Copyright Office Rules Against Lexmark

SparkyTWP writes "'The United States Copyright Office has ruled in favour of Static Control Components, of Sanford, N.C., saying that its microchips do not contravene the Digital Millennium Copyright Act.' This was in regard to SCC making microchips that imitated Lexmark's in remanufactured printer cartridges. It appears Lexmark won't be able to do anything about third-party cartridges."

Doh!

Well, this is going to do some serious damage to the business models of virtually every printer company out there.

Re:Doh!

Exactly, most printer companies, especially in the low end area, depend on making $$$ off of people when they buy their uber-expensive cartridges. Personally I would like to see a company make an easy-to-refill inkjet cartridge and sell me the ink at a reasonable rate, and would be willing to spend more on the printer (though again, they make less in the long run).

Re:Doh!

Well, there's nothing wrong with them _trying_.

The problem is that copyright -- which is what Lexmark was trying to use, and is a monopoly -- is not intended to protect them from this sort of competition.

It is after all entirely possible that the razor/razor blade approach is not feasible with regards to printers. Lexmark should not be protected from fucking up; if they made a mistake with their pricing, it's their own damn problem.

No they can't - Magnuson-Moss act

No they can't. With the DMCA out of the way for now, and disregarding patents, the Magnuson-Moss Warranty Improvement Act [1st-in-synthetics.com] prohibits a manufacturer from conditioning a product's warranty on use of other products identified by trademark unless the manufacturer can prove that the off-brand product damaged the product under warranty.

Re:No they can't - Magnuson-Moss act

I guess I won't k-whore, so I'll post anon, but here [mlmlaw.com] is a pretty good discussion about Magnuson-Moss. The part that prohibits tying a warranty to follow-on sales of supplies is nicely explained in the section titled "Tie-in Sales" Provisions.

Now, that being said, there's nothing to keep the companies from trying to tie warranty to their own supplies. Most consumers are sheep and will believe the "customer service" droid at the end of the 1-800 line when the droid says "your warranty is void because you didn't buy Barfco toner carts."

So the tie-in might work by default. The company will just get its pee-pee slapped by the FTC or a state attorney general if they get called out. But that may take years, and we all know that business milestones are measured in weeks. That's plenty of time for the marketing VP to gather his bonus and promotion and leave the aftermath of anti-competitive and illegal warranty policies to the customer-service VP that he personally doesn't like, anyways.

(It's not everyday that a bright executive gets to garner laurels and financial rewards for a bright idea that simultaneously torpedoes a competing executive in a different department of the same company. Gotta push down to rise up, right?)

"Consumer products" not "motor vehicles"

Relevant text of the statute [padiscountink.com] from an off-brand inkjet ink manufacturer, quoting 15 USC 2302 [cornell.edu]:

(c) No warrantor of a consumer product may condition his written or implied warranty of such product on the consumer's using, in connection with such product, any article or service (other than article or service provided without charge under the terms of the warranty) which is identified by brand, trade or corporate name; except that the prohibition of this subsection may be waived by the commission if:

1. The warrantor satisfies the Commission that the warranted product will function properly only if the article or service so identified is used in connection with the warranted product, and
2. The Commission finds that such a waiver is in the public interest.

Where again is it limited to motor vehicles?

Re:No they can't - Magnuson-Moss act

I think you are wrong.

From FTC.gov ; Understanding the Magnuson-Moss Warranty Act [ftc.gov]

The Magnuson-Moss Warranty Act is the federal law that governs consumer product warranties. Passed by Congress in 1975, the Act requires manufacturers and sellers of consumer products to provide consumers with detailed information about warranty coverage. In addition, it affects both the rights of consumers and the obligations of warrantors under written warranties.

Nothing about cars as far as I can see..
However as a IANAL, I can see that there is a lot of leagal speak about "limited warranty" and "requirements" for the law to apply so comments from law gurus are appreciated.

No more expensive cartridges

I guess HP won't be raping me for cartridges anymore. But I think this will raise the price of printers.

Telling quote

"Lexmark filed its suit against SCC in December, 2002, saying the DMCA shields itself from competition from the remanufacturing industry."

Could there be a more appropriate quote that shows how the DMCA is ultimately an anti-competition and anti-capitalist tool?

Thank goodness...

I was starting to worry that everyone else was crazy and the whole country, the legal system especialy was just out of touch with reality.

Small victiories...make everything work.

I have a Lexmark printer ...

and I just needed a new cartridge (black). This was my first replacement, and what I discovered was that in ordinary retail channels, you can't buy third party. You have to go to the web for that (which means you have to plan ahead). I hope this ruling makes third party cartidges more available, but I suspect that Lexmark has leverage over typical places like Office Max (Don't sell third party ink, or you can't sell our printers).

Re:I have a Lexmark printer ...

Actually, it is the other way around. Places like Best Buy and OfficeMax enjoy the healthier margins on the brand-name ink. Heck - they even get the printer makers to omit the USB cable so that they can charge $20 for a part [bestbuy.com].

