Pending State Housing Laws: Expedited Approval of Post-Entitlement Permits
Various state housing bills are currently making their way through the California State Legislature that are expected to benefit mixed-income multifamily housing developers. The following summaries reflect the status of the pending legislation as of June 6, 2025. Future amendments are expected. Important upcoming dates in the legislative process include:
September 12, 2025 – final date for the Legislature to pass bills.
October 12, 2025 – final date for the Governor to sign or veto passed bills.
January 1, 2026 – default effective date for approved bills (unless otherwise specified).
BACKGROUND
As explained in our prior legal alert, existing law (AB 2234) requires local agencies to process post-entitlement phase permits (defined below) for housing development projects (as defined) within specified timeframes. A local agency must determine whether an application for a post-entitlement phase permit application is complete within 15 days of receiving the application. The local agency must complete its review within 30 to 60 business days after the application is deemed complete (depending on the size of the project) and either: (i) provide a full set of comments with a comprehensive request for revisions; or (ii) approve the permit application within that timeframe (subject to specified exceptions). AB 2234 provides that any failure to do so is a violation of the Housing Accountability Act (Gov. Code § 65589.5) (“HAA”).
AB 1114 (Haney) and AB 281 (Grayson) amended AB 2234, effective January 1, 2024. AB 1114 extended these required review timeframes to all post-entitlement building permits, whether discretionary or nondiscretionary. This clarification is important because certain local agencies, such as the City and County of San Francisco, consider all building permits to be discretionary. AB 281 extended the required review timeframe to post-entitlement phase permits related to service from a special district, as defined in Gov. Code § 56036, such as a water district.
Under existing law, “post-entitlement phase permit” means a permit issued by a local agency (defined to mean a city, county or city and county) after the entitlements process has been completed to begin construction of a project that is at least two-thirds residential and includes, but is not limited to: (i) building permits; (ii) permits for minor or standard off-site improvements; (iii) demolition permits; and (iv) permits for minor or standard excavation and grading.
ASSEMBLY BILL 660: DEADLINES FOR LOCAL AGENCIES
AB 660 (Wilson, Ransom, Blanca Rubio, Wicks, and Haney) would amend the post-entitlement phase permit review and approval process for qualifying housing development projects (as defined) under Gov. Code §§ 65913.3 and 65913.3.1.
As currently proposed, AB 660 would:
Provide that if a local agency fails to determine whether a post-entitlement phase permit application complies with applicable permit standards within 30 to 60 business days after the application is deemed complete (depending on the size of the project), the applicant may retain a licensed professional engineer or architect to check the plans and specifications for compliance with applicable permit standards (at the applicant’s own expense).
Provide that a post-entitlement phase permit includes plan checking and building inspection for the issuance of a building permit (in addition to all required interdepartmental review) and prohibit local agencies from requiring or requesting more than two plan check and specification reviews in connection with a building permit application.
Remove the tolling provision related to review by outside entities.
Prohibit local agencies from requesting or requiring “any action or inaction as a result of a building inspection undertaken to assess compliance with applicable building permit standards that would represent a deviation from a previously approved building plan or similar approval for the building permit” (unless specified findings are made based on substantial evidence in the record related to, e.g., a specific adverse impact on the public health and safety).
Require a final written determination on an administrative appeal of a local agency’s decision on a post-entitlement phase permit (where applicable) to be made within 15 to 30 business days after receipt of the applicant’s written appeal (depending on the size of the project) versus 60 to 90 business days under existing law. All administrative appeals would be heard by the local agency’s governing body (versus the planning commission, or both, at the applicant’s option, under existing law).
Provide that if a decision on appeal is not made within that timeframe, if the appeal is denied, or an appeals process is not provided as required, the applicant may seek a writ of mandate to compel approval of the post-entitlement phase permit. That writ “shall be granted if there is substantial evidence in the record that a reasonable person could find that the application is complete and compliant with applicable standards.”
AB 660 was passed by the Assembly on June 4, 2025, and has been ordered to the Senate.
ASSEMBLY BILL 1026: DEADLINES FOR ELECTRICAL CORPORATIONS
AB 1026 (Wilson, Haney, and Wicks) would newly impose deadlines on the review and approval of post-entitlement phase permits for housing development projects (as defined) by electrical corporations (as defined in Public Utilities Code § 218).
As currently proposed, AB 1026 would:
Revise the definition of local agency to include electrical corporations, thereby requiring such entities to comply with requirements relating to post-entitlement phase permits.
Revise the definition of post-entitlement phase permit to include permits required by utilities that are not owned and operated by a local agency.
AB 1026 was passed by the Assembly on May 29, 2025, and has been ordered to the Senate.
ASSEMBLY BILL 1308: DEADLINES FOR BUILDING DEPARTMENTS
AB 1308 (Hoover and Wicks) would apply to building permits for new residential construction, a residential addition, or a residential remodel where the project: (i) includes between one to ten dwelling units; and (ii) contains no floors used for human occupancy located more than 40 feet above ground level.
As currently proposed, AB 1308 would:
Require building departments to provide an estimated timeframe for completion of inspection of the permitted work under a qualifying residential building permit. If that timeframe exceeds 30 days from receipt of a notice of completion — or the building department has not conducted the inspection within 30 days – the applicant may retain a private professional provider (as defined) to inspect the permitted work (at the applicant’s own expense).
Incentivize building departments to conduct an inspection of permitted work within 60 days of receipt of a notice of completion. If that deadline is not met, the permittee would be entitled to reimbursement of any permit fees paid (unless the inspection was performed by a private professional provider).
Require building departments to respond to the inspection report (as specified) from the private professional provider within 14 days. If the permitted work is compliant (as specified), the building department must issue a certificate of occupancy (or equivalent final approval) within that timeframe.
AB 1308 was passed by the Assembly on May 23, 2025, and has been ordered to the Senate.
SENATE BILL 328: DEADLINES FOR DEPARTMENT OF TOXIC SUBSTANCES CONTROL
SB 328 (Grayson) would impose deadlines on the Department of Toxic Substances Control (Department) for the review and approval of post-entitlement phase permits for housing development projects (as defined) that a local agency has deemed complete pursuant to AB 2234 (Gov. Code § 65913.3(b)) and that requires a response from the Department. If SB 328 is passed by the Legislature and approved by the Governor, the deadlines below would go into effect on July 1, 2028.
As currently proposed, SB 328 would:
Require the Department to provide written notice to a request regarding subsequent actions in the Department’s post-entitlement phase permit review process, including whether any additional information is required to review the request, within a specified time period.
Upon receipt of a request, the Department shall respond within: (i) 60 business days of receipt of the request for a housing development project with 25 units or less; or (ii) 120 business days for a housing development project with 26 or more units.
Require the Department to comply with the applicable 60 or 120-day time period in all responses to requests for additional information from the requestor.
