TURBON INTERNATIONAL LOOSES LAWSUIT TO HP

[Anonymous]

TURBON INTERNATIONAL LOOSES LAWSUIT TO HP

HP Scores Important Win in Turbon v. HP Lawsuit
Of all the lawsuits filed last year—and there have been many—perhaps the most interesting was Turbon International’s suit against Hewlett-Packard Company (HP). This suit offers some insight into the complex and changing relationship between OEMs and non-OEM supplies vendors. It underscores the fact that despite inherent frictions between OEMs and third-party supplies vendors, in today’s maturing market, they are often much closer than they let on. The case also illustrates the difficulties companies on each side of the divide can face when they try to reach across the chasm to form alliances.

According to Turbon’s allegations, detailed below, HP duped the hapless reman into divulging trade secrets. On March 8, Judge Victor Marrero issued a key ruling in the case when he granted HP’s motion to dismiss some of Turbon’s charges. Because other claims in Turbon’s complaint were not resolved, the ruling does not put an end to the lawsuit. Still, there is little doubt that it is a major victory for the HP camp.

Despite any legal setback, however, we suspect Turbon has already achieved a measure of victory by making public many of its private dealings with HP. When the news broke that the OEM had seriously considered contracting with a remanufacturer to produce laser cartridges, it certainly raised many eyebrows. Of all the OEMs, HP has been one of the most outspoken critics of remanufactured cartridges. It has spent millions commissioning study after study and publishing data in all sorts of publications showing how third-party cartridges are vastly inferior to original HP cartridges. For one such example, see Research Briefing, “HP-Commissioned Study Finds Non-OEM Cartridges Are Less Reliable Than Originals.” Much of that criticism now seems hollow since the firm’s clandestine effort to market remans has been revealed.
Turbon Airs Grievances in Juicy Detail

Turbon’s original lawsuit, filed in the U.S. District Court for the Sothern District of New York on June 9, 2010, accused HP of fraudulent inducement, misappropriation of trade secrets, and unfair competition. The complaint itself is an interesting read. It spells out—often in great detail and colorful language—the inception and collapse of Turbon’s agreement to supply HP with remanufactured toner cartridges.

Turbon alleges that in December 2008 HP contacted the firm, expressing an interest in acquiring remanufactured cartridges for HP’s MPS business. In exchange, Turbon says it “open[ed] its kimono” and gave HP “complete access to its entire business, including to its highly proprietary manufacturing, distribution, engineering, and other processes.” Turbon claims that HP awarded it the right to supply remanufactured cartridges for three of its laser cartridge designs in the fall of 2009, and the remanufacturer shipped the first orders. Then, Turbon claims, HP abruptly announced that “it was ‘shelving’ its replacement cartridge program” in January 2010 and ended its relationship with Turbon.

The plaintiff claims that it deduced HP’s “true motive” was “greed and self-interest.” In Turbon’s view, the OEM never planned to carry out its promises to use Turbon supplies, and instead was looking to use the information it gained from the remanufacturer “to effectively crush Turbon” and gain a competitive advantage over the remanufacturing industry as a whole by expanding its Planet Partners empties-collection program and running anti-aftermarket advertisements. Turbon asked the court for damages and to issue an injunction “enjoining and restraining HP from any further use of its confidential trade secrets.”Close That Kimono!

While the lawsuit may have embarrassed HP, Turbon’s public airing of dirty laundry may result in legal action from the OEM. Certain court documents suggest that HP views the complaint itself as a breach of confidential disclosure agreements (CDAs), and it alleges details made public in its lawsuit were protected under the parties’ CDAs. In a letter to the court indicating its intent to file a motion to dismiss the complaint, HP says, “The CDAs protect the very fact that HP was considering entering into a relationship with Plaintiff (and notably, the public filing of the Complaint violates the confidentiality requirement of the CDAs).”

Turbon seems to be aware it has perhaps revealed too much and is willing to close the kimono. In a separate letter to the court, Turbon’s lawyers said, “We have recently conferred with Defendant’s counsel and they have requested that we file the amended complaint under seal, as they believe the allegations set forth in the amended complaint are protected from public disclosure by the parties’ Confidential Disclosure Agreements (the ‘CDAs’). While we do not necessarily agree that the allegations are protected by the CDAs, out of an abundance of caution, we respectfully request the Court’s permission to file the amended complaint under seal.”

Although we do not have this confidential amended complaint, which is under seal, it appears that Turbon has added HP Thailand as a defendant and introduced new charges of tortious interference and false advertising. Regarding the addition of HP Thailand as a defendant, Judge Marrero’s March 8 ruling reveals that Turbon alleges it submitted a bid to supply a hospital in Thailand with remanufactured cartridges in place of original HP cartridges and that HP-Thailand then sent letters to the hospital to persuade it not to change its supplier.

As promised, HP filed a motion to dismiss four of the counts in the amended complaint: misappropriation of trade secrets, unfair competition, tortious interference with prospective business relations, and false advertising.
Judge Marrero’s Ruling

In his March 8 ruling, Judge Marrero dismissed three out of five counts against HP in Turbon’s amended complaint. Specifically, the judge dismissed Turbon’s claims of misappropriation of trade secrets by HP, unfair competition by HP, and false advertising by HP.

The judge found Turbon’s complaint lacked facts establishing that HP used Turbon trade secrets such as “reverse-logistics, manufacturing and re-distribution processes.” Apparently, Turbon’s allegation of trade secret misappropriation centered on HP’s effort to expand its empties-collection program thus reducing the number of empty print cartridges available to Turbon to remanufacture. Because HP’s empty cartridge collection program predated its relationship with Turbon, the judge found it “undermines any claim that the program exploits Turbon’s secret information.” The judge wrote, “To find that HP’s recycling program could establish use of Turbon’s secret information, the Court would have to find the ‘very idea’ of refilling empty printer cartridges for sale is a trade secret.” The judge dismissed the unfair competition complaint because it “is premised on the same factual and legal theories as its misappropriation claims.”

The HP advertising alleged to be false in the Turbon complaint include a print advertising campaign and HP’s website. HP’s print advertisement depicted a seller opening his coat to reveal printer cartridges. The text read, “BEWARE: 1 in 3 BARGAIN TONERS LEAK OR FAIL.”

The HP website named in the lawsuit claimed:
Lower-priced laser printer toner delivers just what you’d expect. Lower quality.
QualityLogic asked real business printing customers about the level of print quality they require for different business purposes. Often, remanufactured cartridge print quality degrades, resulting in pages that are not good enough for distribution to customers and other outside the company—or even for circulation with the company.

HP still includes the verbiage Turbon objected to on its website.

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March 16, 2011 at 9:28 AM