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This presentation contains Attorney Advertising. 131959696.PPTX Remanufacturing as Industrial Sustainability: Patent Law Issues William A. Tanenbaum, Kaye.

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Presentation on theme: "This presentation contains Attorney Advertising. 131959696.PPTX Remanufacturing as Industrial Sustainability: Patent Law Issues William A. Tanenbaum, Kaye."— Presentation transcript:

1 This presentation contains Attorney Advertising PPTX Remanufacturing as Industrial Sustainability: Patent Law Issues William A. Tanenbaum, Kaye Scholer LLP Chair, Technology, Intellectual Property & Outsourcing Group Green Technology Group New York Office

2 This presentation contains Attorney Advertising PPTX Which is Greener? Paper or plastic bags? Plastic – if you reuse Washed or dirty car? Dirty Hand drier or paper towels? Electric hand drying machine Movies from video store or online store? Online Based on Nov/Dec 2008 issue of Mother Jones, article by Ben Whitford

3 This presentation contains Attorney Advertising PPTX Which is Greener? (2) Print or online newspaper? Paper, if reading for more than 30 minutes Air conditioner or car windows open? A/C Quick or slow acceleration to car cruising speed? Quick acceleration

4 This presentation contains Attorney Advertising PPTX Commercial Perspective: What is Remanufacturing? Disassembly of products Cleaning, repairing and/or replacing parts Reassemble to like-new or better than new condition Replacement parts can be those not available at date of original manufacture

5 This presentation contains Attorney Advertising PPTX Why is Remanufacturing Environmentally Sustainable? Reduces energy costs and environmental impact of: Mining or extracting raw materials and natural resources Manufacturing products Shipping components and final product What are the environment savings? Saves enough natural resources to fill a train 1,100 miles lone Saves enough energy to power 6 million automobiles

6 This presentation contains Attorney Advertising PPTX Rebuilt Rebuilt is synonymous with remanufacturing when used in connection with motor vehicle parts and systems but not the entire vehicle.Refurbished Refurbished is synonymous with remanufacturing of furniture systems for offices, hotel lobbies, and hospitals.Recharged Recharged is synonymous with remanufacturing when used in connection with imaging products, such as laser toner cartridges. Factory Reconditioned or Recertified Factory reconditioned or recertified is synonymous with remanufacturing when referring to consumer products, such as electrical hand tools. (Information on this and following 9 slides from Dr. Nabil Nasr of the Golisano Sustainability Institute of the Rochester Institute of Technology is gratefully acknowledged). Remanufacturing is Also Known As …

7 This presentation contains Attorney Advertising PPTX Remanufacturing (Reman) Process Generic Reman Process Process steps required to bring product back to a like-new condition. Inspection Disassembly Cleaning Restoration / Replace Re-assembly Qualify

8 This presentation contains Attorney Advertising PPTX Remanufacturing Industry Recent Trends Higher technology found in products Increased awareness among OEMs Caterpillar Xerox Delphi Hewlett Packard Consolidation of smaller remanufacturers in recent years Additional growth in consumer goods U.S. Remanufacturing Industry: 73,000 Estimated Total Firms $53 Billion in Annual Sales 480,000 Direct Total Employment $2.9 Million average annual company sales 24 Employees per company on average Source: The Remanufacturing Industry; Hidden Giant, Lund, 1996

9 This presentation contains Attorney Advertising PPTX Approximately 85% of the energy expended in the manufacture of an original product is preserved in the remanufactured product. Source: MIT study on the remanufacturing of automobile component, 1981 Recycling Reclaims Material Remanufacturing Reclaims Material Energy from Casting, Machining, etc. Labor from original processes Capital Function/Design Intent The Benefits of Remanufacturing

10 This presentation contains Attorney Advertising PPTX Examples: Automotive Products Current Products A/C Compressors Alternators Engines Fuel System Components Rack and Pinion Steering Starters Steering Gear Boxes Transmissions Turbochargers Water Pumps

11 This presentation contains Attorney Advertising PPTX Economic Benefit The remanufacturing economic benefit is the recovered value minus the cost to recover Initial part cost, replacement, and yield Demanufacturing cost Restoration processing cost RV = ((UMC – URC) + C RC - C DS 9 URC = (1/Y i )*C i i=1 VariableDescription (normalized per design) UMCUnit Manufacturing Cost (cost of new) URCUnit Remanufacturing Cost CiCi Remanufacturing process i YiYi Yield of process i i = 1core cost i = 2initial inspection and test i = 3disassembly i = 4replacement part i = 5processing 1 = 6inventory cost i = 7reassembly i = 8final qualification i = 9amortized reman development C RC Recovered material value C DS disposal cost

