The Legal & Regulatory Environment within the U.S. Power Tool Industry

The U.S. power tool industry covers the manufacturing, marketing, distribution and sale of power tools to professional tradesmen, hardware stores and the home user. Power tools are defined as those that are driven by Alternating Current (AC)

or Direct Current (DC) supplies (electricity), pneumatic (air), and gasoline or some other type of fuel power. Some examples of these tools include: gas saws, rotary hammers, corded and cordless drills, routers, sanders, grinders, etc.

Over the past ten years the industry as well as the two market leaders, Black & Decker, Inc. and Danaher Corporation grossing close to $15 billion worldwide in 2005, has experienced a cyclical change in the demand of these products. This is largely due to the fact that these products are directly tied to all types of building construction, renovations and “Do It Yourself” (DIY) projects, which in turn are driven by wider market forces and the overall economy. However, new innovation technology like battery power and a lift in the housing portion of the market have helped companies in the power tool industry to demonstrate strong financial performance even in the wake of a stable or shrinking economy.1
With regards to the legal and regulatory environment in the power tool industry, there are a few key players. First being OSHA (Occupational Safety & Health Administration), which is the main federal agency charged with the enforcement of safety and health legislation. Others include the EPA (Environmental Protection Agency), the United States Consumer Product Safety Commission and finally the Specialty Tools & Fasteners Distributors Association (STAFDA), all which help monitor are regulate other specific laws and regulations with in the industry.

The purpose of this paper is to explore the legal and regulatory environment in the power tool industry. Section I will present an overview of the regulatory environment. Section II will continue to outline and discuss into two legal issues with specific examples from cases involving Black & Decker, Inc. The first (Section IIa) will discuss product liability and a specific issue with a consumer who bought a pneumatic nail gun which malfunctioned, causing him to lose the sight in one eye. The second (Section IIb) discusses a specific a case in which Black & Decker, Inc. was suing one of its largest competitors Bosch Tool Corporation for patent infringements in regarding their job site battery charger/radio product. I chose these two issues as they were high profile and widely publicized.

The paper concludes that there are numerous legal guardrails within the power tool industry. These laws and regulations are in place to protect industry employees and consumers and ensure that companies involved in the manufacture, sale and distribution of power tools are performing such activities with the safety of employees and consumers and environmental considerations at the top of the agenda. Mature compliance initiatives and top-level management focus on legal and regulatory issues not only helps companies stay within the bounds of the law and avoid penalties but also assists them in gaining competitive advantage through market and consumer confidence and well managed, efficient internal processes. Legal and regulatory requirements are here to stay and those currently impacting the power tools industry are no exception. The power tools industry can continue to expect a similar level of regulation in the future, given the nature and use of the products produced by its companies and their recent adherence to requirements.

Section I: Legal & Regulatory Environments
There are few major industry associations that help set most of the rules and regulations within the industry.

The first one is OSHA (Occupational Safety & Health Administration), which sets the industry standards, agency policies, rules, and regulations by which all companies that employ workers that use power tools and manufactures must follow. The portion of the standards and regulations that pertain to power tools industry and their manufactures is found in Part 1926.302, titled “Power-operated Hand Tools”, within the Safety and Health Regulations for Construction. In this section, there are many regulations surrounding tools either powered by electricity, air, or fuel, how they are manufactured and then operated in the work place. For example, Electric power operated tools need to be of the approved double-insulated type or grounded in accordance with UL regulations. Failure to comply with these regulations can result financial and other penalties.

Another contributor to the many laws and regulations within this industry is the Environmental Protection Agency. The EPA works to develop and enforce regulations that implement environmental laws enacted by Congress and is responsible for researching and setting national standards as well as monitoring and enforcing compliance. Compliance with EPA regulations is particularly relevant for the power tool industry in the context of the disposal and manufacture of a variety of cordless fuel cells. Where national standards are not met, the EPA can issue sanctions and take other steps to assist the states reaching the desired levels of environmental quality.

The third significant regulatory body is the United States Consumer Product Safety Commission. One of the CPSC’s main objectives is to protect the public from unreasonable risks of serious injury or death from more than 15,000 types of consumer products, including power tools. It is responsible for working with manufacturers to ensure sufficiently detailed and timely information is released to the public regarding product recalls and or making arrangements for their repair. The CPSC is also primarily responsible for conducting research on potential product hazards and informing and educating consumers through the various types of media.
The last major association is the Specialty Tools & Fasteners Distributors Association (STAFDA). STAFDA is a not-for-profit educational trade association comprised of distributors, manufacturers, and representative agents of construction, industrial, and related products. While STAFDA is not a regulation setting organization, one of its major purposes is to advise its members of legislation, regulations and lobbying efforts which affect the overall power tool industry and therefore it has an impact on overall compliance to legal and regulatory requirements within the industry.

