Printer Manufacturers are Using Patent Law

Claiming that it is illegal for users to Refill Cartridges – taking it to the Supreme Court

This week, the U.S. Supreme Court will hear arguments in a patent dispute, Impression Products Inc. v. Lexmark International Inc.  The issue comes down to a very key issue that has huge ramifications to the printer industry but also outside the printer industry and that is, does a patent holder have the legal right to dictate how a product is used after it is sold?

In this particular case, Impression Products Inc.  claims a crucial legal patent limitation known as “exhaustion” meaning that once the product is sold to an end user, they own it, and have full rights to use it any way that they want and that the patent holder has very limited rights or say in the matter.

Cartridges represent a huge portion of the total printer business revenue and profits within a printer manufacturer (58% of revenue as shown in Figure 1 below).  It is no wonder that printer manufacturers are doing whatever they can to protect this lucrative cartridge business.

 

Figure 1

The Aftermarket cartridge market was $16B in 2016, is growing, and leading aftermarket suppliers are huge companies with large R&D budgets with product quality rivaling that of OEM (printer manufacturer) brands (see Figures 2 and 3)

 

 

Figure 2
Figure 3

 

 

 

 

 

 

 

 

 

There are many similar situations in other industries where there is either a lucrative consumables annuity or a multi-year service annuity where a patent holding manufacturer has taken actions to retain a user’s business versus using alternatives ( ie. mobile phones).   Many products are patented, so restricting the use of these products could have major ramifications.  Can you image if an auto manufacturer sued you if you did not use one of their recommended repair centers for repair rather using an independent repair shop?

This case is actually Lexmark’s second attempt at protecting their cartridge business.  They initially argued that refills violated software locks and hence the Digital Millennium Copyright Act. U.S. Court of Appeals for the Sixth Circuit ruled against Lexmark for misapplying the scope of the Copyright Act.  The Courts ruled against Lexmark on the Copyright Act claim so now Lexmark is trying to use patent infringement as a way to protect their cartridge business.

I guess that we will just have to wait and see what the Supreme Court decides but it will have a major impact on printer manufacturers and on aftermarket suppliers/cartridge refillers.   Photizo used two sources for some of the content in this News Byte – https://theamericangenius.com and the Financial Post.

 

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