Court rules against Lexmark in printer case

Lexmark International Inc. has suffered a setback in its bid to use the Digital Millennium Copyright Act (DMCA) to prevent other companies from making low-cost, refurbished toner cartridges for its printers.

The U.S. Court of Appeals for the Sixth Circuit has ruled against Lexmark's request that it reconsider an earlier decision that favored Lexmark's opponent in the case, Static Control Components Inc. (SCC), a maker of components used by third parties to make refurbished cartridges.

The earlier decision allowed SCC, in Sanford, N.C., to continue selling its chips for Lexmark laser printers at least until the case came to trial, expected later this year. Lexmark had asked the appeals court for a hearing to reconsider that decision, but the appeals court turned down its request on Feb. 15, SCC announced Monday.

The case has been closely watched in the industry, where printer manufacturers make much of their profit through sales of their own cartridges. Refurbished cartridges typically sell for about 30 percent less than those from the major printer vendors.

Lexmark filed its suit against SCC in December 2002, accusing it of violating copyright law as well as the DMCA. It alleged that SCC's Smartek chips include Lexmark software that is protected by copyright. The software handles communication between Lexmark printers and toner cartridges, and without the software refurbished toner cartridges will not work with Lexmark's printers.

A district court granted Lexmark a preliminary injunction in the case in February 2003, preventing SCC from selling the chips until the case is resolved at trial. But that ruling was overturned eight months later by the appeals court, which said, in part, that copyright law should not be used to inhibit interoperability between one vendor's products and those of its rivals. The appeals court upheld its decision last week.

Printer makers strongly encourage their customers to buy cartridges directly from them, but Lexmark went a step further by using technology to lock out products made by third parties.

The move attracted critics, such as the Electronic Frontier Foundation, which accused Lexmark of abusing the intent of the DMCA at the expense of consumers. The law was intended primarily to protect digital content such as music and films, those critics argued.

A ruling from the U.S. Copyright Office in October 2003 appeared to bolster SCC's case. Without referring directly to Lexmark, the Copyright Office said the DMCA does not block software developers from using reverse engineering to access digitally protected copyright material if they do so to achieve interoperability with an independently created computer program.

SCC was quick to portray last week's appeals court ruling as a win for all consumers.

"We feel that the public interest has been served by a knowledgeable court to not allow a greedy (printer manufacturer) to use the law to perpetuate an electronic monopoly. Consumers and justice have been served," said Ed Swartz, SCC's chief executive officer, in Monday's statement.

Lexmark has said that it is merely acting to protect its intellectual property, which it spends millions of dollars on every year to develop. It notes that it offers a cartridge return program that provides customers with a discount if they agree to return their toner cartridge to Lexmark when it is empty.

"We expect that this case will take a long time to resolve given the complexities of the issue. However, we continue to be very confident in our position regarding the infringement of our intellectual property," the company said in a brief statement.

The case is expected to go to trial in December.

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