SB 328 was passed by the Senate on May 29, 2025, and has been routed to the Assembly.
MPCA Will Postpone January 1, 2026, Reporting Deadline On Products Containing Intentionally Added PFAS
This week the Minnesota Pollution Control Agency (MPCA) posted Parts One and Two of its response to pre-hearing and hearing comments. Part One states that 67 commenters submitted written comments on the April 2025 proposed rule. During the May 22, 2025, hearing on the proposed rule, 11 stakeholders presented verbal testimony. According to the document, MPCA has reviewed the comments and “has identified some parts of the proposed rule that require clarification, or that the agency would consider minor, non-substantive changes to.” MPCA “does not believe that these potential changes will result in rules that are ‘substantially different.’” Part Two of the response to comments notes that the Commissioner of the Pollution Control Agency “has clear authority to extend the deadline if more time is needed for manufacturers to comply.” According to the document, MPCA “has decided outside of the rulemaking process to issue an extension to the initial due date to ensure program success.” MPCA will provide more information on the extension of the January 1, 2026, reporting deadline “in the near future.” MPCA will respond to comments received during the post-hearing comment period in a future rebuttal document. More information on the proposed rule and May 2025 hearing is available in our memoranda.
All Things Chemical: First Six Months of the Trump Administration — A Conversation with James V. Aidala [Podcast]
This week, I was pleased to welcome back to the studio Jim Aidala, Senior Government Affairs Consultant at B&C and its consulting affiliate, The Acta Group (Acta®), to discuss the first six months of the Trump Administration. We have all been trying to take in and process the many Executive Orders, Presidential Directives, and other developments of all sorts coming out of the White House at a head-spinning pace, and assess their impacts on the industrial and agricultural chemical community and federal workforce. Jim is a keen observer of Presidential and executive level administrative action, having served as the Assistant Administrator of Toxics at The U.S. Environmental Protection Agency (EPA) and in other senior EPA leadership positions. We discuss Presidential actions, their impact on the EPA workforce, EPA actions to date, and a bit about the Make America Healthy Again (MAHA) Report’s “Make Our Children Healthy Again” Assessment and its impact on the pesticide community.
EPA Signals Approval of Texas’ Class VI Injection Well Primacy: Streamlining Carbon Capture and Climate Action
In a significant move for environmental policy and energy innovation, the U.S. Environmental Protection Agency (EPA) has proposed to approve Texas’ application to administer its own Class VI underground injection well program. This decision, announced on June 9, 2025, marks a pivotal step in accelerating carbon capture and sequestration (CCS) efforts across the state and potentially the nation.[1]
Results of the EPA Announcement
The EPA’s proposal grants Texas the authority to issue permits for Class VI wells—specialized underground injection wells used to store carbon dioxide (CO2) deep underground. These wells are a cornerstone of CCS technology, which captures CO2 emissions from industrial sources and power plants and stores the CO2 underground, preventing it from entering the atmosphere.
Under the Safe Drinking Water Act (SDWA), the EPA typically oversees the permitting of these wells. However, states can apply for “primacy,” or the right to manage the permitting process themselves, provided they meet stringent federal standards. Texas’ application, led by the Texas Railroad Commission, has now received the EPA’s preliminary approval, pending a final rule.
Streamlining Permits and Boosting Investor Confidence
Once finalized, one of the most immediate benefits of this decision is the expected reduction in permitting times for CCS projects. Under federal oversight, the permitting process for Class VI wells has often been criticized for being slow and cumbersome, sometimes taking several years. By shifting control to Texas, which has decades of experience managing other classes of underground injection wells within their state, the process is expected to become significantly more efficient.
This streamlining is crucial for attracting private investment. Carbon capture projects are capital-intensive and require long-term planning. With Texas now poised to manage its own Class VI program, companies and investors can expect faster approvals, more accurate timelines, and more predictable regulatory outcomes.
A Catalyst for Carbon Capture and Sequestration?
The EPA’s move may not be just a bureaucratic shift—it can be a catalyst for broader adoption of CCS technologies and greater utilization of Texas well space. Companies engaging in CSS may qualify for tax credits, with benefits ranging from $17 to $180 per metric ton of CO2 captured.[2] However, investors may still want to proceed with caution: while the administration has taken steps to ease permitting and regulatory barriers, the 2026 federal budget includes cuts to several CCS-related funding programs, potentially limiting the financial viability of some projects.[3]
Texas, as a leader in both energy production and geological storage potential, is uniquely positioned to scale up CCS. Much of the state’s vast underground formations, particularly saline aquifers and depleted oil and gas reservoirs, offer ideal conditions for long-term CO2 storage. By enabling Texas to take the reins, the EPA may be clearing a path for a new wave of potential CCS projects. This could include retrofitting existing power plants, supporting industrial decarbonization, and even facilitating direct air capture (DAC) technologies that remove CO2 directly from the atmosphere. Still, the long-term success of these efforts may hinge on whether financial incentives can keep pace with the regulatory momentum.
Cooperative Federalism in Action
The EPA’s decision also reflects a broader philosophy of “cooperative federalism,” where federal and state governments work together to achieve shared goals. Administrator Zeldin framed the move as a return to this principle, emphasizing that states like Texas are best equipped to manage their own environmental programs.
This approach has garnered bipartisan support in Texas, with both federal and state officials applauding the decision. It also sets a precedent for other states seeking primacy over Class VI wells, potentially accelerating CCS deployment nationwide.
Looking Ahead
While the EPA’s proposal is not yet final, it represents a major milestone. A public comment period will follow, after which the agency will issue a final rule. If approved, Texas will join the growing list of states with full authority over Class VI well permitting, similar to the state’s management of existing Class I, II, III, IV, and V wells.
This development may spur rapid adoption of CCS technologies, not just in Texas but across the U.S. as the EPA continues to delegate authority to other states. Such changes promise faster project timelines, increased investor confidence, and a stronger foundation for meaningful climate action.
Footnotes
[1] https://www.epa.gov/newsreleases/epa-proposes-approve-texas-application-administer-class-vi-underground-injection-well
[2] https://www.rrc.texas.gov/about-us/faqs/oil-gas-faq/class-vi-wells-in-texas/
[3] https://www.whitehouse.gov/wp-content/uploads/2025/05/Ending-the-Green-New-Scam-Fact-Sheet.pdf
FDA Opens Public Comment Period for Chemical Post-Market Assessment Regulation
On June 18, 2025, FDA announced its proposed “method for post-market assessments of chemicals in the food supply.” This “Post-market Assessment Prioritization Tool” will give chemicals an overall score that will be used to rank each post-market chemical assessment in order of priority. We previously reported on FDA’s proposed systematic process for post-market assessment of chemicals in foods, which had its comment period extended to January 21, 2025.
