Is it an Infringement when You Replace One Component of a Patented Combination? The U.K. Supreme Court Decision in Schütz v. Werit

John Richards
Ladas & Parry LLP

Introduction

In the case of Schütz (UK) Limited v. Werit (UK) Limited [2013] UKSC 16, the United Kingdom Supreme Court was faced with the question of whether there was infringement of a patent claim directed to

Pallet container for the transporting and storing of liquids, having

(i) a flat pallet,

(ii) an exchangeable inner container made of plastic material …and also,

(iii ) surrounding the inner container, one outer sleeve which consists of vertical and horizontal lattice bars made of metal which support the plastic inner container filled with liquid, …

[the lattice bars being welded together to form a cage],

characterised in that … [the lattice bars have contact weld points which] form restrictedly elastic bending points with a reduced bending resistance moment relative to [a raised part of the lattice bars] for relieving the weld joints at the intersection points upon application of static and/or dynamic pressure on the lattice sleeve.

The defendant sells containers for reconditioning used pallets originally sold by the patent owner by replacing the containers and it was accepted that if reconditioning in this way results in an infringing product, the defendant also infringes.

The Supreme Court found that there was no infringement.

Background and Lower Court Decisions

Pallets of the type claimed are known as intermediate bulk containers and the inner container noted as (ii) above normally contain about 250 gallons of liquid. Typically, the original containers cannot be reused because of concerns about toxic residues that may remain in them.

At one point in the proceedings an implied license for the reconditioning was pleaded, but this claim had been dropped when the patent owner pointed out that it had always strenuously opposed replacement of containers by others for fear that it could face liability if contaminated or defective containers were used in its pallets.

The case reached the Supreme Court after prior decisions by Floyd J. in the Patents Court and Jacob LJ in the Court of Appeal.

At all three levels, there was discussion of Lord Hoffman’s speech in United Wire Ltd. v. Screen Repair Services (Scotland) Ltd. [2001] RPC 24 (House of Lords) in which he had rejected a “repair vs. reconstruction approach” to issues of the type raised in the present case and had held that the key question was whether the alleged infringer “made” the patented product. In that case infringement was found where there had been replacement of mesh in a screen comprising a mesh and frame, but it seems that the House had viewed the inventive concept as lying in the combination and not in one part of it. The United Wire decision, of course led to the need to decide what is meant by “made” and what it was that needed to be made for there to be infringement. This was the point on which the judges at first instance, the Court of Appeal and the Supreme Court differed in the present case.

At first instance, Floyd J. had taken the view that “the correct approach is to ask whether, when the part in question is removed, what is left embodies the whole of the inventive concept of the claim”. Consequently he held that there was no infringement because “the inventive concept … is wholly embodied in the … cage” and removal and replacement of the container made nothing relating to that inventive concept.

The Court of Appeal in a judgment by Jacob LJ reversed, taking the view that in United Wire, whatever the inventive concept may have been, the House of Lords had not relied on this in its decision, stating

Accordingly I think that United Wire not only endorses the “making” test but excludes any additional “whole inventive concept” test.

Based on this, he concluded that the fact that the reconditioners using the defendant’s containers “on their own website say they are ‘re-manufacturing’ says it all.”

The Supreme Court Decision

The Supreme Court, in an opinion by its president, Lord Neuberger, with which all four of his colleagues agreed, restored the first instance judgment of non-infringement, but stated that neither of the lower courts had adopted the right approach. Floyd J.’s view quoted above conflicted with the House of Lords decision in United Wire. The Court of Appeal on the other hand had erred by failing to note that “it is a matter of degree, to be assessed in each case, whether replacing a worn or damaged part of a patented article amounts to ‘making’ the patented article.”

