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 user 2007-06-11 at 10:07:00 am Views: 55
  • #17905

    Printer ink retailers await ruling on ‘little piece of plastic’
    an electronic chip that has sparked a lengthy legal fight that could
    potentially result in hundreds of millions of dollars in damages and
    turn the toner cartridge industry on its head.Facing a federal jury
    Monday, the CEO of the North Carolina company being sued by printer
    giant Lexmark tried to put things in perspective.”It’s just a little
    piece of plastic,” said Static Control CEO Ed Swartz, defending his
    company’s chip from the one Lexmark claims it copied in violation of
    federal patent law.

    The chip in question may be little, but this
    trial is enormous to the industry. It’s particularly big for Static,
    which makes its business by selling the parts required to rebuild
    printer cartridges, allowing corporate customers to refill their ink
    for far less money than they would pay in buying new cartridges from
    Lexington, Ky.-based Lexmark.But the arguments being considered by a
    U.S. District judge and jury, who began hearing Static’s side Monday,
    are far more specific.

    They deal with Lexmark’s “prebate”
    program, as it was formerly known, which allows upfront discounts for
    customers who promise to send their cartridges back to the company when
    they’re empty.Those who turn down the discounts are allowed to sell
    them to other companies willing to refurbish them, but an encrypted
    chip inserted inside the prebate version was designed to block its
    reuse by anybody else. That is, until Static figured out a way to
    duplicate the chip.The legal battle began in 2002, when Lexmark sued
    Static Control under the Digital Millennium Copyright Act, a federal
    law to prevent people from tampering with technology. It has since
    included a countersuit by Static alleging Lexmark’s prebate program is
    a monopoly, and the case has made it all the way up to a U.S. appeals
    court. Now it’s back in Kentucky this week for what could be the final
    front.”It’s a huge issue for the remanufacturing industry,” said Jim
    Forrest, an analyst with Lyra Research in Boston. “The outcome of this
    trial will have a big bearing on that. Folks in the industry are
    anxiously awaiting a verdict.”Last year, toner cartridges generated
    more than $30 billion in revenues worldwide, and remanufactured
    versions account for nearly a quarter of that, Forrest said.Although
    other companies haven’t followed Lexmark’s lead on a prebate program,
    Forrest predicts some might, should Lexmark prevail.Swartz contends his
    chip wasn’t copied, and even includes components Lexmark’s doesn’t
    offer, such as a sensor that prevents dark smudges from showing up at
    the end of a toner cartridge’s lifespan.He says his company is only
    rebuilding prebate cartridges that would otherwise be thrown away and
    views the matter as more of an abandoned property case, not a question
    about patent violations.”It just seems ludicrous to me that somebody
    could say they have a claim against garbage,” he said.But, during
    cross-examination Monday, Lexmark attorney Andrew Copenhaver pressed
    Swartz on whether he had any proof that the cartridges would have gone
    to landfills if they didn’t end up at Static Control. Swartz said it
    was common sense.”You’re just making your own assertions to this
    without any reasonable facts or any research,” Copenhaver
    said.Attorneys for both sides declined to comment afterward, and
    neither Lexmark nor Static Control returned calls seeking comment. The
    trial could last several more weeks.