According to FDA’s proposed method, a chemical’s overall score will be calculated from a Multi-Criteria Decision Analysis (MCDA) which will use four Public Health Criteria and three Other Decisional Criteria. The Public Health Criteria are toxicity, change in exposure, effects on a susceptible subpopulation (e.g., children), and availability of new scientific information. The Other Decisional Criteria are external stakeholder attention, other government decisions, and public confidence in the U.S. food supply.
The total score of the Public Health Criteria is given equal weight to that of the Other Decision Criteria, as they both get a score of 1-9 and then the two are averaged to calculate the chemical’s overall score. FDA’s press release points to how the Environmental Protection Agency (EPA) similarly prioritizes certain substances for risk evaluation, though notably the EPA criteria are already specified in the Toxic Substances Control Act (TSCA) § 2605(b)(1)(B) and are “without consideration of costs or other nonrisk factors.”
The proposed prioritization method will be open to public comments until July 18, 2025 under Docket No. FDA-2025-N-1733. In a departure from past practice, there is no Federal Register notice announcing the establishment of this docket for receipt of public comments, only a link in FDA’s announcement to the docket on www.regulations.gov. By way of contrast, see FDA’s August 2024 Federal Register notice announcing a public meeting and soliciting public comment on FDA’s Post-Market Assessment of Chemicals in Food (89 Fed. Reg. 65633, Aug. 12, 2024).
California Delays NOP Requirements for Compostable Products
Earlier this month, the California Department of Resources Recycling and Recovery (CalRecycle) sent a letter to the Biodegradable Products Institute (BPI) that effectively delays, until June 30, 2027, a key requirement for “compostable” and “home compostable” products set to take effect next year. California’s AB 1201 required that after January 1, 2026, products labeled “compostable” or “home compostable” must not only pass tests specified under the law but must also be “an allowable agricultural organic input under the requirements of the United States Department of Agriculture [(USDA)] National Organic Program [(NOP)].” Although this requirement applies to any material that meets AB 1201’s broad definition of a “product,” the law principally affects plastic and plastic-coated products. To assure that products meeting California’s current compostability standards can continue to be labeled “compostable” or “home compostable” in California, BPI submitted a petition in 2023 to the National Organic Standards Board (NOSB) seeking recognition for compostable plastic and plastic-coated products under the USDA NOP. That petition is still pending. CalRecycle’s letter to BPI grants an extension for “products that contain synthetic substances that otherwise satisfy all requirements for lawfully being labeled ‘compostable,’ including the requirement that products meet an ASTM standard specification pursuant to section 42357(a)(1). This extension shall expire as of June 30, 2027.” Absent this action, many companies would have had to remove current “compostable” labels for their products at a time when other laws – notably SB 54, California’s Extended Producer Responsibility (EPR) law for packaging – require that products meet source reduction, recyclability, or compostability requirements by specific deadlines.
CalRecycle’s extension allows plastic and plastic-coated products that currently meet all requirements for being labeled “compostable” or “home compostable” in California, save for formal recognition by the USDA NOP, to continue to be sold in that state without changes to labels until June 30, 2027. After that date, companies must revise labeling for their “compostable” and “home compostable” products sold in California that are not listed as an allowable agricultural organic input under the requirements of the USDA NOP, unless CalRecycle grants a further exemption. On this point, CalRecycle explained that before June 30, 2027:
CalRecycle will evaluate whether to renew exemptions for products that would become compliant with PRC section 42357(g)(1)(B) pursuant to regulations then under consideration. CalRecycle may determine regulations to be under consideration if there is a pending NOSB rulemaking recommendation to the NOP, the NOP has decided to initiate rulemaking but has not yet done so, or the rulemaking process is underway. A renewed extension shall continue while such regulations remain under consideration but shall not extend beyond January 1, 2031.
CalRecycle’s action is good news for companies selling covered compostable products in California. However, the compostability legal landscape remains fractured, with some different – and inconsistent – state laws. Although other states have not adopted California’s added NOP obligations, states like Washington, Colorado, and others have their own restrictions for labeling and marking “compostable” products. CalRecycle’s 18-month extension is a positive step for many companies who have invested in compostable and home compostable products. Nevertheless, businesses offering compostable packaging and products nationally must be familiar with all applicable compostability requirements in developing their labeling and marketing materials.
Supreme Court Provides Crucial Guidance on Venue for Clean Air Act Challenges
On June 18, 2025, the Supreme Court decided Oklahoma v. EPA and EPA v. Calumet, a pair of cases that focus on the Clean Air Act’s (CAA or Act) venue selection provisions.
The judicial review provisions of the Act send review of “nationally applicable” EPA actions to the DC Circuit and review of “locally or regionally applicable” EPA actions to the regional circuits. See 42 U.S.C. § 7607(b)(1). However, in an exception to that rule, venue may lie in the DC Circuit for regionally applicable actions that are “based on a determination of nationwide scope or effect.” In the Court’s two recent decisions, it explained that the CAA venue analysis called for a two-step inquiry. First, courts must decide whether the EPA action is nationally applicable or only locally or regionally applicable; if nationally applicable, the case belongs in the DC Circuit. Second, if locally or regionally applicable, courts must decide whether the case falls within the exception for “nationwide scope or effect” to override the default rule of regional circuit review.
In Oklahoma, the Court held that EPA’s disapproval of the Oklahoma and Utah state implementation plans (SIPs) belonged in a regional circuit, not the DC Circuit. At the first step, the Court found the SIP disapprovals were “[c]learly” “locally or regionally applicable.” The Court held that the disapproval of a SIP by its nature (and by statute) is always a locally or regionally applicable action. EPA cannot change that by grouping multiple state-specific disapprovals into one Federal Register notice. At the second step, the Court set forth a high standard that EPA must clear in order to show that a locally or regionally applicable action is based on a determination of nationwide scope or effect: That determination must lie at the “core” of EPA’s decision, i.e., it must serve as the most important part of EPA’s rationale. EPA receives no deference on this issue. If it is “debatable” whether such a determination lay at the core of EPA’s rationale, then the exception does not apply. In Oklahoma, the Court explained that the SIP disapprovals were based on a variety of state-specific facts and that EPA’s various nationwide determinations were not the primary reasons for disapproving the SIPs. Thus, the exception did not apply, and the litigation belonged in the Tenth, not DC, Circuit.
In Calumet, the Court reached a different conclusion regarding challenges to exemptions under the CAA’s renewable fuels program for fuel refineries. Although EPA’s denial of exemption petitions was “locally applicable,” the Court concluded that EPA had relied on national legal and economic determinations that applied “generically to all refineries, regardless of their geographic location.” Because those nationwide determinations provided the basis for denying the individual exemption requests, they lay at the core of EPA’s action and thus triggered the exemption to bring venue to the DC Circuit.
Together, these decisions clarify the line between national and local or regional EPA actions for purposes of venue under the CAA. Oklahoma suggests that actions grounded in state-specific facts (like SIP disapprovals) belong in regional circuits, even if decided in omnibus fashion or using a shared analytical framework. Calumet shows that when EPA applies a uniform national rationale not grounded in state- or region-specific considerations, challenges belong in the DC Circuit.
