T.I.C:The Latest Lawsuit: Throne of Gold or Seat of Twigs?

[Anonymous]

The Latest Lawsuit: Throne of Gold or Seat of Twigs?

There is a basic rule applied when writing: ask a question, and put forward an answer. It is a basic formula and one I try to adhere to. In this case, I can only ask more questions.

How will the latest lawsuit affect the entire industry?

I am not a legal expert, and I have very little exposure into the third party toner niche, but I am curious.

I hear about lawsuits of this genre all the time – it seems since 1999, I have read monthly headlines about Canon suing somebody over toner formulas or melting processes or some issue. Like many, I became numb and assumed the players recognized legal defense as operational overhead.

So at first, when I read about Canon suing “dozens” over a gear-thingie, I ignored it. Then I researched deeper and discovered what appears to be a difference. Canon has been suing smaller companies for years but this current suit is large, international and follows a similar, smaller and successful legal excursion against Ninestar.

Again, I am not well versed in patent law – what interests me are two issues:

1. Timing
2. General reaction

Timing

For years, possibly decades, the OEMs have tolerated the existence and growth of third party toner manufacturers. Printer installs grew, and the OEMs were making good numbers. Times have changed; print is decreasing, and the pool of opportunity is shrinking. Moving into a more vigorous defensive stance, indeed, ratcheting up the pressure on your competition by going on the legal offense, makes sense. Also, what is believed to be the largest remanufacturer in the world, Clover Holdings, has been named in this latest suit. Clover Holdings is owned by Golden Gate Capital, which is a private equity firm with $12 billion under management – deep pockets. And Clover throughout the past years has consolidated a few smaller concerns – WestPoint and Image1 for example – offering up a single target with multiple divisions.

General Reaction

Reaction from the third party folks I know is predictably subdued and nonchalant – it’s just “another lawsuit.” Industry analysts, on the other hand are watching very closely. This may be the opening salvo of a very serious and long drawn legal war, not simply another skirmish.

For me, from the outside, this looks serious. If Canon can successfully petition for a general exclusion order (GEO), the importation of certain OPC drums would cease. This would cripple OEM and channel MpS engagements – other than HP – and devastate the “big-box” office suppliers like OfficeMax, Staples and Office Depot, who are Clover’s larger customers.

The one silver lining may be that all this legal wrangling illuminates the fact that less people are printing so it might not be such a bad idea to slowly withdraw from the printing supplies business.

Regardless, it is worth noting that in all of the U.S. International Trade Commission’s (ITC) toner and inkjet cartridge investigations since 2010, those complainants that have asked for a general exclusion order (GEO) have been successful. If this case results in the same fashion, HP and Canon would then achieve what has to be a product manager’s ultimate dream – King of Supplies.

Of course, the king would be sitting upon a throne of sticks.

[Author]

March 8, 2012 at 7:52 AM