ARO MANUFACTURING CO., INC., ET AL. v. CONVERTIBLE TOP REPLACEMENT CO., INC.
377 U.S. 476 (1964)
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Rule of Law:
The seller of a component for a patented combination commits contributory infringement under 35 U.S.C. § 271(c) if the original combination was manufactured without a license, as repair of an infringing device constitutes direct infringement. However, the seller is only liable if they knew the combination was both patented and infringing, and a subsequent settlement between the patentee and the direct infringer can limit the damages recoverable from the contributory infringer.
Facts:
- Convertible Top Replacement Co., Inc. (CTR) held the rights to a combination patent for a convertible top structure.
- General Motors Corporation (GM) manufactured cars with this top structure under a license from the patent holder.
- Ford Motor Company manufactured cars with the same patented top structure between 1952 and 1954 without a license, thereby infringing the patent.
- Aro Manufacturing Co., Inc. (Aro) produced and sold replacement fabric tops specifically designed for both the GM and Ford convertible models.
- On July 21, 1955, after all the infringing cars had been built, Ford and the patent holder entered a settlement agreement.
- The agreement released Ford and its customers from all past infringement claims arising from the manufacture, use, or sale of the cars.
- By letter on January 2, 1954, the patent holder had informed Aro that the tops were patented, that GM was licensed, but that Ford was not.
Procedural Posture:
- CTR sued Aro in the U.S. District Court for the District of Massachusetts for contributory patent infringement.
- The District Court found Aro liable for contributory infringement for sales related to both licensed GM cars and unlicensed Ford cars.
- Aro, the appellant, appealed to the U.S. Court of Appeals for the First Circuit, which affirmed the District Court's judgment.
- The U.S. Supreme Court, in Aro Mfg. Co. v. Convertible Top Replacement Co. (Aro I), reversed the judgment, holding that replacement of a part on a licensed product was permissible repair.
- On remand, the District Court dismissed CTR's entire complaint, applying the Aro I holding to the unlicensed Ford cars as well.
- CTR, as appellant, appealed the dismissal related to the Ford cars to the First Circuit.
- The Court of Appeals reversed the District Court's dismissal, reinstating the judgment in favor of CTR regarding the infringing Ford cars.
- The U.S. Supreme Court granted certiorari to review the First Circuit's decision.
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Issue:
Does the seller of a replacement part for a patented combination commit contributory infringement under 35 U.S.C. § 271(c) when the original combination was manufactured and sold by an unlicensed, infringing manufacturer?
Opinions:
Majority - Justice Brennan
Yes, a seller of a replacement part for an infringing combination commits contributory infringement, subject to certain limitations. Because Ford did not have a license, its sale of cars with the patented top-structure was an infringement, and consequently, the purchasers' use and repair of those cars were also direct infringements. Aro's sale of replacement fabrics specifically made for these infringing Ford cars falls within the definition of contributory infringement under 35 U.S.C. § 271(c), as Aro supplied a material component for a known infringing use. However, liability under § 271(c) requires that the seller knew the combination was both patented and infringing; therefore, Aro is only liable for sales made after it received notice on January 2, 1954. Furthermore, the 1955 settlement between Ford and the patent holder acted as a license for future use, meaning any sales by Aro after the settlement date did not contribute to an infringement, as car owners were then authorized to repair their tops. For sales before the settlement, Aro's liability remains, but the damages CTR can recover are limited by the amount the patent holder already received from Ford as compensation for the infringement.
Dissenting - Justice Black
No, the seller of a replacement part does not commit contributory infringement in this scenario. The Court's prior decision in Aro I should have disposed of the entire case, as it established that a combination patent holder cannot extend its monopoly to unpatented components like the fabric cover, regardless of whether the original car was licensed. Granting a monopoly over this unpatented fabric offends the constitutional plan of a competitive economy. Furthermore, the settlement with Ford, the principal infringer, should release all subsequent users and repairers from liability. Finally, the majority's interpretation of the law unfairly punishes innocent purchasers and repairmen who have no knowledge that a product they bought or are servicing contains an infringing part, which is contrary to the patent law's notice requirements and principles of fairness.
Concurring - Justice White
Yes, but only in part. I agree with Justice Black that § 271(c) requires the alleged contributory infringer to have knowledge that the combination is patented and infringing. Therefore, Aro is only liable for sales of replacement tops made after it received notice from the patentee. For all other aspects of the case, I agree with Justice Brennan's analysis regarding the effect of the Ford settlement on post-settlement sales and the calculation of damages for pre-settlement sales.
Analysis:
This case, known as Aro II, significantly clarified the doctrine of contributory infringement under 35 U.S.C. § 271. It established that while the repair of a licensed patented item is permissible, the repair of an unlicensed, infringing item constitutes direct infringement, which can support a claim for contributory infringement against a parts supplier. The decision also imposed a crucial, strict knowledge requirement on contributory infringers, protecting innocent suppliers by requiring proof they knew the end product was both patented and infringing. Finally, it articulated how a settlement with a direct infringer impacts a contributory infringer, confirming that past liability is not erased but that damages may be limited to prevent double recovery for the patentee.
