Antitrust lawsuit filed against Lexmark

Computerworld - WASHINGTON -- The North Carolina company that says it's fighting for the survival of low-cost, remanufactured printer cartridges filed an antitrust lawsuit today against Lexmark International Inc., charging it with attempting to monopolize the printer market.
The new lawsuit, filed by Static Control Components Inc. (SCC) in Sanford, N.C., comes after Lexmark filed a lawsuit against Static last December for illegally copying its printer computer technology -- the computer chips that have become an integral part of toner cartridges (see story).
On Friday, the U.S. District Court for the Eastern District of Kentucky issued a preliminary injunction favoring Lexington, Ky.-based Lexmark that bars SCC from making chips used in replacement cartridges for two of its laser printers (see story).
"Naturally, we're disappointed in that order," said William "Skip" London, general counsel for SCC. But London said Judge Karl Forester's ruling also provided guidance on what it could and couldn't do in producing compatible cartridges. "We anticipate that we will be able to come up with a chip in a very short period of time that doesn't go against the judge's ruling," he said.
In its antitrust case filed today in federal court in North Carolina, SCC alleges that Lexmark's anticompetitive practices are squeezing out companies that remanufacture toner cartridge. In its lawsuit, it argues that approximately 35% of Hewlett-Packard Co. toner cartridges are remanufactured, compared with about 14% for Lexmark. Static blames that disparity on Lexmark's anticompetitive practices.
Although Lexmark officials had yet to receive the lawsuit, Roger Rydell, a Lexmark spokesman, defended the company and said it "provides more choice in cartridges for laser printers" than "any of our competitors offer."
Rydell said customers can buy unrestricted cartridges that they can return to Lexmark free of charge for reuse or sell to a third party for reuse. The company also offers an upfront discount, or "prebate," in exchange for returning the cartridge to Lexmark. The company can then remanufacture the cartridge and sell it at a lower price.
But SCC officials have called the prebate program a "sham" and said end users will always buy the lower-priced discounted cartridge that can't be remanufactured.
The case has potentially broad implications. Lexmark's Dec. 30 lawsuit against SCC charges the company with violating the Digital Millennium Copyright Act (DMCA), the controversial 1998 law established to prevent piracy. The law was aimed at music and motion pictures, but critics have said Lexmark's use of it illustrates a broader problem.
Under the DMCA, it's conceivable, for instance, that a hardware maker could prevent interoperabilitywith other systems by citing the law's anticircumvention provisions. By putting software controls on, for instance, auto parts, OEMs could use the law to stop remanufacturing of parts in that industry.

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