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 user 2009-04-03 at 12:54:51 pm Views: 55
  • #22202
    Lexmark loses key ruling in long-running case
    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!!”

    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