Lexmark case rings alarm bells for printer cartridge market

A US court last week heard legal arguments in a case involving Lexmark International and a third-party printer cartridge...

 A US court last week heard legal arguments in a case involving Lexmark International and a third-party printer cartridge manufacturer, and industry observers claimed that if Lexmark were to win the case, the market for low-cost, refurbished printer cartridges could be stifled.

The hearing was to determine whether Lexmark is entitled to a temporary injunction preventing a third-party manufacturer, Static Control Components, from shipping computer chips used to make clones of toner cartridges for two of Lexmark's laser printers.

"As we expected, the judge took the information under advisement and said he'd take a few weeks to decide," said Tricia Judge, executive director of the International Imaging Technology Council, a trade association representing SCC and others opposed to Lexmark in the case.

Lexmark officials could not be reached late on Friday to comment on the outcome of the hearing.

SCC makes chips and other components for refurbished, or "remanufactured" printer cartridges, which are sold to customers at prices at around 30% lower than those offered by the major printer companies. Analysts estimate that remanufactured cartridges account for roughly a quarter of all printer cartridges sold.

Printer makers have argued that their printers work best with their own cartridges, and offer incentives to customers to use their own supplies. But up until now they have permitted remanufacturers to ply their trade.

Last year Lexmark began using a computer chip with some toner cartridges that uses software programs to communicate with its printers. Without the software, for which Lexmark filed copyrights, its printers will not function. In the remanufacturing industry the chip is known as a "killer chip," because it prevents remanufacturers from making compatible cartridges.

SCC figured out a way to mimic the software program and began selling chips that allowed cartridges to be made for Lexmark's printers. Lexmark claimed SCC had violated terms of the 1998 Digital Millennium Copyright Act, which makes it illegal to circumvent a protection technology to gain access to a "protected work" inside.

Lexmark's suit argued that SCC's chips contained "unauthorised copies" of its software programs, and the company wants the court to prevent SCC from selling the components in question.

Hewlett-Packard vice president of HP's imaging and printing group Pradeep Jotwani said Lexmark was "going too far" in using the DMCA to prevent the likes of SCC remanufacturing printer cartridges.

"I don't have any similar suits in place and I don't have any plans to do so," he said, noting that the DMCA was intended primarily to protect unauthorised copying of artistic works such as music and images.

"To be a long-term player in this industry you have to do what customers want, and customers want choice in terms of what they buy, where they buy it and when they buy it."

However, observers were sceptical of HP's claim that it would not use the DMCA to protect its cartridge business. If Lexmark is successful in its suit, HP - the world's biggest printer manufacturer - would be likely reverse its position and follow a similar path, using either the DMCA or some other applicable law, said Peter Grant, a principal analyst at Garner.

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