The Oklahoma decision will be particularly helpful in clarifying proper venue in other cases involving state plans. For example, under the current administration, EPA is proposing to approve state plans for “reasonable progress” on visibility improvement during the second planning period. Venue for any challenges to those EPA approvals will presumptively lie in the local circuits.
Foley Automotive Update June 26, 2025
Foley is here to help you through all aspects of rethinking your long-term business strategies, investments, partnerships, and technology. Contact the authors, your Foley relationship partner, or our Automotive Team to discuss and learn more.
Trade and Tariff Policies
Foley & Lardner provided an update for multinational companies to mitigate risks posed by the Trump administration’s focus on drug cartels and transnational criminal organizations (TCOs).
Mexico will impose an Export Notice requirement for five tariff lines that include certain mechanical and electrical machinery, according to an update from Foley & Lardner.
A Section 232 investigation into imports of semiconductors and semiconductor manufacturing equipment that may result in new import tariffs prompted widespread concern from automakers and other stakeholders in a review of public comments featured in Bloomberg. The Commerce Department did not provide an update on the expected outcome of the investigation.
President Trump on June 12 stated he may raise automotive tariffs “in the not-too-distant future. The higher you go, the more likely it is they build a plant here.”
The U.S. Supreme Court rejected a request from two family-owned businesses to expedite their challenge to President Trump’s broad “reciprocal” tariffs. A federal appeals court had ruled in a separate case that the tariffs can remain in effect at least until a hearing in late July.
Ford and other automakers are still experiencing challenges obtaining adequate supplies of certain rare earth magnets two weeks after the announcement of a U.S.–China trade deal.
The Trump administration’s attention to the U.S. auto trade deficit with Japan is one of the key issues that have impeded that nation’s trade agreement negotiations.
Automotive Key Developments
Automotive News released its annual ranking of the top 100 global parts suppliers.
U.S. new light-vehicle sales in June are projected to increase 2.5% year-over-year to reach a SAAR of 15 million units, according to a joint forecast from J.D. Power and GlobalData.
A draft of the “big, beautiful” budget and tax bill released by the Senate Finance Committee on June 16 would end EV tax credits for all automakers 180 days after bill passage.
California and 10 other states sued the federal government on June 12 over Congressional Resolutions that revoked Clean Air Act waivers which had allowed the Golden State to establish vehicle emission standards that were more stringent than federal requirements. The waivers had also facilitated a California program that required increasing percentages of zero-emission vehicle sales in the state over the next decade.
California Governor Gavin Newsom signed an executive order on June 12 reaffirming the state’s “commitment to accelerate the deployment of zero-emission technologies.”
The U.S. Supreme Court on June 20 ruled that fuel producers have standing to sue over California’s vehicle emissions standards.
A Seattle federal judge on June 24 issued a preliminary injunction blocking the Trump administration from withholding funds for EV charging infrastructure projects in certain states, but stayed the order to allow time for an appeal.
The National Highway Traffic Safety Administration (NHTSA) plans to streamline reviews of automakers’ exemption requests to deploy self-driving vehicles without certain required human controls such as steering wheels or brake pedals.
The Alliance for Automotive Innovation expressed concernsover risks to vehicles’ wireless safety features resulting from provisions in the “big, beautiful” bill that may require the Federal Communications Commission (FCC) to auction federal spectrum rights in the years ahead. Features at risk of losing functionality may include remote parking, hands-free trunk release, and anti-theft capabilities, as well as certain systems to prevent collisions.
OEMs/Suppliers
Certain ongoing trade challenges experienced by a Japanese supplier to Honda suggest “the true toll of the trade war on the auto sector will be magnitudes more than the billions of dollars forecast” by the top automakers, according to a report in Bloomberg. Japan’s top automakers estimated the Trump administration’s tariffs will cost them over $19 billion.
German automakers incurred approximately €500 million ($576 million) in tariff-related costs in April.
Marelli CEO David Slump cited tariffs “against automotive manufacturers and suppliers” as a key factor in the company’s Chapter 11 bankruptcy filing.
Toyota intends to raise prices on certain vehicles sold in the U.S. by up to $270 per vehicle beginning in July in response to the Trump administration’s tariffs. Ford and Subaru raised vehicle prices by up to $2,000 because of the levies, and Mitsubishi will raise prices on U.S. vehicles by an average of 2.1%.
Consultancy AlixPartners estimated consumers’ new-vehicle prices will increase by nearly $2,000 per vehicle due to tariffs.
A number of parts suppliers are reported to be skeptical of certain Chinese automakers’ promises to adhere to 60-day payment terms. This coincides with concerns over the impact to profit margins and financial risk resulting from ongoing price wars among China’s car companies.
Dana Inc. announced an agreement to sell its off-highway business to Allison Transmission for $2.7 billion. The divestment supports Dana’s goal to reduce the complexity of its business and “become a streamlined light- and commercial-vehicle supplier with traditional and electrified systems.”
Continental announced a partnership with GlobalFoundries to establish an Advanced Electronics and Semiconductor Solutions (AESS) organization to design automotive semiconductors.
Market Trends and Regulatory
The Alliance for Automotive Innovation called for significant reforms to NHTSA, and stated the regulator has impeded automotive industry progress and innovation.
Nippon Steel closed its $14.1 billion acquisition of U.S. Steel after reaching an agreement that will give the U.S. government approval over certain provisions such as job moves, facility closures or future acquisitions.
Exports of Chinese-built vehicles to Brazil are projected to rise by 40% year-over-year to represent approximately 8% of the nation’s total light-vehicle registrations in 2025.
China suspended vehicle trade-in subsidies in certain cities due to funding shortfalls, as well as scrutiny over the prevalence of exporting new zero-mileage cars as “used” to boost sales volumes.
New-vehicle registrations in Europe rose 1.6% YOY in May, but declined 0.6% for the first five months of 2025, according to data from the European Automobile Manufacturers’ Association (ACEA).
Ford will require the majority of its salaried workforce to report to the office four days a week.
A report from a court-appointed monitor concluded that UAW President Shawn Fain unjustly withdrew certain key duties of Secretary-Treasurer Margaret Mock in 2024 after Mock was “falsely accused of misconduct.”
Workers at GM’s plant in San Luis Potosí, Mexico will vote this week on whether to join the National Auto Workers Union (SINTTIA).
Autonomous Technologies and Vehicle Software
Waymo launched driverless rides in parts of Atlanta for Uber passengers on June 24, expanding a partnership that started earlier this year in Austin, Texas. Separately, Waymo applied for a permit to begin autonomous vehicle testing in New York City.
Daimler Truck subsidiary Torc Robotics announced a new $5.6 million engineering center in Ann Arbor, Michigan.
