October 3, 2003
(IDG News Service)
The laser-cartridge return program from printer manufacturer Lexmark International Inc. received a green light this week when a federal judge in California upheld the program as fair and legal.
The rebate program by the Lexington, Ky.-based company offers an upfront discount to consumers who agree to return used cartridges only to Lexmark for refilling or recycling. The Arizona Cartridge Remanufacturers Association Inc. (ACRA) had charged in a lawsuit filed in September 2001 that the program, formerly known as Prebat,e was illegal under California law because it constituted unfair and deceptive business practices as well as deceptive advertising.
Judge Saundra Brown Armstrong of the U.S. District Court for the Northern District of California on Sept. 30 issued a ruling dismissing ACRA's lawsuit. "Because of its patents, Lexmark has the right to impose conditions on the sale of its patented product. It may restrict a purchaser's ability to repair it, which is what in essence the single-use condition does," the judge wrote in her ruling.
"In light of the Court's ruling that the Prebate condition falls squarely within Lexmark's patent right, Lexmark has adequately shown that there is little if any evidence to support ACRA's contention that the Prebate program is misleading, deceptive or unfair under Sections 17200 and 17500," the ruling said.
Lexmark welcomed the ruling in a statement released yesterday, adding that it continues to offer more choices in toner cartridge purchases than any other laser printer manufacturer.
ACRA's lead counsel in the case, Ron Katz, said in a statement that the group has 30 days to file an appeal, a move he has recommended to his client.
For its part, ACRA tried to paint the ruling as a positive outcome for the group, saying that a summary judgment given before a trial speeds up the legal process. "The appeal should only take nine to 12 months," the organization said in a statement on its Web site. "The economics of an appeal are much better than going through an expensive trial that will be appealed in any event."
Printer makers make recurring profits by selling replacement cartridges, but other companies have entered the lucrative market by buying empty cartridges from users, then selling the refurbished and repackaged cartridges. ACRA claimed that Lexmark's rebate program, as well as the use by Lexmark of a "lock-out" chip in its latest Prebate products, was unfair. According to ACRA, the chip is intended purely to lock out Prebate cartridges that have been remanufactured by third parties for use in Lexmark printers.
The judge ruled that ACRA hadn't sufficiently proved its case regarding the lock-out chip. "ACRA brought forth exactly one Lexmark purchaser who complained of being frustrated and dissatisfied. Frustration and dissatisfaction, however, don't equate to deception," the judge said in the ruling.
A separate lawsuit brought by Lexmark against Static Control Components Inc. (SCC) in Sanford, N.C., is pending. In that suit, Lexmark has charged that the Smartek microchip, which is made and used by SCC in remanufactured laser printer toner cartridges to defeat Lexmark's technological controls, is a violation of the Copyright Act and the Digital Millennium Copyright Act (see story). Static Control is one of the sponsors of the ACRA lawsuit, Lexmark said in its statement.