RULING RESTORES CANON’S PROFIT ON INK

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Ruling restores Canon line of profit
An appellate court decision Tuesday restored Canon’s control over the market of ink cartridges for its home-use printers.
The Intellectual Property High Court ordered Recycle Assist Co. to stop selling recycled Canon cartridges for home-use inkjet printers, saying the products infringe on Canon patents.
The Tokyo District Court earlier ruled for the defendant in Canon’s suit against the recycling company. The defendant plans to appeal to the supreme court.
Inkjet printers are a small part of Canon’s operations, but the business is profitable.
Analysts estimate that combined domestic sales of inkjet printers and consumables represented a mere 2 percent of Canon’s consolidated sales for the year ended in December.
Moreover, recycled products accounted for only 6.1 percent of the nation’s ink cartridge market in 2005, according to market researcher BCN Inc.
Still, sales of recycled products are growing.
More important, if the Intellectual Property High Court had upheld the lower court decision, it would have been construed as approval for third-party recycling of consumables for office-use printers and copiers, which were not covered in the suit.
For Canon and other manufacturers of printers and copiers, consumables are highly profitable.
Margins on cartridges for home-use inkjet printers, for example, are estimated to be as much as 25 to 30 percent.
Critics say Canon is earning huge profits from cartridges while keeping printer prices low. They also say Canon is not disclosing sufficient information on profits from consumables.
In Tuesday’s ruling, the Intellectual Property High Court declared that recycled products should be promoted.
Canon, which started as a camera maker, entered the office equipment sector in the 1960s.
While barring entry of newcomers in the consumables market, Canon has used the hefty profits to finance development of high value-added products.
In 2003, the Fair Trade Commission searched Canon’s office on suspicion that it had modified specifications of its toner cartridges for office-use printers to prevent other companies from entering the business.
Canon had installed electronic parts on the cartridges, which prevented them from being recycled. The FTC ruled, however, that the modifications were not illegal.

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February 7, 2006 at 10:29 AM