Livonia, Michigan-based Roush Industries was selected to scale upfitting trucks with autonomous driving systems for Kodiak Robotics.
Amazon-owned autonomous vehicle company Zoox opened a plant in Hayward, California that will be capable of producing up to 10,000 robotaxis annually.
China released draft guidance to regulate the export of data generated by cars in the country, including details of scenarios that may require security assessments for companies seeking to transfer data outside the nation.
Volvo and Daimler Truck announced the launch of joint venture Coretura to develop a software-defined vehicle platform for commercial vehicles.
Electric Vehicles and Low-Emissions Technology
BloombergNEF expects battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) to represent 27% of U.S. new light-vehicle sales by 2030, from a previous forecast of 47.5%. The updated analysis eliminated 14 million units from the 2030 sales projection, and assumes California will retain its ability to set its emissions standards.
A report from the Alliance for Automotive Innovation indicates BEVs and PHEVs achieved a 9.6% share of total new light-vehicle sales in the first quarter of 2025, representing a decline of 1.3 percentage points from the fourth quarter of 2024, and a 0.3 percentage point increase YOY.
Cox Automotive estimated new EV sales in May fell 10.7% year-over-year to 103,435 units, representing a 6.9% share of the total U.S. new light-vehicle market. The average transaction price (ATP) for a new EV in May declined 1% YOY to $57,734.
Leases represented nearly 60% of first quarter 2025 new EV sales in the U.S.,up from 36% one year ago, according to data from Experian.
Automotive News provided an update on the status of notable U.S. battery manufacturing investments and projects.
Uber announced an international partnership with C40 Cities to increase access to charging infrastructure in London, Boston and Phoenix. Uber also launched the Electric Vehicle Infrastructure Estimator (EVIE) tool to help cities project EV charging demand from Uber drivers. Uber estimated there are 230,000 EV drivers on its platform globally, and charging access has overtaken vehicle cost as drivers’ top concern.
Ion Storage Systems began small-scale production of solid-state batteries at its factory in Maryland. Solid-state technology is expected to significantly extend batteries’ range and improve charging speeds. However, the technology has a number of challenges to overcome to achieve cost-effective production at scale.
Analysis by Julie Dautermann, Competitive Intelligence Analyst
Mexico Publishes Sustainability Reporting Standards
On May 13, 2024, the Mexican Financial Reporting and Sustainability Standards Board (CINIF) published the Sustainability Reporting Standards (NIS), which took effect Jan. 1, 2025. The NIS require any entities that report their financial statements under Mexican Financial Reporting Standards to include sustainability information in financial statements beginning in 2026 using data from the 2025 fiscal year. This GT Alert summarizes the most relevant aspects of the NIS.
I. Context
In response to the increased environmental and social demands in recent years, and in line with the United Nations’ Sustainable Development Goals (ODS) and the first international sustainability standards, IFRS S1 and S2, issued by the International Sustainability Standards Board (ISSB) May 13, 2024, CINIF issued the first Mexican NIS, NIS A-1, and NIS B-1. The promulgation of these standards corresponds to the first stage of CINIF’s strategy for issuing the NIS.
II. Purpose
The NIS aim to formalize and standardize ESG (Environmental, Social and Governance) information reporting. Specifically, the purpose of NIS-1 is to establish the conceptual framework of the NIS, in line with the conceptual framework of the Financial Reporting Standards (NIF). On the other hand, NIS B-1 establishes the standards for determining the Basic Sustainability Indicators (IBSO) and their disclosure.
III. NIS A-1
Establishes the conceptual framework and general requirements applicable to sustainability information, which are consistent with NIF.
NIS A1 provisions should be applied in conjunction with the detailed requirements provided in NIS B-1.
Defines the characteristics that must be met for sustainability information to demonstrate improvement from previous years’ reporting.
IV. NIS B-1
Establishes the criteria for the identification and disclosure of all IBSOs, which are applicable to all types of entities.
Introduces 30 IBSOs, 21 quantitative and nine qualitative, which must be fully disclosed:
Quantitative indicators
Qualitative indicators
Environmental
Social
Governance
Social-Human capital
Governance
1. Greenhouse gas (GHG) emissions, scope 1
2. GHG emissions, scope 2
3. GHG emissions, scope 3
4. Energy consumption
5. Renewable energy consumption
6. Sustainable investment
7. Incoming water
8. Water reuse
9. Wastewater discharge
10. Discharge of treated wastewater
11. Incoming water from water-stressed areas
12. Land use within or near irrigated areas for biodiversity
13. Dependence on substances and products that deplete the ozone layer
14. Generated waste
15. Used waste
16. Hazardous waste
1. Wage gap
2. Training hours
3. Performance evaluations and professional development of employees
4. Accidents and diseases at work that caused incapacity or death
1. Women on the board of directors
1. Management of equal opportunity and suitable work conditions
2. Occupational health and safety management
1. Board of directors
2. Independent supervisory body
3. Risk management policy
4. Sustainability strategy
5. Code of integrity and ethics
6. Information security
7. Protection and privacy of third-party data
For each of the quantitative IBSOs, the absolute and relative value must be determined and disclosed according to the specifications of the standard.
Entities must disclosure at least the following: (i) profile and context in which they operate; (ii) reporting period; (iii) comparable information with the previous year; (iv) economic sector to which they belong; (v) geographic regions in which they operate; (v) economic activities; and (vi) number of workers and categories of occupation, gender, and age ranges.
IBSO disclosure should be made in the notes of financial statements at the end of the reporting period, displayed in comparison with the previous period.
NIS B-1 outlines the sources that may be consulted to obtain the information required for the determination of each IBSO.
V. Effective Date
The NIS took effect Jan. 1, 2025.
VI. Additional Considerations
The NIS B-1 transitory provisions specify that in the first year of application, entities will not be required to present information from previous periods in comparative form with the current period.
The first reporting deadline will be in 2026, using data from the previous year.
In addition to the above, entities may not disclose Scope 3 GHG emissions1 during the fiscal year following Jan. 1, 2025.
1 Scope 3 GHG emissions are the result of activities from assets not owned or controlled by the reporting entity, but that the entity indirectly affects in its value chain.
Paula Maria De Uriarte contributed to this article
Regulatory Developments: Maritime Emissions
Maritime environmental regulations have become increasingly prominent internationally as concerns over climate change and air pollution intensify. The shipping industry is under mounting pressure from governments, environmental organizations, and the public to reduce its environmental footprint. This pressure is compounded by the complexity of navigating a rapidly evolving regulatory landscape, making compliance a critical and challenging priority for maritime stakeholders. International cooperation has been essential in shaping these regulations, as countries and organizations work together to establish unified standards and enforcement mechanisms.
