Cheap cartridge option in peril

Computerworld - Washington—The remanufactured toner cartridge industry, which provides low-cost printer cartridges for many corporations, is under a legal and technological assault that could deprive IT managers of a money-saving option.

The major printer manufacturers are making changes to cartridge designs and the computer chips that mate a cartridge with a printer, thereby making it increasingly difficult for remanufacturers to refill the cartridges. It can take remanufacturers more than a year of engineering work to reproduce a cartridge chip's functionality.

And now, a company that has so far overcome the technological challenges posed by the printer makers is being sued by Lexmark International Inc. Lexmark alleges that Static Control Components Inc. (SCC) in Sanford, N.C., is illegally copying its printer computer chip technology.

The two sides will face off in a federal court hearing Friday in Lexington, Ky., the home of Lexmark. It's a case that the remanufacturing industry, also called the aftermarket, sees as key to its fate.

SCC CEO Edwin Swartz

Remanufacturers have about 25% of the toner cartridge market, according to industry estimates.

Eby-Brown Co., a $3 billion wholesale distributor of convenience store goods, is a large user of remanufactured cartridges. The Naperville, Ill.-based company saves 20% to 50% buying remanufactured cartridges, said Brian Freeman, network services manager at the company.

Eby-Brown has standardized on a limited model line of Hewlett-Packard Co. printers, so it's practical to keep an inventory of printer parts for in-house repairs, said Freeman. "Most companies are like me—we are extremely tied to our printer vendor," he said.

But this printer standardization also means the remanufactured toner cartridges are the only source of competition with those made by the printer maker. "Anytime there is no competition, the quality declines and the price increases," said Freeman.

The Lexmark lawsuit, filed Dec. 30, affects only two of SCC's 70 printer parts lines. SCC has stopped producing the chips for those cartridges, pending the outcome of this week's hearing. But SCC CEO Edwin Swartz said he worries other original equipment manufacturers (OEM) will follow Lexmark if it succeeds in court.

"The OEM is not the friend of the aftermarket," said Swartz. "Every cartridge that is remanufactured is one that the OEM doesn't get to sell."

Lexmark officials told Computerworld that the company offers users the option of buying cartridges without an upfront discount or "prebate" if they choose not to return the cartridges to Lexmark. Those cartridges can be remanufactured without SCC's chip and "will perform without loss of functionality," they said.