Container II” deals with the important distinction between the permissible “repair” of a patented product and the impermissible “renewed-manufacturing” of this product. From a practical point of view, the decision addresses the legal boundaries to aftersales competition regarding “wear-and-tear-parts” and consumables (e.g. coffee pads or ink cartridges). As will be detailed below, in the future the “end customer’s perception and understanding” will play an important role in order to decide whether these boundaries are crossed or not.
Whereas in Germany a “repair” of a patented product is considered as its “intended use” and therefore warranted under the principle of exhaustion, the “renewed-manufacturing” is considered as a further commercial exploitation of the patented invention which is only permissible with the patentee’s consent.
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Interestingly, the German Supreme Court held at the outset of the decision that the abovementioned legal principle equally applies to the customers of the patented product on the one hand as well as competitors of the patentee on the other. In the case at hand, these competitors acquired the used patented products from the patentee’s customers, refurbished them and offered them again for sale on the market. In a nutshell, it is henceforth irrelevant from a German point of view who will carry out the repair/re-manufacturing activity. This is an important finding which had so far not been discussed in the case law of the German Supreme Court. This finding is based on the “exhaustion principle” which applies de jure and which does not presuppose an explicit or implicit consent of the patentee for the further “intended use” of the patented product.
In the decision “Pallet Container II” the German Supreme Court thereafter repeats its established principle that the line between the permissible “repair” of a patented product and the impermissible “renewed-manufacturing” has to be drawn by asking whether the activity at issue – e.g. exchange of “wear-and-tear-parts” or consumables – does still preserve the “identity” of the original product or whether the activity at issue culminates in the creation of a new patented product. The answer to this question has to be given in cases of direct as well as indirect infringement by a weighing of the interests involved, i.e. the patentee's interest of the commercial exploitation of his invention on the one side and the customer’s interest of an unrestricted use of the acquired product on the other side.
For the necessary weighing of interests it has so far generally been the decisive factor whether the technical effects of the patented invention are residing in the exchanged parts, i.e. whether these parts reflect the core of the invention. If this is the case, a “re-manufacturing” is given and if not, a mere “repair” can be assumed. In this respect, it is settled case law that it does not suffice to meet this “core of the invention”- requirement that a mere functional relationship exists between the exchanged parts and the remaining parts of the patented product. On the contrary, it is necessary that the remaining parts are actually influenced by the exchanged parts as regards their function or durability (note: this was not the case for the exchanged parts in the “Pallet Container II” decision).
In the decision “Pallet Container II” the Supreme Court held that this criterion is however only decisive for the necessary weighing of interests if the exchange of the part(s) is according to the end customers’ perception and understanding “a usual repair measure”. In order to determine the end customers’ perception and understanding the court remanded the case to the Court of Appeal. According to the Supreme Court, it will play an important role in this regard if the used products are commercially worthless for the end customers or not. If the used products still have a commercial value, it is likely that the exchange of their parts will be perceived by the end customers as a mere standard repair measure.
After the decision “Pallet Container II”, infringement cases concerning “wear-and-tear-parts” and consumables (e.g. coffee pads or ink cartridges) will more and more center around the end customers’ perception and understanding. This implies not only that these cases will become a battle of witnesses and market surveys but also that their outcome will be hard to predict.
Read the decision (in German) here.
Head note: Tobias Wuttke
Interestingly, the German Supreme Court held at the outset of the decision that the abovementioned legal principle equally applies to the customers of the patented product on the one hand as well as competitors of the patentee on the other. In the case at hand, these competitors acquired the used patented products from the patentee’s customers, refurbished them and offered them again for sale on the market. In a nutshell, it is henceforth irrelevant from a German point of view who will carry out the repair/re-manufacturing activity. This is an important finding which had so far not been discussed in the case law of the German Supreme Court. This finding is based on the “exhaustion principle” which applies de jure and which does not presuppose an explicit or implicit consent of the patentee for the further “intended use” of the patented product.
In the decision “Pallet Container II” the German Supreme Court thereafter repeats its established principle that the line between the permissible “repair” of a patented product and the impermissible “renewed-manufacturing” has to be drawn by asking whether the activity at issue – e.g. exchange of “wear-and-tear-parts” or consumables – does still preserve the “identity” of the original product or whether the activity at issue culminates in the creation of a new patented product. The answer to this question has to be given in cases of direct as well as indirect infringement by a weighing of the interests involved, i.e. the patentee's interest of the commercial exploitation of his invention on the one side and the customer’s interest of an unrestricted use of the acquired product on the other side.
For the necessary weighing of interests it has so far generally been the decisive factor whether the technical effects of the patented invention are residing in the exchanged parts, i.e. whether these parts reflect the core of the invention. If this is the case, a “re-manufacturing” is given and if not, a mere “repair” can be assumed. In this respect, it is settled case law that it does not suffice to meet this “core of the invention”- requirement that a mere functional relationship exists between the exchanged parts and the remaining parts of the patented product. On the contrary, it is necessary that the remaining parts are actually influenced by the exchanged parts as regards their function or durability (note: this was not the case for the exchanged parts in the “Pallet Container II” decision).
In the decision “Pallet Container II” the Supreme Court held that this criterion is however only decisive for the necessary weighing of interests if the exchange of the part(s) is according to the end customers’ perception and understanding “a usual repair measure”. In order to determine the end customers’ perception and understanding the court remanded the case to the Court of Appeal. According to the Supreme Court, it will play an important role in this regard if the used products are commercially worthless for the end customers or not. If the used products still have a commercial value, it is likely that the exchange of their parts will be perceived by the end customers as a mere standard repair measure.
After the decision “Pallet Container II”, infringement cases concerning “wear-and-tear-parts” and consumables (e.g. coffee pads or ink cartridges) will more and more center around the end customers’ perception and understanding. This implies not only that these cases will become a battle of witnesses and market surveys but also that their outcome will be hard to predict.
Read the decision (in German) here.
Head note: Tobias Wuttke
hi, i didn't understand very well which are the circumstances whereby a repair of a patented product can be considered as a patent infringement (making the product)..
Posted by: Johns | 21/09/2012 at 17:39