S.C.C. WINS & LEXMARK LOSES KEY RULLING

[Anonymous]

http://www.kentucky.com/101/story/748532.html
Lexmark loses key ruling in long-running case
Lexmark
International lost a battle earlier this week in its seven-year
litigation against a North Carolina company that provides supplies to
companies that remanufacture printer cartridges.The case between the
Lexington-based printer maker and Static Control Components began in
2002 and centers on a program that offers Lexmark customers upfront
discounts on toner cartridges if they agree to return the cartridge
after a single use to Lexmark and not other remanufacturers. Lexmark
then remanufactures the cartridges and resells them.

The program
keeps some cartridges out of the hands of remanufacturers and
refillers, who over the past decade have siphoned off the profits from
printer companies. The printer companies rely on profit-rich ink and
toner, because printers are often sold for little or no profit.The case
grew out of a past decision by Lexmark to include a chip on its Lexmark
Return Program toner cartridges that determined whether they had been
remanufactured. If they had, the cartridge turned itself off and would
not print.

The legal battle began when Static Control developed
a chip that turned off Lexmark’s, allowing remanufacturers to buy up
empty Return Program toner cartridges, install Static Control’s chip
and then resell them.The court battles have gone both ways over the
years. On Tuesday, a federal judge in Kentucky reversed his previous
ruling, which had favored Lexmark, now saying the program is invalid
under patent law.Lexmark said Thursday, though, that the ruling does
not end the “popular program,” as it is valid under contract law and it
will continue.

Judge Gregory Van Tatenhove had previously ruled
that Lexmark’s patent rights do not expire after the cartridge’s first
sale as part of the Lexmark Return Program, previously called the
Prebate Program. But a 2008 U.S. Supreme Court ruling has overturned
such a theory, Van Tatenhove wrote in his order.Applying the ruling,
the judge said Lexmark “attempts to reserve patent rights in its
products through post-sale restrictions on use imposed on its customers
… (and) this is what (the Supreme Court ruling) says Lexmark cannot
do.”An attorney for Static Control did not return a message Thursday,
but the company’s Web site proclaimed victory with a message reading,
“Federal Judge Agrees with Static Control. Prebate Ruled Invalid!!”

Lexmark
had argued that the Supreme Court ruling did not apply because its
Return Program toner cartridges were sold on certain
conditions.However, Van Tatenhove said, “sales of Lexmark Prebate
cartridges were unconditional.”Anyone could walk into a store carrying
Lexmark Prebate cartridges and purchase one. Anyone could purchase
Lexmark Prebate cartridges directly through its Web site,” he wrote.
“No potential buyer was required to agree to abide by the Prebate terms
before purchasing a cartridge.”As Lexmark pointed out, though, Van
Tatenhove also wrote, “This is not to say, however, that state contract
law may not be invoked.”

Static Control had argued that contract
law would not permit the program, either, but Van Tatenhove previously
ruled against that argument, noting the program established “contracts
of adhesion” so named because consumers could essentially “take it or
leave it.””We want to stress that the March 31 ruling does not
invalidate our successful Lexmark Return Program, which we will
continue,” Lexmark spokesman Jerry Grasso said. “Lexmark is assessing
its next possible steps, which may include an appeal of this recent
decision.”

[Author]

April 3, 2009 at 12:54 PM