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TechRoadmap Directions
  IP Issues of Interest to High Tech Companies
Vol 2 Issue 4 April 2002

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News from TechRoadmap

Put Your Patents Where Your Profit Is

Tip of the Month

IP Links of Interest

On-Line Patent Glossary

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  Welcome!!
This is the 12th issue of Directions, a newsletter from TechRoadmap Inc. discussing intellectual property issues and ideas. We hope to stimulate you to examine and improve your own IP practices.

This month we look at a local company that apparently took its eyes off the prize. They overlooked or forgot that a patent on a complex system covers the combination of parts, not the individual parts themselves, and in doing so, they lost out on their monopoly on the expendables that went with the system.

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  • News from TechRoadmap
  We've revamped our web site and added some interesting and useful material. Click over and view our "Client Stories" and "Tip of the Month". Next month we will be adding a downloadable forms/programs section. Check it out.

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  • Put Your Patents Where Your Profit Is
  King Gillette built a shaving empire on the marketing principle of giving away the razor and selling the blades. George Eastman gave away cameras to build Kodak. And Kendall Company of Mansfield, MA hoped to do the same with the Kendall SCD System.

Kendall invented a device (sold as the SCD) for applying compressive pressure to a patient's limbs to treat or prevent deep vein thrombosis. The device includes a pair of pressure sleeves that wrap around a patient's limbs. Although the sleeves were robust, Kendall understood that medical facilities would rather replace the sleeves for each patient than risk cross- contamination.

This concern opened up a lucrative market opportunity. The replacement sleeves were Kendall's razor blades. To find out what happened when customers started buying their replacement sleeves from a second supplier,

read on...

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  • Tip of the Month
 
Points to remember when your invention is a system:
  • A patent (generally) only protects one invention at a time - If your invention is a system of multiple inventive parts, you usually must file divisional applications to cover each invention separately.
  • Your patent covers the system (combination), not the parts individually - It is perfectly possible to get a patent for a system in which none of the individually identifiable parts is new.
  • Show me the money! - Don't forget that the purpose of the patent is to make your company successful in the marketplace. Patent the items that bring in the money, even if they are less advanced or complicated than the system.
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  • IP Links of Interest
  US Patent office - Searchable database of all US Patents and, now, published patent applications.
The Patent Cafe - an on-line source of interesting insights into current IP issues.
EKMS Inc. - a company with whom we've worked that provides a range of IP management services including portfolio analysis, deal-making, and process improvement.

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  • On-Line Patent Glossary
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Industry's Best Glossary
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  • Put Your Patents Where Your Profit Is - continued
  Kendall is the assignee of U.S. Patent 4,253,449, covering a device (sold as the SCD) for applying compressive pressure to a patient's limbs to treat or prevent deep vein thrombosis. The device has three basic components: a controller-pneumatic pump for supplying pressurized fluid, a pair of pressure sleeves that wrap around a patient's limbs, and connecting tubes. Although the sleeves were robust, Kendall helped ensure the replacement sleeve market by marking the sleeves "FOR SINGLE PATIENT USE ONLY. DO NOT REUSE." Thus, in addition to any profits on the device itself, Kendall could look forward to a more or less steady revenue stream from the sales of replacement sleeves.

Third Party Parts
In the early 90's, Kendall realized that some customers were buying their replacement sleeves from a second supplier, Progressive Medical Technology. Kendall sued Progressive only for contributory infringement of the '449 patent, using the logic that the customers could not have engaged in infringing behavior (viz., replacing OEM parts with "aftermarket" parts) were it not for Progressive's sleeve manufacture.

Progressive asked the judge for a summary judgment of non-infringement, arguing that customers have the right to repair or maintain systems they purchase with any legally manufactured parts. Kendall countered that the repair doctrine did not apply because the sleeves were not physically worn-out when they were replaced (they could have been used repeatedly for three years or more before wearing out) so this was not a "repair". Unfortunately for Kendall, they discovered too late that a patent protected system is not a collection of patent protected parts and that customers have the right to buy un-protected parts to maintain their systems at any time and from whomever they please.

First, to paraphrase the Appeals Court, "[t]he Supreme Court has taken an expansive view of conduct that constitutes permissible repair of a patented combination of unpatented elements." Thus, when Kendall sold their patented device, without restriction, the Court held that infringement would occur only when there is a complete "reconstruction" of the device. Replacement of individual unpatented components, on the other hand, is permissible "repair," not direct infringement. Mere replacement of individual unpatented parts, one at a time, whether of the same part repeatedly or different parts successively, is no more than the lawful right of the owner to repair his property.

Additionally, Kendall's argument that the sleeves were not physically worn out was not relevant; if a customer wants to perform preventive maintenance on a product more often then absolutely required, that's his right. As the Appeals court said, "Premature repair is the business of the purchaser of the product, who owns it, rather than the patentee, who sold it." Besides, it was Kendall itself who had urged and directed customers to replace the sleeves for each patient, so keeping the sleeve for three years was never contractually the expected mode of operation at the time of purchase.Kendall, recognizing this practical necessity, marketed its replacement sleeves for single-use only.

Finally, getting down to the nub of the matter, "Kendall's counsel [argued that] the district court's decision would make it uneconomical for companies to invent and develop devices like that involved in this case, because much of the profit arises from sale of the replaceable sleeves rather than from sale of the original device." [emphasis added]. And indeed those razor blades do add up. According to the court, Kendall's sale of replacement sleeves had accounted for about eighty million out of eighty-five million dollars in total annual sales! The Appeals Court would only guess that Kendall's predicament might be due to "the failure to obtain effective patent protection for the replaceable sleeve" [See, there is a reason Gillette holds 76 patents that include "blade" in the title.]

There are many markets today where companies are trying to emulate Gillette and make their profit selling "blades". From Swifter(TM) dust mops to ink jet printers, expendables are the name of the game. If you choose to enter the fray, try to remember Kendall's experience. Make sure you have the patent protection on the part of the business that brings in the profits, even if it is less technically exciting than the device that uses the expendables.

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Nothing in the preceding article should be construed as legal advice. TechRoadmap Inc. serves as an interface between companies and their legal counsel.