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Archived updates for Saturday, January 20, 2007

Replacement of Parts that Must Be Broken Not Impermissible Reconstruction

In Fuji Photo Film Co., LTD. v. International Trade Commission (January 11, 2007) the Federal Circuit provided further guidance on the repair/reconstruction Doctine. On appeal in this case, the parties agreed that the eight step refurbishment discussed in an earlier decision involving the same facts, and a nineteen step refurbishment described in the Commission's exclusion order involved permissible repair. The narrow question on appeal was whether one additional action by Jazz, the addition of a new plastic back cover (to replace the existing covered that had to be broken in order to access the film), converted its activities from permissible repair into impermissible reconstruction.

The latest in this serires of opinions arose out of an enforcement proceeding instituted by the Commission to investigate Fuji’s allegation that Jazz, Benun, and Jazz’s then-president and Chief Executive Officer Anthony Cossentino violated the cease and desist order by importing and selling infringing LFFPs during the period after the Jazz I decision. The Commission had imposed a civil penalty of $13,675,000 on Jazz. It also imposed a $154,000 penalty on Cossentino and held Benun, as the more culpable of the two, jointly and severally liable for the entire $13 million penalty imposed on Jazz. Needless to say, the penalized parties were anxious to reduce their fines.

The eight steps that the Commission held to constitute impermissible reconstruction were: 1) removing the cardboard cover; 2) opening the LFFP body; 3) replacing the winding wheel or modifying the film cartridge to be inserted; 4) resetting the film counter; 5) replacing the battery in flash LFFPs; 6) winding new film out of a canister onto a spool or into a roll; 7) resealing the LFFP body using tape and/or glue; 8) applying a new cardboard cover.

According to the opinion by Circuit Judge Dyk:

In Husky Injection Molding Systems Ltd. v. R & D Tool & Engineering Co., 291 F.3d 780 (Fed. Cir. 2002), we concluded that the replacement of a spent part was a fundamental example of a permissible repair. Id. at 785-86. Benun
contends that the back covers were spent parts and their replacement was permissible repair. This is so, he argues, because as a practical matter the backs had to be broken to remove the film, and once new film was inserted the
back covers could no longer serve their function of enclosing the camera and keeping light out. The backs therefore were spent and could properly be replaced. Although Fuji did not intend the LFFP to be refurbished, "the patentee’s unilateral intent, without more, does not bar reuse of the patented
article, or convert repair into reconstruction." Jazz I, 264 F.3d at 1106; Hewlett-Packard Co. v. Repeat-O-Type Stencil Mfg. Corp., 123 F.3d 1445, 1453 (Fed. Cir. 1997).

Benun’s factual premise that the backs had to be broken to repair the film is not contested by the Commission on appeal. This court and other tribunals have repeatedly concluded that, in view of the continued utility of the shutter mechanism, lens, viewfinder, film advance mechanism, and other significant parts in the original camera, replacing the film is a permissible
repair and reattaching or replacing a part that must be removed or broken to replace the film also constitutes permissible repair. See Jazz I, 264 F.3d at 1106 (reattachment of the back cover); Fuji II, 249 F. Supp. 2d. 434, 446 (D. N.J. 2003), aff’d 394 F.3d 1368 (Fed. Cir. 2005) (removal of the film door that
was broken in removing the film); J.A. at 95 (refurbishment of the half backs). Significantly, there is no contention here that the extent of the refurbishment is disproportionate to the overall value of the parts that were not replaced. See Husky, 291 F.3d at 786-87; Jazz I, 264 F.3d at 1106.

In a variety of other contexts we have also held that replacement of a part that must be broken or removed to repair the device does not convert permissible repair into impermissible reconstruction. For example, in Bottom
Line Management, Inc. v. Pan Man, Inc., 228 F.3d 1352 (Fed. Cir. 2000), we found that "incidental repairs to minor damages" necessary to replace a spent part did not justify a finding of reconstruction. Id. at 1356 (internal quotation marks
omitted). In that case studs that held a spent part in place had to be broken in order to remove that part for replacement, and we concluded that replacement of these studs did not justify a finding of reconstruction. Id. at 1355. Similarly, in Everpure, Inc. v. Cuno, Inc., 875 F.2d 300, 303 (Fed. Cir. 1989), we held
that a patentee who designed a product so that the neck which connects a filtering cartridge to the base of the device had to be replaced in order to replace the worn-out cartridge itself could not claim impermissible reconstruction from the replacement of the neck. We concluded that "Everpure and Everpure alone made the business decision to sell disposable cartridges and to
render its filter irreplaceable without replacement of the entire cartridge." Id. Likewise, in this case, it would appear that Jazz’s actions in replacing the back covers, which must be broken in order to replace the spent film and film cartridge, does not justify a finding of impermissible reconstruction.

The Commission’s sole basis for reaching a contrary conclusion was its reliance on an erroneous repair-reconstruction test. The Commission found that by replacing the back cover, Jazz was completely replacing two horizontal ribs that satisfied the "means for exerting force" element of claim 5 of the ‘495
patent,16 as well as completely replacing two other elements of claim 5 (the film and the film cartridge) and partially replacing the fourth element (the light-tight film case). The Commission said, "if a component is integral to a specific patent claim, and it is replaced with a new part, such replacement could weigh heavily towards a finding of reconstruction."

The Supreme Court in Aro Manufacturing Co. v. Convertible Top Replacement Co., 365 U.S. 336 (1961) rejected a test for repair/reconstruction that would look to whether an "essential" or "distinguishing" part of the patented combination had been replaced. Id. at 345. In doing so, the Court concluded "that the combination patent covers only the totality of the elements
in the claim and that no element, separately viewed, is within the grant" and "that there is no legally recognizable or protected ‘essential’ element, ‘gist’ or ‘heart’ of the invention in a combination patent." Id. at 344-45. We see no material difference between the Commission’s test that focused on whether an "integral" component has been replaced, and the tests previously rejected by the Supreme Court that focus on whether an "essential" or "distinguishing" part, or part that is at the "gist" or "heart" of the invention, has been replaced. , 448
U.S. 176, 217 (1980))).

. . . Thus, we conclude that the Commission erred in holding that the cameras in which full backs were replaced were impermissibly reconstructed; we hold that the replacement of the full backs was part of a permissible repair. We accordingly remand to the Commission for the limited purpose of considering an appropriate adjustment in the amount of civil penalties in light of our holding that the 998,250 [of the 27 million] LFFPs refurbished by replacing the full backs were permissibly repaired.

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