Section IIa: Exploration into a Product Liability Case

As outlined in Section I, OSHA and CPSC regulate the manufacture and safe use of power tools. The first legal example to be discussed in this paper issue was a product liability case between a customer and a power tool manufacturer, Black & Decker, Inc. In this case the local state, Product Liability Act which was help drafted from the CPSC, defended the manufacturer. The case was originally held in a Louisiana district court and was subsequently appealed and went to the United States Fifth Circuit Court of Appeals. The outcome was a significant product liability victory for Black & Decker, Inc.

The case involved the plaintiff, Kenneth B. White, who while using a pneumatic brad nailer, was blinded in one eye after a nail ricocheted off of the work surface. The district court granted “Black & Decker’s summary judgment motion on the ground that the plaintiff did not satisfy his burden of proving the “risk/utility” element of a defective design claim under the Louisiana Product Liability Act”, which states that, “A manufacturer can be held liable to a claimant for damage proximately caused by an unreasonably dangerous characteristic of a product when such damage arose from a reasonably anticipated use of the product”.

The plaintiff, an experienced carpenter, was injured while using a DEWALT Heavy Duty, 18 gauge Brad Nailer. He was not wearing his safety glasses at the time of the accident. The nail gun came equipped with two types of trigger, a “bump fire” trigger and a sequential fire trigger, and was sold with the “bump fire” trigger pre-installed. Switching trigger mechanisms was, however, simple to do, and the alternative “sequential trigger” was attached to the product in a plastic bag with clear instructions on how to switch the trigger mechanism. The plaintiff claimed that the nail gun “double fired,” causing the second-fired nail to ricochet and strike him in the eye. The plaintiff argued at the district court that pneumatic nail guns with “bump fire” triggers are unreasonably dangerous because of the potential for “double fires” and that the accident would not have occurred if a sequential trigger had been used.

The plaintiff filed suit against Black & Decker under the Louisiana Products Liability Act, and claimed that the nail gun was “unreasonably dangerous” in design. Black & Decker “moved for summary judgment” on three different grounds. First, the plaintiff’s use of the nail gun without wearing safety glasses provided with the product was not a “reasonably anticipated use” since the plaintiff was an experienced carpenter who testified he was aware of the risk of eye injury when using nail guns. Secondly, the proposed “alternative design” or sequential trigger that was preferred by the plaintiff was, in fact, provided with the product even though it was not pre-installed. Lastly, the plaintiff could not come forward with competent evidence to satisfy the “risk/utility” standard of a defective design claim.5 The district court granted Black & Decker’s judgment because it found that the plaintiff did not present sufficient evidence to support a jury finding that the “likelihood” the product’s design would cause the plaintiff’s injury and the seriousness of that injury outweighed the adverse effect from the design of the product. The court also found that the risk of injury with this particular product was lower than it was with other types of nail guns because it was designed to fire brad, very small finishing nails and, thus had a much lower recoil force and was less likely to double fire than larger framing nail guns. The court concluded that the risk of injury could also have been avoided because the product manual and labels warned about the dangers of double fire, warned about the risk of ricochet, and provided safety glasses with the product and that the plaintiff did not present adequate evidence to make an obvious showing that the proposed “alternative design” would not excessively impact the function of the nail gun.

On appeal, the United States Fifth Circuit Court of Appeals essentially agreed with all of the district court’s findings and conclusions and dismissed the case.

Section IIb: Exploration into a Patent Case
The second legal issue is one regarding patent law. A patent is issued for the protection of an invention, product, process, or machine and is the grant of a property right to the inventor, issued by the United States Patent and Trademark Office. The inventor also may have to comply with other laws and regulations with in the industry to make use of the claimed invention.7 The term or length of a patent is 20 years from the date on which the application for the patent was filed. Once a patent is issued it excludes others from “making, using, offering for sale, or selling” the invention in or brining it into the United States. United States patent grants are effective only within the United States, its territories, and its possessions. If a patent is issued and is then used without permission from the inventor, the holder of the patent may bring an infringement suit to the federal courts. A successful action may result in an injunction prohibiting further use of the patented item by the infringer and the inventor can also be awarded damages.

Patents provide incentives for economically efficient research and development. Many large modern corporations have annual R&D budgets of hundreds of millions of dollars. Without patent protection, R&D spending would be significantly less or eliminated altogether, limiting the possibility of technological advances. Corporations would be much more conservative about the R&D investments they made, as third parties would be free to exploit any developments.

Additionally, in many industries, especially those with high fixed costs and either low marginal costs or low reverse engineering costs, for example the power tool industry, once an invention exists, the cost of commercialization, testing, tooling up a factory, developing a market, etc., is far more than the initial conception cost.

