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 user 2009-11-24 at 10:33:24 am Views: 56
  • #22999


    Lexmark toner-cartridge program at center of
    ongoing litigation

    A seven-year court
    battle between Lexmark International and a North Carolina company that
    provides supplies to companies that remanufacture printer cartridges has
    reached a final ruling in U.S. District Court.

    Last month, Judge
    Gregory Van Tatenhove dismissed a number of claims by Lexmark and
    Static Control Components and said they “shall recover nothing.” The
    ruling ended with a note saying the companies could present arguments
    that the other should pay for costs and attorneys’ fees but cautioned
    that in “close and difficult” cases, costs are sometimes denied as “a
    proper exercise of discretion.”

    The case may be far from over,
    In an Oct. 26 motion, Lexmark asked for a new trial, citing
    several arguments including that the jury’s verdict in part of the case
    “was against the weight of the evidence at trial.” The company also
    argued that pre-trial rulings “set the stage for irrelevant,
    inadmissible and highly prejudicial evidence to be presented to the
    jury.”Static Control Components has already filed notice of appeal with
    the U.S. Court of Appeals for the Sixth Circuit in Cincinnati.

    case between the Lexington-based printer maker and Static Control
    Components began in 2002. It centers on a program eventually called the
    Lexmark Return Program, which offers Lexmark customers up-front
    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 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 Components
    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.

    Van Tatenhove ruled in favor of Static
    Control on two counts, saying “this court declares that the computer
    software code on Static Control’s reengineered replacement microchips
    for use with (various Lexmark printers) sold after February 24, 2004,
    does not infringe any Lexmark copyright.”He also ruled that the
    manufacture, distribution and sale of microchips for use with the same
    printers do not violate a certain section of the federal Digital
    Millennium Copyright Act.He ruled in favor of Lexmark, though, on a
    specific patent infringement claim “but with no remedy being entered on
    said claim.”Lexmark spokesman Jerry Grasso said the company would not
    comment on ongoing litigation but noted that “it is likely we will
    appeal.”An attorney for Static Control Components did not return

    The court battles have gone both ways over the years.
    this is how the legal system has evolved, especially with patent law,”
    said Tom Carpenter, vice president and senior equity analyst at Hilliard
    Lyons in Louisville, in describing the length of time it has taken for
    the case to be considered.”Laser cartridges are a large profit pool and
    that’s important for Lexmark to protect,” he said.

    Asked whether
    Lexmark should be spending the court costs elsewhere in its business,
    Carpenter called it “a delicate balance.”"The company’s justified in
    defending its patents, technology and profit pools, but as an investor,
    you’d prefer not to see perpetual litigation,” he said. “However, in
    this case, it may be the nature of the beast with Lexmark and the
    remanufacturing industry.”