June 19, 2014
Corporate Counsel
Authored by Elizabeth D. Ferrill and P. Andrew Riley
Replacement parts are big business and major revenue sources. A typical razor costs close to $10, while replacement cartridges exceed $45 annually. Power toothbrushes will set you back at least $10, but the replacement brush heads cost about $6-10 each and usually require replacement every three months. One major manufacturer sells an inkjet printer for as little as $36, but the list price for a single set of two replacement ink cartridges exceeds $40—more than the cost of the printer.
What do all of these products have in common? Not only do these manufacturers make big money from parts sales, but they also have invested heavily in acquiring intellectual property to protect their replacement parts.
While many companies may use utility patents to cover the function of, or technique of, building their replacement parts, companies with innovative replacement-part designs also frequently turn to design patents. Simply put, design patents protect the way something looks. With this IP protection, a company may exclude others from making, selling or offering for sale a product using a design substantially the same as the patented design.
Historically, design-patent protection for replacement parts has been ideal when the parts (1) get broken or damaged (e.g., car bumpers); (2) get dirty (e.g., toothbrush heads or medical equipment with direct patient contact); (3) get used up (e.g., empty inkjet cartridges, dull cutting blades, empty insulin pen injectors); or (4) get easily lost (e.g., toys, kids' gear). But the rapid developments in 3-D printing have added a fifth reason to this list: replacement parts a competitor or even your own customer might decide to 3-D print rather than buy from you.
In the U.S., design patents undergo an examination process. Once the U.S. Patent and Trademark Office (PTO) determines that a design meets the patent requirements—meaning that it is new, not an obvious variant of existing designs, not solely dictated by function and clearly depicted—it issues a design patent. The patent remains in force for 14 years from the date of issue. The U.S. recognizes 35 classes of protectable articles of manufacture, including furniture, personal-care items, games and sporting equipment, vehicles and construction equipment, and medical devices. Many of these products require replaceable parts over the product's lifetime.
Significantly, the PTO does not require that design patents cover the entire product. This technique, known as "portion claiming," allows a design patent to focus on only a part of a design. Thus, a manufacturer could obtain a design patent for the base design (e.g., the razor handle) and the replaceable part design (e.g., the replaceable razor blade).
For instance, when it came time to protect its Fusion® razor, Gillette obtained multiple design patents, including those protecting the whole razor, the razor handle and the replacement cartridge:
And in May 2014, Gillette filed lawsuits in Ohio against companies allegedly selling compatible replacement Fusion cartridges on the Internet. Gillette Co. v. Juba Razors, No. 14-cv-418 (S.D. Ohio filed May 19, 2014); Gillette Co. v. Generic Shavers, No. 14-cv-419 (S.D. Ohio filed May 19, 2014). Gillette asked the court to issue an injunction stopping both defendants from selling the copycat products accused of infringement.
Automobile manufacturers and other companies in similar industries have found design-patent protection ideal, because their customers often break or damage their products. Indeed, a robust secondary-parts market developed to service these customers, often at prices much lower than the original equipment manufacturer. In the past five years, the PTO has issued over 1,700 design patents to the top five automakers alone. This IP allows automakers to protect their innovative car designs (including replaceable parts such as bumpers, quarter panels, doors, headlights, etc.) and exclude aftermarket parts makers from selling parts that appear substantially the same as the authentic ones.
In response, aftermarket parts makers (and the insurance companies that would like to buy their lower-priced products) have repeatedly approached Congress seeking an exception to be carved out of the design-patent statutory scheme for these parts. See Promoting Automotive Repair, Trade, and Sales Act of 2013, H.R. 1663, 113th Cong. (2013); see also H.R. 3889, 113th Cong. (2012); H.R. 3059, 111th Cong. (2009).
Although the carve-out has differed from Congress to Congress over the years, generally the proponents want to create an exception that shields secondary-parts makers from liability for design-patent infringement for automobile component parts of a motor vehicle after some initial period of exclusivity (e.g., 30 months) for the original manufacturer. To date, none of these bills made it to a full vote by Congress. So, as the law currently stands, these aftermarket parts makers must resign themselves to making parts that look substantially different from the originals.
Until recently, however, only the most popular products (the Gillette razors, the inkjet cartridges, bumpers for Honda Accords) would create enough demand for a counterfeit spare-parts market. Creating and selling spare parts requires tooling a production line and building a distribution network to get the parts into the hands of consumers or auto mechanics. It makes little business sense to create and sell aftermarket spare parts for a low-volume or unpopular product. As a result, some companies faced little competition for spare parts because such a small market could not support an investment by the competition.
The competitive landscape is changing. Rapid advancements in 3D printing and scanning will soon make it possible for competitors to quickly design and manufacture replacement parts for even lesser-known and lower-volume products.
Recently, Autodesk introduced its 123D Catch program that turns ordinary photos into 3-D models. This type of software could allow someone to take pictures of your product (such as on the showroom floor or at a trade show) and quickly make a 3-D model suitable for directly 3-D printing a replacement part. Alternatively, a company could use the 3-D model to 3-D print molds for more traditional methods like injection molding or fiberglass production. This could allow a competitor to leverage its existing production techniques with 3-D printing and gain significant cost savings over more traditional approaches.
The competitor does not need to actually make a part either, just post the ability to make the part and offer it for sale. Once someone places an order, the competitor can print the part on a just-in-time basis. While some of these printed objects might not mimic your design (because 3-D printing allows for easy, cheap customization), the opposite holds true as well. Conceivably, a savvy competitor could start offering replacement parts for sale before your company sells its first model.
Finally, in the near future, 3-D printing may advance to the point where even your customers can print their own replacement parts. At that point, you might need to imbue your parts with capabilities that 3-D printers cannot reproduce yet, such as circuitry or special materials, in order to maintain an edge in the replacement-parts market. At the same time, you may educate your customers about why they should buy "authentic" replacement parts (e.g., highlighting safety testing and the benefits of using high-quality materials). Soon, for some parts, you might even cut out the production process completely and sell "authentic" 3-D printable files directly to consumers.
In any event, you can continue earning revenue from replacement parts if you start planning now. Initially, look to protect your designs by seeking the necessary IP, including design patents. But just as important, keep a close eye on developments in 3-D printing to continue adapting to the increasing threat this new technology poses to your replacement-parts business.
Reprinted with permission from the June 19, 2014 edition of the Corporate Counsel © 2014 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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