Specifically, the International Maritime Organization (“IMO”) has introduced several amendments to MARPOL Annex VI (emissions) that are entering into force within the next few months and are expected to significantly influence vessel operations and compliance strategies worldwide. These regulatory developments are expected to have far-reaching effects on global shipping practices, driving innovation and operational changes across the industry. Below is a selection of recent and upcoming maritime emissions-related regulatory developments, which demonstrate the global impact and growing importance of these regulations.
The Mediterranean Sea Emissions Control Area
The Mediterranean Sea became an Emissions Control Area (“ECA”) on May 1, 2025, under MEPC.261(79), which reduced the maximum sulfur content allowed in marine fuel from 0.5 percent to 0.1 percent. The Mediterranean Sea is the fifth designated ECA, joining the Baltic Sea, North Sea, North American Area, and U.S. Caribbean Sea Area.
Looking further ahead, on March 1, 2026, under MEPC.392(82), the Norwegian Sea and Canadian Arctic will be designed as ECAs with respect to nitrogen oxides, and on March 1, 2027, one year after the amendments enter into force, with respect to sulfur oxides and particulate matter.
Other Amendments to MARPOL Annex VI
On August 1, 2025, additional amendments to Annex VI under IMO Resolution MEPC.385(81) regarding fuel sampling, bunker delivery notes (“BDN”), major engine conversions, and fuel consumption data sharing enter into force.
Fuel Oil Sampling and Bunker Delivery Notes
The fuel oil sampling and BDN requirements are of particular importance to shipboard personnel and bunker suppliers. These amendments clarify the definitions of fuel oil (any fuel delivered to and intended for use on board a ship) and gas fuel (a fuel oil with a vapor pressure exceeding 0.28 MPa absolute at a temperature of 37.8°C). They also provide exemptions for in-use onboard sampling points for low-flashpoint fuel[1] and gas fuel (Regulation 14.12), and require the BDNs for gas and low-flashpoint fuels to meet the informational criteria listed in Appendix V to Annex VI (Regulation 18).
As of August 1, 2025, a BDN for low-flashpoint fuel and gas fuel will be required to state:
Name and IMO Number of receiving ship;
Port where fuel is received;
Date of commencement of delivery;
Name, address, and telephone number of fuel supplier;
Product name(s);
Quantity in metric tons;
Density determined by a method appropriate for the fuel, including the temperature;
Declaration signed by the supplier that the fuel meets the fuel quality requirements of MARPOL Annex VI Regulation 18; and
The sulfur content of the fuel specifically for use on board as tested by an appropriate method, or a statement that, when tested by an appropriate method, the sulfur content is less than 0.001 percent m/m.
The new requirement for low-flashpoint and gas fuels could lead to potential non-compliance if not carefully followed. It is therefore essential to ensure BDNs include all the required information.
Pursuant to MEPC.1/Circ.795/Rev.8, electronic BDNs are acceptable and should be protected from edits, modifications, or revisions and can be authenticated by a verification method such as a tracking number, watermark, date and time stamp, QR code, GPS coordinates, or other means. A BDN must be retained onboard for at least three years from the date of delivery and made readily available for inspection as required.
BDNs are also critical for emissions reporting, particularly to the IMO Ship Fuel Oil Consumption Database (Regulation 27), as explained further below. Reporting incorrect or inaccurate fuel types and their corresponding Emission Factor can affect a vessel’s overall Carbon Intensity Indicator calculation. Therefore, shipboard officers and bunker suppliers must ensure accuracy and completeness at the time of each delivery.
Collection and Reporting of Ship Fuel Oil Consumption Data
As required by MARPOL Annex VI, Regulation 27, all ships of 5,000 gross tonnage and above have been required to collect fuel oil consumption data since 2018 and to report this data to the IMO starting in 2019. The collection criterion are listed in Appendix IX of MARPOL Annex VI. Notably, MEPC.385(81) also adopted amendments to Appendix IX, “Information to be submitted to the IMO Ship Fuel Oil Consumption Database.” These amendments require vessels, starting on August 1, 2025, to report information beyond the existing requirements, including fuel oil consumption per consumer type (main engines, auxiliary engines, oil-fired boilers, and others), both generally and while not underway. Vessels must also report the total amount of onshore power supplied (in kWh), and, on a voluntary basis, the laden distance traveled. Therefore, shipowners and operators should ensure compliance with the added data collection information.
Conclusion
The evolving landscape of maritime emissions regulations underscores the increasing global commitment to reducing the environmental impact of shipping. With the introduction of new ECAs, such as the Mediterranean Sea, and forthcoming designations in the Norwegian Sea and Canadian Arctic, the industry faces new requirements for fuel quality, emissions reporting, and operational transparency. Amendments to MARPOL Annex VI, including expanded bunker delivery note requirements and enhanced fuel consumption data collection, reflect the IMO’s drive for greater accountability and innovation within the sector. As these regulations come into force, shipowners, operators, and bunker suppliers must prioritize compliance and adapt to the complexities of the new standards. Proactive engagement with these regulatory changes will not only mitigate the risk of non-compliance but also position maritime stakeholders at the forefront of sustainable shipping practices, supporting both environmental stewardship and long-term industry resilience.
[1] Low-flashpoint fuel means gaseous or liquid fuel oil having a flashpoint lower than otherwise permitted under Paragraph 2.1.1 of Regulation 4 of Chapter II-2 of the International Convention for the Safety of Life at Sea (“SOLAS”), 1974, as amended.
Investment Management Client Alert June 2025
ESMA Publishes Final Report on the Preparation of Securities Prospectuses
On 12 June 2025, the European Securities and Markets Authority (ESMA) published its final report with regulatory technical standards (RTS) for the preparation of securities prospectuses. This contains a proposed amendment to Delegated Regulation (EU) 2019/980, which contains the schedules for the content of securities prospectuses. This is intended to further elaborate and implement the amendments to the Prospectus Regulation, in particular due to the introduction of new prospectus types with the Listing Act adopted by the European Parliament on 14 November 2024.
The draft amendment to Delegated Regulation (EU) 2019/980 for European green bonds and nonequity securities that are advertised as considering Environmental, Social, and Governance (ESG) factors or pursuing ESG objectives provides for significant changes to the prospectus content. This applies in particular to information on the EU Taxonomy Regulation and on market standards or ESG labels. In addition, issuers of nonequity securities that are advertised as considering ESG factors or pursuing ESG objectives and that are based on an underlying asset (structured securities) must provide information on the extent to which this underlying asset is material for the assessment of the ESG factors or ESG objectives.
The European Commission now has three months to decide whether it will implement the final draft amendment to Delegated Regulation (EU) 2019/980.
ESMA Publishes Technical Advice on Harmonization of Prospectus Liability
On 12 June 2025, ESMA published technical advice on the further harmonization of civil liability in relation to securities prospectuses. A mandate from ESMA in this regard is provided for in the Prospectus Regulation following amendment by the Listing Act. To date, civil liability for prospectuses has largely been governed by the national laws of the member states. However, under the Prospectus Regulation, member states must establish a prospectus liability regime. ESMA had previously examined the liability regimes in the member states for its technical advice.
