Germany: Delimitation between exhaustion and re-production (FCJ X ZR 55/16 – Drum Unit)

If the patent proprietor has put his patented product on the market, he cannot use his patent again to prevent the buyer from having this legitimately acquired product repaired by third parties or from reselling it to third parties. This is the legal principle of exhaustion. But what happens if the patent refers to only part of the product? Can a third party renew the product for resale?

Canon distributes printers and related cartridges. These contain not only the consumables but also the drum with which the image can be printed by electrophotography. Canon is the proprietor of patent EP 2 087 407 B1, which protects the "drum unit" of the cartridge. The patented special feature of the drum unit is the coupling with which the drum is coupled to the drive motor of the printer. This coupling clutch pivots when engaging or disengaging the drum in or from the printer engine.

A competitor has specialized in recycling old Canon cartridges. So he takes the cartridges disposed of by the users, replaces the drum and refills the cartridge. He then brings these cartridges on the market at a significantly lower price than Canon. For the customers, these cartridges are actually like new.

Canon sued the competitor for patent infringement. Canon argues that the replacement of the drum results in a re-manufacture of the cartridge or drum unit. The Higher Regional Court confirms the patent infringement. In the revision, the German Federal Court of Justice (FCJ) comes to the conclusion that there is no patent infringement, because in the specific case, the recycling is covered by the principle of exhaustion. The FCJ reasons as follows:

The principle of exhaustion ensures that the patented products placed on the market by the patent holder can freely circulate in the market. Each legitimate purchaser is authorized to use these product samples within the framework of “proper use”. Also the purchaser can resell them.

Proper use includes restoring fitness for the intended purpose of the product if the function or performance of the particular specimen is impaired in whole or in part because of wear or damage. The replacement of individual parts is permissible, even if these parts are “functionally identified” in the patent claim. The proper use has to be distinghuished from the re-production of the product. The latter remains reserved to the patent holder

The decisive factor is the product protected in the claim (the so-called total combination). This also applies if the product defined in the claim is placed on the market as part of a more complex item. In the previous case-law, the "total device" and the "protected product" were identical. In contrast, this is not the case in this case at issue.

If both the "overall device" and the "component" are protected by separate claims, then exhaustion must be assessed separately for each of the two claims. Measures that serve to restore the overall device thus exhaust the claim to the overall device, but not necessarily the right to the component.

The same principle is applicable if the overall device is not under protection. In this case, the purchaser may use or re-manufacture the entire device as intended (because it is not patent-protected). However, this does not give the authorization to reproduce a patented component.

The rights to the product are therefore not exhausted by the patent owner placing the printer (with a cartridge) on the market.

Whether a repair or a new production is present, is basically to be judged from the point of view of the customers. Because the customers in the present case do not perceive the drum unit as a product (since only the whole cartridge is put on the market), the Higher Regional Court has constructed a fictional perception of the drum unit by the average consumer and has come to the conclusion that the recycling is an (inadmissible) remanufacturing.

The FCJ contradicts this decision. In the context of exhaustion it is not appropriate to construe a fictive perception of average consumers.

For the issue of exhaustion, it is in the present case not relevant that, from the consumer's point of view, replacement of the drum equates to re-construction the drum unit. All that matters is whether the technical effects of the invention are reflected in the replaced parts.

The interest of the patent proprietor in the economic exploitation of the invention must be balanced against the interest of the customers in the unhindered use of the acquired product. The patented peculiarity of the product must be taken into account.

The Federal Court of Justice notes that, in principle, the conception of the average user must be taken into account for the demarcation between the proper use and the re-production. In the present case, however, the peculiarity is that consumers only know the printer and the replaceable cartridge, but not the drum unit. It is therefore not possible that a conception of the average consumer can grow with respect to the drum unit.

In such constellations (i.e. in constellations where the re-production cannot be affirmed on the basis of the conception of the average user), it is essential to determine whether or not the technical effects of the invention are reflected in the parts exchanged.

The replacement of the image drum and the flange is not a re- production, because in these parts, the invention is not reflected. The image drum has been known and the invention does not change the characteristics, operation or life of the drum. Although the inventive coupling component facilitates the assembly and disassembly of the drum unit in the cartridge. However, the drum is the mere object of the drum unit and does not take part in the effect of the invention. The same applies to the flange of the drum. This leads to the result that the replacement of the drum and the flange is not an (inadmissible) new production, but only a (permissible) repair.

Note: The principle of exhaustion sometimes has the effect that the economic benefits of the invention cannot be fully exploited by the patentee. As in the present case, however, the FCJ judgment shows that in addition to the concept of conception of the average user it can also matter whether or not the repaired parts belong to the core of the invention.