A case heard by the United States District Court in Illinois, including two companies from the power tools industry. Black & Decker, Inc., the plaintiff, filed multiple claims against the Robert Bosch Tool Corporation for infringing on a various patents involving Bosch’s Power Box. On September 22nd, 2006, a verdict by the jury and the court found that all claims by Black & Decker, Inc relating to patent infringement by the defendant were valid. The ruling concluded that the defendant, Bosch, must stop selling, making, using, offering, and importing the Power Box in the United States, effective immediately.

The trial ran from September, 13th through September 26th. The patents that Black & Decker stated that were infringed were claims 1, 2, 6, 7, and 10 of the United States Patent No. 6,308,059, and claim 1 of the United States Patent No. 6,788,925, both titled “Ruggedized Tradesworkers Radio”. These patents included specifics of a radio charger having an AC powered DC power supply design, an AC powered-DC charger design, a removable DC power supply design and or a power conversion circuit design and shown with specific electrical schematics. After hearing the case the jury found that Bosch had infringed on the two patents stated above, and that Black & Decker will suffer irreparable harm if an injection is not entered. Additionally they found that no adequate remedy at law exists and that a balance of the relevant hardships is in Black & Decker’s favor. Therefore Robert Bosch Tool Corporation, its officers, agents, servants, employees, affiliates, successors, and assigns were then restrained from making, using, selling, offering, or importing the Bosch Power Box, model number PB-10 and or PB-10-CD. There was an additional note that the updated version of the Power Box, PB-10 Advanced, was excluded from this case; however it was part of another lawsuit that was to be heard in the same court.

Conclusion
In conclusion, there are numerous legal guardrails that impact companies in the power tool industry, not just specific industry regulation but also wider laws and regulations at a state and federal level.
The power tool industry is heavily consumer driven, the reputation damage and loss of consumer confidence associated with a successful law suit or infringement of laws or regulations is a risk that many companies in the industry cannot afford to take. Organizations and regulatory bodies such as the OSHA and CPSC provide the legal and regulatory framework within which the power tool industry must operate, while STAFDA provide guidance and assistance for the companies in the industry to help them understand and address the various requirements. There is no doubt that increased legal and regulatory requirements force companies to change the way in which they operate to ensure achieved compliance. Often these internal compliance initiatives result in more arduous internal processes and controls and increased costs but, if implemented properly, these can help a company streamline its operations through process re-engineering and gain competitive advantage whilst also avoiding the financial and reputation penalties of non-compliance.

Given the nature and use of power tools and the industry’s recent history of adherence to requirements, the industry can continue to expect a similar level of regulation in the future.

Endnotes
1 “Handtools.” Encyclopedia of American Industries. Online Edition. Thomson Gale, 2006. Reproduced in Business and Company Resource Center. Farmington Hills, Mich.:Gale Group. 2006. http://galenet.galegroup.com.ezp.lndlibrary.org/servlet/BCRC (retrieved November 22, 2006)

2 “Standards” United States Department of Labor, Occupational Safety & Health Administration website. 200 Constitution Avenue, NW, Washington, DC 20210 http://www.osha.gov (retrieved December 17, 2006)

3 United States Environmental Protection Agency, Ariel Rios Building, 1200 Pennsylvania Avenue, N.W. Washington, DC 20460. http://www.epa.gov/ (retrieved December 18, 2006)

4 United States Consumer Product Safety Commission, 4330 East West Highway, Bethesda, MD 20814. http://www.cpsc.gov/ (retrieved December 18, 2006)

5 Kenneth B. White vs. Black & Decker, Inc., US Court of Appeals for the Fifth Circuit, (Case no. 04-30710) Filed March 11, 2005. http://www.ca5.uscourts.gov:8081/isysquery/irl140e/2/doc (retrieved December 18, 2006)

6 “Louisiana Products Liability Act”, Louisiana Products Liability Law.
http://radio.weblogs.com/0119806/stories/2003/02/13/louisianaProductsLiabilityLaw.html (retrieved December 18, 2006)
Endnotes continued
7 “Patents” United States Patent and Trademark Office website. Office of Public Affairs
U.S. Patent and Trademark Office, P. O. Box 1450 Alexandria, VA 22313-1450 http://www.uspto.gov/index.html (retrieved December 19, 2006)

8 “Patent”, Wikipedia: The free encyclopedia. (2006, February 13). FL: Wikipedia Foundation, Inc. http://en.wikipedia.org/wiki/Patent (retrieved December 20, 2006)

9 Black & Decker, Inc. vs. Robert Bosch Tool Corporation, US District Court, (Case No. 1:04-cv-07955) (Filed November 11, 2006. retrieved via email December 19, 2006)