A while ago (when USB printers first became the dominant style), I had some real fun. I loaded up a cart with thousands of dollars worth of computer stuff (that I was legitimately going to purchase) and a printer was part of it. When I found out that the *cheapest* USB cable in the store would cost me $20, I just left the salesmen standing there with their thumbs in their asses.

I ordered a *hundred* USB cables for a dollar and I keep them in my trunk. Now, Best Buy is a necessity for me at times because it is convenient. Whenever I go, I stop by the printer aisle and give a cable or two away to anyone who mich need one. It saves them $20 and makes me feel a little better about actually spending my money at such a crooked store.

The interesting thing is that Lexmarks are sold *with* a USB cable at places like RiteAid and other convenience stores.

woohoo laissez faire

I just love it when the government actually does what it's supposed to, namely, protect free markets instead of encroach on them!

YAAAY!

Now printer companies will be honest in their product pricing models. No more low-ball piece-of-crap printers and highway-robbery refills cartridges. A little competition in the expendables market will be awesome. Let quality and price drive the market, not consumer lock-in.

Does anyone know if Lexmark has any legal recourse beyond this ruling? Can they appeal somewhere? Or is this the done deal?

I say good!

I'll say this is good because NO company should ever try to lock people into propietary accessories by selling the initial main product at, close to or below cost, hoping to make up their profits by selling the locked-in accessories for a larger portion of the profits.

Look at the Playstation 2. It's locked-in (you must have Sony approve of and produce your game in _most_ instances), yet they make their profits on the game system whether or not you buy any games.

Let's see how long before other companies discover ways to break the models of these lock-ins and force the main company to rethink their strategy of selling short and hoping for bigger profits as time goes on because no one else can sell the accessories at reasonable prices.

Justice...

Nice. It's been said before here - the courts usually do the right thing, you just need the staying power (read: money) to get there.

I liked the quote at the end:

"We are examining the documents and devoting a large amount of time with our economists and attorneys to calculate the damages that we feel we are entitled to from Lexmark because of their serious misdeeds," SCC CEO Ed Swartz said about the ruling.

I read that as "My turn now..."

I

not just lawyer bills

It's not just lawyer bills... The injunction [scc-inc.com] has halted the sale of SCC's smartek chips since feb 8... Nine months of lost sales for SCC and the cartridge remanufacturers who buy SCC's chips.

What kills me is that, in granting the preliminary injunction the judge had to consider the potential for damages (page 48)... he found that Lexmark would suffer "irreparable harm" in terms of lost sales and money. Excuse me, but I think those can be repaired with money. On the other hand, if SCC had been put out of business under a load of bogus legal bills it couldn't survive, I think it would have suffered irreparable harm.

Which printer to buy?

Linuxprinting.org [linuxprinting.org] has a vendor score card [linuxprinting.org] to show you which vendors deserve yor support.

Their recommendation (and HP's work writing opensource drivers [sourceforge.net] that support all the features of their printers) was the reason that I purchased a PhotoSmart 7260 from HP and I haven't regretted it - even the integrated card reader works [sourceforge.net].

Not surprisingly they rate Lexmark inkjet printers as useless.

A major hit for "Intellectual Property"

This issue had no business involving copyright law. This should have been settled with patents (i.e. If Lexmark doesn't have any covering it's cartridge design, it's SOL). This was a perfect example of the concept of "Intellectual Property" clouding the distinction between copyrights, patents and trademarks. The fact of the matter is that Lexmark's business model is perfectly valid, and well documented, but they didn't want the time limitations imposed by patent law and they thought they could get around it. They should fire the legal team that gave them the advice that led them down this path, and wise investors should have left long ago after seeing all this money wasted on developing "protection" technology that depended on an untested legal concept to work.

No serious effect on the market

People think that the price of laser printers are kept low because manufacturers sell toner at inflated prices. This is true for SOHO ink/bubble jet printers, but certainly isn't true when it comes to laser printers (I worked for a major manufacturer for years). Bundled/hidden with the price of the printer is potential service costs, the costs of marketing, what it took to train the service partners and uphold the contracts, etc. Printer manufacturers, when it comes to the corporate world, attempt to make as much of a profit as possible from both the sale of printers and the sale of toner/fusers/consumables.

What the inclusion of third party cartridge resellers into the market place does is cause competition in the sale of a specific consumable (toner), and nothing more. Sure, it is going to cut into profits, but printer manufacturers have a very easy way of fighting back: if you use third party consumables, you void your warranty. And this is a perfectly reasonable tactic, because you can't expect a printer manufacturer to insure a product that is using components who's quality they have no way of controlling. And trust me, when it costs $450 dollars just to have a printer tech take a look at your machine, no one is going to willingly void their warranty.

more info @ scc's website

Here's SCC's webpage on the case [scc-inc.com]. They have a Press Release (pdf) [scc-inc.com] and a link to the official ruling site [copyright.gov] (but I don't see the ruling there yet).

I've been watching this case closely, and I'm glad it's been thrown out like the Garage door opener case! [eff.org]

Great!