Like the market participants it consulted, ESMA does not see any fundamental need for reform or harmonization with regard to the prospectus liability rules. However, ESMA has identified two areas that it believes are worthy of discussion. Some prospectus liability regimes provide for an exemption (safe harbor rule) for forecasts in prospectuses, as these are generally inherently uncertain. ESMA proposes certain criteria and restrictions in the event that such a safe harbor rule should also be included in the prospectus liability provision (Article 11) of the Prospectus Regulation. ESMA also points out difficulties in determining the applicable national law in relation to prospectus liability claims. This is determined by the conflict rules of private international law (e.g., the Rome I and Rome II Regulations). In ESMA’s view, specific regulations for prospectus liability claims could be helpful here.
ESMA will publish its final report next.
BaFin’s Consultation on the Withdrawal of GwG Exemptions
On 6 June 2025, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, or BaFin) started a hearing for a general ruling regarding the withdrawal of exemptions from the provisions of the German Anti-Money Laundering Act (Geldwäschegesetz, or GwG).
Under the version of the GwG in force until 20 August 2008, obliged entities could be exempted from the provisions of the GwG. BaFin and its predecessor authority had made use of this and issued corresponding exemption decisions, some of which are still valid today.
In light of the new EU Anti-Money Laundering Regulation, which will in general apply from 10 July 2025 and that also governs exemptions from the GwG obligations, BaFin no longer sees any scope for the continuation of the previously granted exemptions and plans to withdraw the exemptions by way of a general ruling by 10 July 2025.
ESMA Publishes Final Report on Active Account Requirement Under EMIR
On 19 June 2025, ESMA published its final report with RTS regarding the obligation to use an active account for OTC derivatives.
Financial counterparties and nonfinancial counterparties that are subject to the clearing obligation and exceed the clearing threshold for certain derivative contracts must maintain an active account with an authorized central counterparty for these derivative contracts in accordance with the European Market Infrastructure Regulation (EMIR) and clear a certain number of transactions on this account.
ESMA’s regulatory technical standards set out further requirements for the functionality and operation of active accounts, the conditions for stress tests, and the details of reporting in a draft delegated regulation. The requirements depend on the type of derivative and whether certain thresholds are reached.
The European Commission now has three months to decide on the adoption of the proposed Delegated Regulation.
ESMA Takes Action Against the Promotion of Unauthorized Financial Services
On 28 May 2025, ESMA sent a separate letter to the major social media providers asking them to take action against the promotion of unauthorized financial services. Accordingly, social media providers should take proactive steps to prevent the promotion of unauthorized financial services in the European Union. In particular, they should verify whether the firms that wish to promote a financial service on their platform have been authorized to provide investment services in the European Union or are acting on behalf of an authorized firm.
Building a Sustainable Future: Understanding Permissible Repair Vs Impermissible Reconstruction In Support Of A Circular Economy
The circular economy invites us to fundamentally reconsider our relationship with resources and products. By moving away from the outdated “take-make-dispose” model, companies are embracing a more sustainable approach that prioritizes longevity, repairability, and eventual recycling. This thoughtful design philosophy creates and preserves value throughout a product’s entire lifecycle. Effective management of intellectual property (IP) rights serves as a cornerstone of this forward-thinking vision. Companies that skillfully balance robust IP protection with accessible repair rights position themselves to foster continued innovation while advancing sustainability goals. These businesses develop products with extended useful lifespans that significantly reduce unnecessary waste and conserve valuable resources for future generations.
Businesses stands to gain numerous advantages by embracing repair as part of their product lifecycle. Customers increasingly recognize and reward brands that demonstrate genuine environmental responsibility, building stronger loyalty and trust in the products. Products designed with repair in mind naturally create more resilient supply chains that can better withstand parts shortages or other disruptions. This approach also contributes to vibrant local repair economies, reducing transportation-related environmental impacts while creating jobs and economic opportunities in communities where customers live and work.
The legal landscape governing repair rights varies significantly between regions like the United States and European Union. A clear understanding of these different frameworks empowers businesses to make informed decisions about how customers can legally interact with products after purchase.
Here, we highlight significant court decisions, relevant statutes, and practical implications for businesses and consumers, specifically for authorized purchasers of an IP-protected product and the holder of those same IP right. This knowledge allows a company to develop strategies that protect their valuable intellectual property while simultaneously supporting broader sustainability objectives. By thoughtfully balancing potential revenue from repair services against the needs and expectations of the customers, a company can position its business for long-term success.
U.S. Legal Framework
The doctrine of patent exhaustion plays a central role in understanding the right to repair. Under this doctrine in U.S. law, once a patented product is sold, the IP Holder’s rights over that specific item are exhausted. This means the Product Owner is free to use, repair, or resell the item without infringing the patent. The Supreme Court’s ruling in Impression Products v. Lexmark International (2017) reaffirmed this principle, rejecting attempts by IP Holders to enforce post-sale restrictions through patent infringement lawsuits. Repair is an affirmative defense to a patent infringement claim; however, where the line between a permissible repair ends and impermissible reconstruction begins is not always clear.
Permissible Repair
Permissible repair in the US refers to actions taken to preserve the utility and operability of an IP-protected product, typically a patented product. This includes replacing individual unpatented parts, one at a time, whether of the same part repeatedly or different parts successively. The Supreme Court’s decision in Aro Mfg. Co. v. Convertible Top Replacement Co. (1961), Impression Products both established (and most recently reaffirmed in (2023)) that such repairs are lawful and do not constitute patent infringement under U.S. law.
Impermissible Reconstruction
Impermissible reconstruction involves actions that effectively create a new article from the IP-protected product or embodiment after it has become spent. Typically, the product is protected by patents and thus, reconstruction generally relates to patent infringement. The key distinction lies in whether the activity amounts to making a new article, rather than merely preserving the existing one.
Distinguishing Repairs from Reconstruction
While there is no definitive rule, courts assess multiple factors to determine whether a Product Owner has created a new article, thereby reconstructing the patented product. These factors include:
Extent of Replacement – Courts look at how much of the patented product has been replaced at one time. If the replacement involves a substantial portion of the product at the same time, it is more likely to be considered reconstruction. However, even if the Product Owner sequentially replaces all the worn-out parts of a patented combination, courts have found this sequential replacement does not constitute reconstruction.
Nature of the Parts Replaced – Replacing minor, unpatented parts is generally considered repair, while replacing essential, patented components can be seen as reconstruction.
Purpose of the Replacement – The intent behind the activity is considered. If the replacement is intended to extend the life of the product or restore it to its original condition, it is more likely to be considered repair. However, if the replacement effectively creates a new product, it is more likely to be reconstruction.
