Lexmark must rue the day that it elected to sue a small components supplier, which had developed a chip to enable toner recartridge manufacturers to produce printer clones. In the latest round of its fight against Static Control Components SCC), a jury in Kentucky - Lexmark's home state - ruled the printer giant "unreasonably restrained competition" in the way it ran a used cartridge return program. Worse, the jury agreed with SCC that Lexmark has the "substantial ability to exploit customers".
So what is the fuss all about? Well, Lexmark offered corporate customers "prebates" or discounts for agreeing to return the empty cartridge for recycling. Lexmark's cartridges include a chip which must be authenticated by the printer before it will accept the new cartridge. Static Control Components makes a chip which replicates this "handshake".
In 2002, Lexmark filed patent suit against SCC. Ludicrously, it tried to invoke the Digital Millennium Copyright Act (DMCA) in its battle orders, a move that ended in failure - but not before earning the derision of millions and the enmity of many digital rights activists. In a counter-attack, SCC filed suit, alleging that Lexmark's prebate program was anti-competitive, and claimed $100m in damages. For good measure, SCC also hurled bad for the environment mud at Lexmark.
Will the Kentucky case boost the clone refill market in the US? And more to the point, does it mean cheaper printer ink - a substance so precious that it costs many more times than its own weight in gold? It's too early to say: the jury may be in, but its decision is non-binding, and there are 30 days to go before we hear U.S. District Court Judge Gregory Van Tatenhove' verdict.
But judging from the Louisville Courier-Journal report of the trial, it seems unlikely that his conclusion will be very different. He told the paper that he will give the jury verdict "serious consideration". In which case, Lexmark must surely appeal.
Read Lexmark's version of events and one would think that the company emerged a winner from the Kentucky court house. Nowhere in its press statement does it say disappointed" or "loss" or "appeal".
It notes that SCC's antitrust and false advertisement accusations against Lexmark were rejected by the jury. And it also says that "Over the course of the litigation, the court ruled that Lexmark’s patents were valid, covered Lexmark’s toner cartridges and that Lexmark’s patent license under the Lexmark Return Program was valid and enforceable". Also it notes that three remanufacturers enjoined in the litigation had settled earlier and had acknowledged Lexmark patents.
All in all, a decidedly different spin from our reading. You can check out the jury verdict for yourself; it has been posted, ever so helpfully, on SCC's website (pdf). ®