Lexmark International has lost its appeal to a federal court in its attempt to protect its share of the lucrative market for refill printer cartridges.
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The court vacated a preliminary injunction that barred Static Control Components (SCC) from selling computer chips enabling third-party manufacturers to clone Lexmark's cartridges.
The judge said Lexmark had not established a likelihood of success on any of its claims against SCC and should not have been granted a preliminary injunction. His ruling detailed a series of legal errors in the lower court's decision.
Lexmark sued SCC in late 2002 alleging copyright infringement and Digital Millennium Copyright Act (DMCA) violations.
The court favoured Lexmark's arguments and granted the injunction in March 2003, but a later interpretive ruling by the US Copyright Office cast doubt on the DMCA grounds Lexmark used to establish its case.
SCC retired the disputed Smartek chips in accordance with the preliminary injunction, but in March 2004 it began selling a new line of chips to enable cloned cartridges to function in Lexmark printers.
In the printer market, the big money comes not from selling the devices but from selling products such as refill cartridges. Printer makers strongly encourage their customers to buy cartridges directly, but Lexmark took its campaign a step further by locking out products from third-party manufacturers.
The Lexmark/SCC case is being watched for the precedent it will set, as the two suppliers test whether copyright law protects software used to inhibit interoperability between one supplier's products and those from its rivals.
Stacy Cowley writes for IDG News Service