Lexmark gets first-round ruling in printer suit

A U.S. district court has issued a preliminary ruling in favor of Lexmark International in a case that analysts have said could affect the future availability of low-cost replacement toner cartridges for printers.

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Judge Karl Forester, Chief Judge for the Eastern District of Kentucky, issued a preliminary injunction that bars Static Control Components  (SCC) from making or selling chips used to make replacement cartridges for two of Lexmark's laser printers, the companies said in separate statements Thursday.

SCC's components are used by thousands of vendors to "remanufacture" toner cartridges by refilling, refurbishing, and repackaging them. Such cartridges typically sell for around 30 percent less than replacement cartridges offered by the major printer vendors.

Lexmark, in Lexington, Ky. , filed suit against SCC in December, charging it with violations of the Copyright Act and the Digital Millennium Copyright Act. It argued that SCC's Smartek chips include Lexmark software that is protected by copyright, and that they allow the unauthorized remanufacturing of toner cartridges for two of its printers.

The software, which was introduced by Lexmark last year, handles communication between its printers and toner cartridges. Without the software replacement toner cartridges will not work with Lexmark's printers. SCC, in Sanford, N.C. , developed the Smartek chips to allow the continued remanufacturing of Lexmark cartridges.

Judge Forester determined that Lexmark is likely to prevail at trial on the merits of its case and issued the temporary injunction against SCC, Lexmark said. The injunction means that SCC must refrain from shipping the Smartek chips until the case has been decided at trial.

"We are disappointed in his order, and feel that after he or a jury has heard a full exposition of the facts that we will prevail," SCC said in its statement.

SCC is still studying Forester's 53-page order, but said it thinks the judge has "given us guidance in this matter so that we will be able to offer a replacement Lexmark 520/620 chip that fully complies with the order."

It said the chip should be available in "a very few weeks." The company did not return a call seeking further explanation late Thursday, but said it will hold a press conference Monday to discuss the case.

Lexmark said it was pleased with the ruling. The company spends hundreds of millions of dollars a year on research and development,  said Vincent Cole, Lexmark's general counsel.

"We believe that our printing solutions and services make us unique, and we intend to vigorously protect the intellectual property that helps to set us apart from our competition," Cole said in the statement.

Like other major printer vendors, Lexmark has argued that its printers work best with its own cartridges, and that replacements offered by third parties are of lower quality.

It said it offers users a choice in toner cartridge, including a cartridge that can be remanufactured by others without the need of a third-party microchip. It also offers a cartridge return program that provides customers with an up front discount if they agree to return the cartridge they buy directly to Lexmark when it runs out of toner.

Analysts have said the case could have a wider impact than on Lexmark alone. If Lexmark succeeds at trial, those analysts said, other printer vendors may adopt similar technologies that prevent their printer cartridges from being remanufactured.

"It's an important case," said Jim Forrest, managing editor of The Hard Copy Supplies Journal, a monthly newsletter that tracks the printing industry, in a recent interview. "The final outcome when it goes to trial could impact the whole industry."