12 This presentation contains Attorney Advertising PPTX Ecologic Benefit of Reman The remanufacturing ecological benefit is the recovered energy and avoided environmental impact minus the impact of the remanufacturing processes. CS130 Example:

13 This presentation contains Attorney Advertising PPTX Ecologic Benefit (2) Material analysis for Delco CS A alternator: Kwh used to create one NEW alternator:61.1 Kwh CO 2 emissions to create one NEW alternator:66.6 lbs Benefits from remanufacturing one thousand produced Delco CS A alternators each year: Annual energy savings:37,700 Kwh Annual CO2 savings:51,357 lbs

14 This presentation contains Attorney Advertising PPTX Eastman Kodak Company One Time Use Cameras (OTUC) Corporate Goal: Improve the environmental attributes of KODAK products throughout their life cycle Kodak Film Products Group achieved $1.968 Billion in revenue of which OTUC are a significant contributor Since 1990, the total number of OTUC collected reached 1.2 billion In 2007 alone, Kodak collected 120 million single-use cameras Since 1990, 800 million Kodak OTUC have been remanufactured and the balance sent back to other manufacturers Approaching 100% of Kodak OTUC manufactured from recycled bodies and/or parts Source: Eastman Kodak Company 2007 Global Sustainability Report

15 This presentation contains Attorney Advertising PPTX Consumer Products Product Evolution Product complexity is increasing Product lifecycle is decreasing Residual value varies greatly Required Competencies Electronic board repair Delicate surface finishing Material handling Remaining-life assessment Sterilization and cleanliness

16 This presentation contains Attorney Advertising PPTX Legal Issue: How Will New Be Defined? The new new New will be equivalent to scope of warranty to repair or replace

17 This presentation contains Attorney Advertising PPTX IP Ownership Who owns the IP in the inventions developed to improve the remanufactured product – the commissioning party or the party doing the remanufacturing? What are the issues when the remanufactured product includes improvements owned by one or more third parties? What is the impact of government funding?

18 This presentation contains Attorney Advertising PPTX The Patent Exhaustion Doctrine Purchasers price paid to patent owners includes patent license fees Purchasers customers (or transferees) do not have to pay additional patent license royalty Put another way: patent owner (patentee) cannot recover license fees from purchasers transferee

19 This presentation contains Attorney Advertising PPTX Case Law United States v. Masonite Corp., 316 U.S. 267 (1942) Intel Corp. v. ULSI Systems Tech, Inc., 995 F.2d 1566 (Fed. Cir. 1993) (The law is well settled that an authorized sale of patented product places the product beyond the reach of the patent.) Note: authorized first sale must have occurred under a U.S. patent (See Boesch v. Graff, 133 U.S. 697 (1890) (a lawful foreign purchase does not obviate the need for the licensee from the U.S. patentee before importation and sale in the U.S.)

20 This presentation contains Attorney Advertising PPTX How to Limit the Exhaustion Doctrine Use contract to impose prohibition against what would otherwise be permitted Due diligence point: review contracts for restrictions that would limit rights otherwise granted to subsequent transferee by virtue of exhaustion doctrine

21 This presentation contains Attorney Advertising PPTX Key Issue Under Case Law Refurbishment used as general (and neutral) term (See Jazz Photo Corp. v. Dynatec Intl, 264 F.3d 1095 (Fed. Cir. 2001)(Judge Newman) Permissible repair vs. prohibited reconstruction (See Id.) Repair generally deemed less that making a new article (product) Must consider scope of patent claims to made determination, especially when product consists of multiple components

22 This presentation contains Attorney Advertising. Repair vs. Reconstruction Right of repair includes Right to preserve useful life Right to replace individual unpatented elements that themselves have a shorter life Reconstruction includes Making a new article (after original article, viewed as a whole, has become spent) Creation of a second entity Summary: making like new vs. making new or anew PPTX

23 This presentation contains Attorney Advertising PPTX Illustrative Cases Jazz Photo v. Dynatec 2009 ITC case Fuji single use camera Unauthorized third parties added new film to discarded single use camera Fed Cir. Upheld activity as permissible repair because of 8 patented steps, only the 3rd step – inserting new film– was only implicated Overruled portion of ITC ruling finding prohibited reconstruction

24 This presentation contains Attorney Advertising PPTX Illustrative Cases (2) Sandvik v. Akteibolag v. E.J. Co., 121 F.3d. 669 (Fed Cir. 1997) Patented drill bit included innovative drill tip Tip could be re-sharpened a limited number of times Federal Circuit held that cutting of and replacing tip with new material was a prohibited reconstruction Holding rested on finding that a new article was made after the patented article viewed as a whole has become spent Looked to intent of patentee, which contemplated re-sharpening but not reconstruction with new tip

