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Try the battery first. There were some posts from them on their forum a while ago that said if the battery gets really low then it can cause some weird things with the display that look like temporary dead pixels or "line out" errors. They said that you can fully recharge and the problem might go away. Sounded like some voltage problems from a low battery might effect the display hardware.
However, it could also be a hardware fault in the display. There are sometimes "line out" issues with eInk, but it's usually an entire row that goes out together. Generally, they also stay black, not invert back and forth. Most of the time, this would be covered under warranty (not sure what happens to warranty claims with them in bankruptcy though).
I have never seen anyone say that iRex told them a certain number of "line out" errors was normal. From reports on here, even a single line would get a warranty replacement of the screen.
Hopefully, charging the battery will resolve it.
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