Legal Geek No. 84: Print Cartridges and Controlling the Re-use of Commercial Goods

Welcome back to Legal Geek. This week, we take a look at the printer industry and the many ways it is battling for the right to control re-use of commercial goods, specifically the print cartridges which often must be replaced or refilled with more ink.

https://archive.org/details/LegalGeekEp84

A news story broke last week that HP used a firmware software update on their popular printer lines to enact a time bomb for remanufactured unauthorized cartridges. In short, as of September 13, the HP printers put up an error message which prevented further use of any unauthorized cartridge. In this regard, HP has taken a step beyond the typical of just displaying a warning by actually preventing use of remanufactured cartridges that do not come from HP itself.

Granted, cartridge remanufacturers can reprogram their control chips to avoid this error, but that will take time, and in the meantime, HP will hold their printer customers hostage to buying cartridges from them. It's a strong-handed play to protect HP's most lucrative revenue stream, and one which will probably find some consumer pushback despite being effective.

However, the HP approach is just one small part of a larger battle in this industry between these printer companies and their competitors in the cartridge industry. The most notable battle is in the courts is potentially heading to the Supreme Court between Lexmark and Impression Products, a company that recycles and re-sells print cartridges.

Here are the important facts: Lexmark sells regular cartridges at full prices with no restrictions on re-sale or re-use, and also "return program" cartridges at reduced prices in return for an agreement for the user to return the cartridges to Lexmark when empty. Impression buys used genuine cartridges that Lexmark sold to foreign customers and then refilled them for re-sale in the U.S.. Lexmark does not like this, so their legal team filed for patent infringement against Impression. These facts have led to some interesting patent law arguments.

First, Impression has argued that the original sale of the cartridges by Lexmark in foreign countries invokes the patent exhaustion doctrine and thus prevents Lexmark from preventing re-sale of those cartridges in the U.S. because they already benefitted from the first sale. This type of argument won a Supreme Court copyright case a couple years ago in the context of textbook re-sales, but it is contrary to prior patent case law. The Federal Circuit Court of Appeals declined to overrule that precedent, which means Lexmark can pursue Impression for patent infringement despite having sold these cartridges abroad already.

Second, Impression has argued that the sale of a patented cartridge with restrictions on re-sale also invokes the patent exhaustion doctrine. However, Impression is trying to overturn 25-year old patent case law on this point designed to protect the sale of licenses to use instead of complete sales, and the Federal Circuit also declined to overrule those old cases. Thus, Lexmark is not subject to patent exhaustion just because it puts restrictions on some of its "return program" sales of patented cartridges.

The differences between patent exhaustion law and copyright law may be enough for the Supreme Court to jump in and give the final word on this issue, even though Lexmark is winning for now.

The Bottom Line is, when companies need to protect a primary revenue stream like print cartridges for printer manufacturers, they will go to great legal and technical lengths to save that future money. While this may put product manufacturers and patent holders at odds with their consumers in some sense, consumers can help regulate any unfair business practices by doing business with those who follow more fair practices. That's the beauty of market competition, and we will see if it works in the case of HP, Lexmark, and this industry over time.

(Post-notes, not for audio) - Thanks to Brian Tobey and others on Twitter who have recommended the Lexmark case for this segment over the past few months. A shout out to code-wow on the Current Geek subreddit as well for bringing the HP news to our attention. 

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Thanks for reading. Please provide feedback and legal-themed questions as segment suggestions to me on Twitter @BuckeyeFitzy