25 This presentation contains Attorney Advertising PPTX Illustrative Cases (3) Replacement of limited-life component, worn canvas convertible top, held to be a permitted repair, Aro Mfg. v. Convertible Top Replacement, 365 U.S. 334 (1961) Rebuilding of discarded worn truck clutches, even on commercial scale, held to be permissible repair, Data Corp. v. American Precision Co., 872 F.2d 755 (Fed. Circ. 1987)

26 This presentation contains Attorney Advertising PPTX General Conclusion from Case Law Not many cases Many are older Historically, cases have taken expansive view of scope of permissible repair Query: will advanced technology remanufacturing result in change in case law? General conclusion: prohibited reconstruction generally required finding that new article (in a patent sense) was created, vs. only a portion of claimed invention Prediction: expansion of remanufacturing will lead to new round of cases

27 This presentation contains Attorney Advertising PPTX Portion vs. New Article Analysis Portion is less than all of claimed steps in patented invention Even if portion is embodied in inventive concept, it is less than entirety of claimed steps constituting the patented invention Cases also look to whether refurbished portion had a useful life of shorter period than entire patent Some cases also looked to whether patentee intended that purchases would replace or repair portion (because of its shorter useful life)

28 This presentation contains Attorney Advertising. Green Implications Will remanufacturing products to obtain green benefits be deemed permitted repair or prohibited reconstructions – given the commercial objective of reman Issues when reman is designed to allow a portion of product to be continuously upgraded with improved version to take advantage of advancing technology But does incorporating a more advanced chip from a third party supplier constitute infringement of that third partys patents? PPTX

29 This presentation contains Attorney Advertising PPTX Patentee Arguments to Overcome Finding of Repair? Argue that repair was not contemplated Argue that upgrades are not standard repair of worn idem

30 This presentation contains Attorney Advertising PPTX Looking Ahead Predict use of more expansive contractual provisions, from both licensees and licensors to clarify scope of rights What result when refurbishment includes enhanced or new technology Even if permissible repair of old patent, use of new technology may require licensee for that patentee Patentees will argue that provider of enhanced technology is liable for inducing or contributory infringement

31 This presentation contains Attorney Advertising PPTX Questions and Answers William A. Tanenbaum Kaye Scholer LLP, New York Office

32 This presentation contains Attorney Advertising PPTX William A. Tanenbaum William A. Tanenbaum is the international chair of Kaye Scholers Technology, Intellectual Property & Outsourcing Group, a partner in the GreenTech Group and resident in the firms New York office. Chambers identifies him as an internationally recognized intellectual property, technology and outsourcing lawyer and concluded that he has built one of New York Citys most outstanding transactional IT law practices. It awarded him Recommended ratings in both Technology and IT Outsourcing and Business Process Outsourcing, and named him as a Notable Practitioner at the national level in Business Process Outsourcing. He regularly advises clients on strategic intellectual property concerns, privacy, data security, data transfer, information life cycle management and competitive intelligence matters, in both transaction and litigation contexts.

33 This presentation contains Attorney Advertising PPTX William A. Tanenbaum (continued) Mr. Tanenbaum is the founder and co-chair of PLIs annual Outsourcing Conference, the founder and co-chair of its Green Technology conference, a regular lecturer at industry outsourcing conferences. He chairs Kaye Scholers GreenTech breakfast seminar series and presents a monthly series of webcasts on Green law topics. He is a past President of the International Technology Law Association (formerly the Computer Law Association) and is listed in Whos Who in America, the International Whos Who of Business Lawyers, the Guide to the Worlds Leading Litigation Experts and the Guide to the Worlds Leading Patent Law Experts. He is the privacy and data protection columnist for the New York Law Journal, co-author of a book on privacy law and has been quoted in The Economist magazine as an expert on IP law. His articles have been used at Harvard and other law schools. He graduated from Brown University (degree with highest honors and Phi Beta Kappa) and Cornell Law School.

34 This presentation contains Attorney Advertising PPTX Kaye Scholer LLP Kaye Scholer LLP is a leading international law firm with offices in New York, Chicago, Los Angeles, Washington, DC, West Palm Beach, London, Frankfurt and Shanghai. Our more than 500 lawyers represent public and private companies, governmental entities, financial institutions and other organizations in matters across the United States and around the world. Our ability to handle sophisticated representations has consistently attracted clients who depend on the highest standard of legal counsel. Kaye Scholers ability to meet both domestic and international clients high standards is also evident to our peers. Kaye Scholer has been recognized in 17 transactional and litigation practice areas in Chambers USA: Americas Leading Lawyers for Business, and 27 of our lawyers are ranked in their respective areas of practice. Chambers & Partners lists and ranks firms, practices and lawyers, based on interviews with thousands of in- house counsel and private practice attorneys.


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