A pertinent example provided by the court in the Karl Storz case illustrates the application of many of the factors listed above. The court held that if a patent is granted for an automobile, the replacement of a spark plug constitutes permissible repair. Conversely, retaining the spark plug while replacing the entirety of the car in one action is more likely deemed reconstruction.
Right to Repair at the Federal Level
Recent national developments have significantly impacted the landscape of the right to repair in the U.S. Major players such as Apple Inc. have endorsed federal legislation, while the Federal Trade Commission (FTC) has intensified its enforcement against restrictive repair practices.
Apple Inc. has publicly supported federal right to repair legislation, marking a significant shift in the company’s stance on repairability. On October 24, 2023, Apple announced its backing of a federal right-to-repair bill, committing to provide access to tools and parts for customers nationwide.
The Federal Trade Commission (FTC) has taken significant steps to combat illegal repair restrictions and restore the right to repair for consumers, small businesses, and government entities. In July 2021, the FTC adopted a policy statement prioritizing investigations into unlawful repair practices under relevant statutes, including the Magnuson-Moss Warranty Act and Section 5 of the FTC Act. Targeting practices that raise repair costs, stifle innovation, and limit business opportunities for independent repair shops, the FTC aims to address antitrust and consumer protection violations.
Right to Repair at the State Level
As of 2025, right to repair legislation has been introduced in all 50 states. These bills generally aim to guarantee consumers’ rights to access replacement parts, repair manuals, diagnostic data, and appropriate tools necessary for maintenance. States such as New York, Minnesota, Colorado, California, and Oregon have already passed right to repair laws, setting a precedent for other states to follow. These laws empower consumers by providing tools and information for self-repair, reducing dependency on manufacturers. They support independent repair shops by ensuring access to parts and tools, fostering competition and innovation.
The most notable example is Oregon’s 2024 right to repair law, which requires manufacturers to provide parts, tools, and information for repairing consumer electronics. It also bans software that prevents technicians from fully installing spare parts, known as “parts pairing.”
EU LEGAL FRAMEWORK
In the EU, the principle of exhaustion of IP rights also plays a central role in understanding the right to repair. once a product has been placed on the market by the IP Holder or with their consent, the exclusive rights to that specific product are typically considered exhausted. This means consumers can use the product as intended, including repairing it. However, there are no specific guidelines that apply uniformly across all EU member states or the UK for distinguishing repair from reconstruction. Article 64(3) of the European Patent Convention (EPC), which also applies to the UK despite it not being an EU member, requires national courts to handle disputes about European patents using their own laws. The following is an analysis of the general principles and themes that countries under the EPC apply when differentiating between repair and reconstruction.
Permissible Repair
Permissible repair in the EU involves actions that maintain the functionality of a product without infringing on the patent. The Supreme Court in the UK provided guidance in Schütz v Werit (2013), outlining factors to consider when determining whether an activity constitutes repair or reconstruction. These factors include:
Subsidiary Nature of the Replaced Component – Courts assess whether the replaced component is a relatively minor part of the product. If the component is subsidiary and does not embody the inventive concept of the patent, its replacement is likely considered repair.
Life Expectancy – The life expectancy of the replaced component compared to other parts of the product is evaluated. If the component has a significantly shorter lifespan and is expected to be replaced periodically, its replacement is generally deemed repair.
Ease of Replacement – The physical ease of replacing the component and its practical perishability is considered. Components that are designed to be easily replaceable and are relatively perishable in practice are typically associated with repair.
Inventive Concept – Whether the replaced component includes any aspect of the inventive concept of the patent is a critical factor. If the component does not embody the inventive concept, its replacement is more likely to be seen as repair.
Independent Identity – Courts examine whether the replaced part has any independent identity from the product. If the part is integral to the product’s identity, its replacement may lean towards reconstruction.
Impermissible Reconstruction
Impermissible reconstruction in the EU is defined similarly to the U.S., where actions that effectively create a new product from the patented entity are considered patent infringement. Key factors held by countries applying the EPC that indicate impermissible reconstruction include:
Extent of Replacement – Replacing all claimed elements of a patented invention without reusing any parts is likely considered reconstruction. Extensive replacement that transforms the product into a new article falls under reconstruction.b. Creation of a New Article – Activities that result in the creation of a new article from the patented entity are deemed reconstruction. This includes refurbishing a totally worn or spent product to make it operable again.c. Impact on Patent Rights – Reconstruction activities that infringe on the patent rights by creating a new product are impermissible. This includes using patented replacement parts or refurbishment methods without authorization.
Distinguishing Repairs from Reconstruction
Differentiating between permissible repair and impermissible reconstruction requires a careful analysis of the factors outlined above. Courts subject to the EPC assess the nature, extent, and purpose of the activity to determine whether it constitutes repair or reconstruction. The EU’s Right to Repair Directive further clarifies these distinctions by mandating that manufacturers provide access to spare parts, repair manuals, and diagnostic tools for certain products.
EU Directive on Promoting Repair
The European Union has introduced a new directive aimed at promoting the repair of goods, amending existing regulations to enhance sustainable consumption and reduce waste. The directive, officially titled “Directive (EU) 2024/1799 of the European Parliament and of the Council on Common Rules Promoting the Repair of Goods,” was adopted on June 13, 2024, and entered into force on July 30, 20241. Member States are required to transpose it into national law by July 31, 2026.
Key aspects of the directive include:
Obligation to Repair – Manufacturers of products subject to reparability requirements in EU law must repair those products within a reasonable time and at a reasonable price. This obligation applies to products listed in Annex II of the directive, which includes items such as fridges, smartphones, and washing machines.
Prohibition of Repair Impediments – Manufacturers are prohibited from using contractual clauses, hardware, or software techniques that impede the repair of goods listed in Annex II, unless justified by legitimate and objective factors.
Access to Spare Parts and Repair Information – Manufacturers must provide access to spare parts at reasonable prices and make repair information available to consumers in an easily accessible manner. This includes publishing indicative prices for typical repairs on their websites.
Consumer Awareness – The directive mandates that manufacturers inform consumers about the availability of repair services and spare parts, enhancing transparency and encouraging repair over replacement.
CONCLUSION
For companies in the repair business, distinguishing between permissible repair and impermissible reconstruction is crucial. In the U.S., the doctrine of patent exhaustion and key court rulings support the rights of product owners to repair their IP-protected products. Similarly, the EU emphasizes the principle of exhaustion of IP rights, allowing consumers to repair products as intended. However, companies must ensure their repair activities do not cross into reconstruction, which could lead to legal challenges.
Recent legislation in both regions supports consumer rights and independent repair shops, offering significant opportunities for growth. Federal and state laws in the U.S., along with the EU’s directive promoting repair, aim to empower consumers and support independent repair shops by ensuring access to necessary parts, tools, and information.
Finding this equilibrium between IP protection and repair accessibility enables a company to flourish in the emerging circular economy while making a meaningful contribution to environmental sustainability