Originally Published MDDI July 2002
NEWS & ANALYSIS
Court Rules Refurbisher Infringed on OEM Trademark |
| Karl Storz endoscopes |
The U.S. Court of Appeals for the Ninth Circuit has ruled in favor of Karl Storz Endoscopy-America Inc. (Culver City, CA) in a case involving alleged trademark infringement against Surgical Technologies Inc. (Surgi-Tech; Miami). Surgi-Tech, an independent service organization (ISO), had been repairing Karl Storz–brand endoscopes without labeling the refurbished products as such, and without removing the Karl Storz logo and labeling. The opinion reverses a prior summary judgment granted to Surgi-Tech by a District Court in 1999. Karl Storz appealed that decision.
In June 2001, Karl Storz attorney William Speranza, of Wiggin & Dana (New Haven, CT), argued before the three-judge panel of the appellate court that trademark law does apply to the Surgi-Tech situation. Charlie Wilhelm, executive vice president of operations for Karl Storz, explains the appeal this way: "Our major bone of contention is that when [Surgi-Tech] does major repairs—which we call reshafting—of the endoscope, it's essentially not a Karl Storz endoscope anymore. [The appeal is] about trying to protect our trademark and our image."
Until May of 1996, Surgi-Tech had, in fact, been etching a Surgi-Tech marking onto the endoscopes it repaired. That month, however, the company sent a letter out to its dealers and employees explaining that it would no longer place its own marking on repaired products. Doing so could make the company liable for shoddy repair work performed later in a medical product's lifespan, the letter explained. Karl Storz sued Surgi-Tech unsuccessfully two years after the letter went out, and subsequently filed an appeal of the District Court's summary judgment in January 2000.
Speranza and partner Mark R. Kravitz told the judges that by leaving the Karl Storz trademark intact and by not adding a label of its own, Surgi-Tech was engaging in "use of commerce" of the Karl Storz trademark. This resulted in a "likelihood of confusion" on the part of end-users, they argued.
According to Speranza, Karl Storz became aware of the issue when their sales representatives went to hospitals to hear surgeons' complaints about the performance of the company's rigid endoscopes. "The reps went in, talked with the surgeons involved, and determined that [the endoscopes] weren't actually Karl Storz products," Speranza says. "They had in fact been reshafted, which is literally a rebuild of the scope." In other words, Speranza says, the repair shop was rebuilding Karl Storz scopes "under the guise of repair." He argued—and the Court of Appeals agreed—that surgeons had been mistakenly attributing to Karl Storz the poor quality and performance of endoscopes that "were no longer" genuine Karl Storz products.
Surgi-Tech's counsel, Dale Britton of Klinedinst, Fliehman & McKillop (San Diego), rejects this line of reasoning. He calls the appellate court's decision "almost dangerous" because it "does away with the opportunity for" anyone who owns a product made by a trademark holder from having that product repaired by someone other than the original manufacturer. Britton says the court's opinion suggests that "anybody who makes a repair that may cause a change to a product—which of course is every repair ever made—runs the risk of being sued."
Britton also dismisses Karl Storz's assertion that an endoscope rebuilt by Surgi-Tech is no longer a Karl Storz product. "To me that's a red herring," he says. He believes the real issue at the core of this case is consumer choice—or a lack thereof. "I don't see how Storz gets the right to tell a doctor or a hospital that owns a scope that they are legally precluded from having it changed by anybody other than Storz," he says.
"In this case," Britton says, "we're not talking about my client going out and making a repair, then selling the scope on the market to some unsuspecting dope." Instead, Britton argues, the hospital itself sends the scope off to a company for repairs. "They know what's getting fixed, they know what's getting changed—and they get their own scope back," he says.
Lynn Perry, a partner at the intellectual property law firm Townsend and Townsend and Crew LLP (San Francisco), says she believes the court's opinion makes sense. In the hospital setting, she says, surgeons are the "downstream users who don't know who rebuilt a particular device." And though she is not involved in the case, she agrees with the court. "A decision the other way would be much more dangerous."
Copyright ©2002 Medical Device & Diagnostic Industry