This can only be a good thing. Not only does it put Lexmark in their place, but it also tells other companies that they can't cloak their anticompetitive practices behind the DMCA.

There was a similar case where the Chamberlain Group, a garage door opener manufacturer, sued Skylink Technologies over a universal garage door opener using the DMCA by saying that the program that interpreted the signals from the garage door remote was being exploited by Skylink, and thus fell under the circumvention article in the DMCA. Skylink has won this case. The judgement is here. [eff.org]

Buy Canon (for windows users)

Canon doesn't support free software very well, but if you're running Windows, Canon is still in the old school for ink; their ink carts are translucent plastic boxes with ink in them. Trivial to refill. I just last week bought an i960, and I love it. The ink boxes hold 15ml of ink per color, which lasts forever it seems, and it looks like refilling is as simple as "pop a hole in the top, squirt in ink, reseal." Each color has its own ink box so you only replace what's empty. They have an optical low ink sensor so it tells you when the ink is REALLY LOW, not "the counter says you should be out of ink, so I'm not printing anymore."

The i960 prints photos very fast, as well, and the 4x6 drop-down tray is very cool if you're using the printer to print photos and regular stuff every day. The photo quality is excellent.

They do charge $200 for the printer; if it was from Lexmark I think it would be $100, but they'd be selling you locked-in ink carts for $30 each.

I had an Epson before, and between bottom fill refilling leaking ink onto my hands, sponges that got air-saturated so you couldn't get them full anymore after a few fills, chips that you had to buy reprogrammers for to reset them, etc, etc, I was fed up.

Similar case

The facts sound roughly similar to Sega v. Accolade [harvard.edu], a 1992 9th Circuit Court of Appeals case in which Sega (whom you all know) sued Accolade, who made Sega Genesis-compatible games without obtaining a license to do from from Sega.

Sega sued the crap out of them, alleging among other things trademark infringement. Basically, the Genesis console has a bit of code in the bootloader that checks that the game cartridge has the word "SEGA" in a particular location. That triggers a display that says "PRODUCED BY OR UNDER LICENSE FROM SEGA ENTERPRISES LTD" for a few seconds on the screen.

Sega was trying to be clever. If you manufactured a game cartridge without the "SEGA" code, it wouldn't run. And if you manufactured one with it, then you caused the display to appear. And if that statement was false (because you hadn't actually obtained a license), Sega could sue you for trademark infringement! Hehehehe.

The court told Sega to get a life. Trademarks are a limited monopoly allowing the holder exclusive use of certain aspects of words, pictures, or phrases. They certainly can't be used to tie monopoly purchases to nonprotected things, thereby extending the limited monopoly to them. If you could, then every manufacturer would have monopolies on everything they manufactured, as well as every replacement part, or compatible product, etc. etc. etc. They'd simply manufacture a patented, copyrighted, or trademarked doodad and then make sure that their entire product depended on that item to operate.

This sounds like what Lexmark was trying to do -- they had some sort of computer chip that verified that things were legit, and then they sued anyone who needed to copy that chip in order to make replacement parts. The lesson from Sega v. Accolade is: don't do this.

do people think this will make a difference?

How many companies other than Lexmark had tried such a tactic to protect their refill market? How long has the DMCA been a spector, seriously
preventing 3rd party cartridge competition? The lexmark case -- isn't it less than a year old? Refill gouging has been going on alot longer than that.

Printer companies can still use technological means to ensure cartridge loyalty, and only for the oldest printers are you likely to reap the benefit of reliable reverse engineering. Suppose your printer company has rotating encryption keys for the protocol that rotate twice a year for 10 years but only after 365 days of being 'on' with '5' days assumed usage out of '7'. Now you use your printer 3 days a week -- That would mean you rotate in .8-1.0 years. To crack all the keys, (assuming 256-bit encryption) they could make it very difficult to produce a reliable replacement. At the very least it would create a great deal of FUD around using 3rd party cartridges for years after a new printer came out. Now compare that with the useful life of a printer.

HP places expiration dates in each printer cartridge -- which means if you buy a 3rd party cartdridge and if such encryption were employed, users could find their 3rd party cartridges quickly "expired".

This legal decision does nothing more than release low-quality cartridge verification algorithms -- the easy one's to reverse engineer; it does nothing to prevent printer manufacturers from using ever more complex methods to protect their lucrative cartridge income.

Only if state laws (some state out east was doing this?) pass "open replacement" requirements on printer manufacturers will this situation seriously change.

There is also nothing to prevent printer manufacturers from secretly detecting foreign cartridges and setting a flag in the printer NVRAM to mark it as "tainted" and no longer available for support/warrantee. Makes perfect sense -- "we" (a printer manufacturer) "won't warantee our printers when used with 3rd party cartridges due to the lack of quality assurance in such cartridges. We can't be held responsible if a 3rd party cartridge damages or otherwise causes problems in your printer and won't be held responsible if 3rd party cartridges are used."....etc.etc.etc...blah blah blah. The DMCA is a tool of companies to protect against easily circumventable access controls.

-lpq