The lower courts had considered a number of German decisions based on the equivalent requirements of the German law, which like the current British definition of infringement had their origin in Article 25 of the proposed Community Patent Convention. Lord Neuberger noted that such decisions should be sympathetically considered and given considerable respect, but the English courts were not obliged to follow them. Unlike the lower courts, however, the UK Supreme Court also had before it a decision of the German Supreme Court on the same issues as were before it (Pallet Container II Case X ZR97/11). The German Supreme Court had approached the case on the basis that a relevant question was whether one normally expects parts of the patented combination to be replaced during the useful life of the product and the extent to which the technical effects of the invention are reflected in the replaced parts. It also noted as relevant the opinion of the market as to whether replacement of the part would be seen as a repair or re-manufacture. Since it had no evidence before it on the latter question, the German Supreme Court had remitted the case to the lower courts for a determination of this issue.

Against this background, Lord Neuberger made the following points:

The mere fact that an activity involves replacing a constituent part of an article does not mean that the activity involves “making” of a new article rather than constituting a repair of the original article.
Whether replacing a part of a patented article constitutes “making” it is a matter of fact and degree.
Where the article includes a component which is physically easily replaceable and in practice relatively perishable, those features must constitute a factor (which may, of course, be outweighed by other factors) in favor of concluding that the replacement of that component [is not an infringement]
The extent to which a component of an article is a subsidiary part, so that its replacement is more likely to involve repairing than “making” the article, must be a matter of degree. It is therefore legitimate, in the context of addressing the question whether a person “makes” the patented article by replacing a worn out part, to consider whether that part includes the inventive concept, or has a function which is closely connected with that concept.
It must be legitimate, in the context of addressing the question whether a person “makes” the patented article by replacing a worn out part, to consider whether that part includes the inventive concept, or has a function which is closely connected with that concept. While there is nothing in the judgments in United Wire to support the notion that the inventive concept is relevant to the question raised in an appeal such as this, there is nothing inconsistent with such a notion either.

After holding that, unlike the situation in Germany, there was nothing to be gained by remitting the case to the trial judge because even with evidence on the issue which had caused remittal in Germany this was just one factor of many to be considered and had the defendant wished to adduce evidence on the issue it should have done so previously, Lord Neuberger concluded:

Deciding whether a particular activity involves “making” the patented article involves, … an exercise in judgment, or, in Lord Hoffmann’s words, it is a matter of fact and degree. In some such cases, one can say that the answer is clear; in other cases, one can identify a single clinching factor. However, in this case, it appears to me that it is a classic example of identifying the various factors which apply on the particular facts, and, after weighing them all up, concluding, as a matter of judgment, whether the alleged infringer does or does not “make” the patented article. In the present case, given that (a) the bottle (i) is a freestanding, replaceable component of the patented article, (ii) has no connection with the claimed inventive concept, (iii) has a much shorter life expectancy than the other, inventive, component, (iv) cannot be described as the main component of the article, and (b) apart from replacing it, [the reconditioner] does no additional work to the article beyond routine repairs, I am of the view that, in carrying out this work, [the reconditioner] does not “make” the patented article.

However, he also thought it useful to “cross check” this conclusion with a “repair” approach in view of the German Supreme Court’s use of such an approach and concluded that this would produce the same result.

Comments:

The use of the idea of looking to see which parts of a combination involve an “inventive concept” in making a determination of whether there is infringement could be troubling. It was argued by the plaintiff that this would impose an additional difficulty for the judge. Lord Neuberger did not agree saying this was always apparent or an issue in patent cases anyway. One wonders, however, whether the use of characterizing language in the claim may have contributed to Lord Neuberger’s thoughts on this. Of course with patents arising from European patent applications (as was the case here) one may have no option but to use such language.

The approach adopted by the Supreme Court avoids the problems that can otherwise arise where one claims an entire article based on the presence of one inventive component. However, it may affect the way in which multi-component products are to be priced for initial sale if the user is in fact going to have to purchase fewer of them over a period of time than would be the case if the entire product had to be replaced each time a component wore out.

The cross reference to the German Supreme Court’s repair approach may indicate that contrary to United Wire, this approach may have a new lease of life in Britain.