Permissible Refurbishment Depends Upon the Relative Value of the Replaced Versus The Remaining Parts

Canon, Inc., v. GCC International Limited, [2006-1615] (January 25, 2008)[GARBIS, Michel, Dyk] NON-PRECEDENTIAL The Federal Circuit affirmed the grant of a preliminary injunction on making, using, offering for sale, or selling in the United States, or importing into the United States, any product that falls within the scope of claim 58 of U.S. Patent No. 6,336,018.

SIGNIFICANCE: Permissible refurbishment depends upon the relative value of the replaced verus the remaining parts. Price erosion and loss of marker share are difficult to compensate with money damages. Difficulty in collecting an damage award also makes money damages inadequate.

BRIEF: The claims were directed to "A process cartridge detachably mountable to a main assembly of an electrophotographic image forming apparatus". Defendants contended that the claims included the main assembly, and thus their provision of the process cartridge was a permissible repair. The Federal Circuit disfavors interlocutory appeals on claim construction, and tried to avoid reaching the claim construction, finding instead that Canon had a reasonable likelihood of success, regardless of whether the claim covered the process cartridge or the combination. The Federal Circuit examined permissible repair, noting that it has divided permissible repair into two categories—replacement of readily replaceable parts and refurbishment. In each instance the concept of proportionality is pertinent, though less so in the case of readily replaceable parts. A part is not readily replaceable if the part in question constitutes the bulk of the value of the patented item. And refurbishment is not a permissible repair if, for example, the extent of the refurbishment would be disproportionate to the overall value of the parts that were not replaced. The Federal Circuit said that it appears that under the facts of this case, the replacement of the toner cartridge would constitute impermissible reconstruction because it would essentially be a "second creation of the patented entity."

As to irreparable harm, the Federal Circuit said that "Due to the difficulty (if not impossibility) of determining the damages resulting from price erosion and loss of market share, an award of money damages would not be sufficient." Moreover, the Federal Circuit said that because Defendants' business operations are geographically "far-flung," enforcement of a money judgment would be "exceedingly difficult." The Federal Circuit concluded that in the instant case, the district court reasonably evaluated Canon's likely success on the merits and the irreparable harm balance and did not abuse its discretion in granting the preliminary injunction.