Component suppliers targets for infringement

DN Staff

April 7, 1997

4 Min Read
Component suppliers targets for infringement

Can components suppliers become drawn into patent infringement cases? This esoteric area of the law represents a significant problem. What happens if a supplier delivers a product that goes into an infringing device patented by yet another party? Parts suppliers need to know whether they could be drawn into such patent infringement cases.

An illuminating example. Drawing on an old U.S. Supreme Court case can give us a specific example of this problem. Suppose you have a patent on a kerosene lamp that includes a base/reservoir, burner, a wick mechanism, and a chimney. Then I decide to sell chimneys to the consumer for use with your components. You lose sales of chimneys, but I don't directly infringe your patent, even though the only place the chimney can be used is with your patented lamp. In this situation, my chimney contributes to an infringement, since it can only be used with a patent-infringing product. Had I manufactured or sold a lamp that includes the base/reservoir, burner, wick mechanism, and chimney, then I would have directly infringed your patent. Instead I avoided directly infringing by selling only the chimney. This is the heart of contributory infringement. The sale may have also induced third parties (the customer) to infringe the patent.

Suppose, though, that now I sell bolts. My bolts can be used in non-infringing as well as infringing structures. Therefore, no contributory or inducement problem exists, since the product can be used in non-infringing situations as well. Moreover, one could argue that I didn't know and could not have intended that the bolt be used as part of an infringement. Clearly, the component manufacturer incurs greater risk when the item for sale can only be used as part of an infringement. Both case law and statutory law support much greater exposure when the item can only be used as part of an infringement.

More questions. Under closer examination, the role of the component supplier in patent infringement cases leads to other issues, such as parts replacement vs. reconstruction, the component manufacturer's intent, and whether only direct infringement risks lawsuits. Shouldn't a buyer of a patented combination be entitled to repair that combination without fear of infringement, especially when the replacement was purchased from the patent holder? What happens if the buyer replaces parts, particularly from a less expensive source? Say the original parts wear out. Can Sam, the patent owner, use the threat of patent infringement to urge the customer to buy parts from him?

Recently, an entity held a patent on a combination of components to produce a product. The patent holder intended that one of its components could be replaced with another component used in the manufacture of similar products. However, the patent owner, who was also the combination manufacturer, did not and could not supply the original replacement part. If the buyer of the machine also purchased or replaced its components, does this make the buyer a contributory infringer? This dispute remains unsolved.

Issues of inducement and contributory infringement are far from simple. Be aware of these situations to better address them when they arise.

Q: What is the status of the various Patent Reform Bills now making the rounds in Congress?

A: With the old Congress terminating, these bills expire. Features of these bills may be resurrected in new bills as the next Congress goes into session.

Q: Relative to the Federal Trademark Law, what is considered to be trademark dilution?

A: Simply stated, the use of a famous trademark in another area, where the use of the famous trademark by another can tarnish the good will of the trademark owner or one used to sell products not associated with the trademark owner can cause the famous trademark holder's rights to be diluted, even though there may not be infringement in the classical sense. Recent Federal legislation addresses the dilution issue.

Q: Does the problem of contributory infringement exist elsewhere in the law?

AYes, in the copyright law the doctrine is alive and well. A famous case dealt with VCR tapes. Could the manufacturer of such tapes sell them knowing that they would be used in the VCR to capture copyrighted works for later viewing? The ultimate decision was that personal (i.e. non-commercial) copying was not an infringement.

Q: Is there anything new concerning "shrink-wrap" licenses?

A: These are licenses to use a computer program or data that accompany a shrink-wrapped retail package. There had been some suggestion that these licenses were not binding agreements. However, a Federal Court recently ruled that shrink-wrap licenses were valid and binding contracts.

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