A legal firm discussed how the OEM’s case against the remanufacturer has been “redrawing the boundaries of ownership”.
Banana IP looked at the implications of the Lexmark-Impression Products legal case decided in Lexmark’s favour earlier this year, which saw the US Court of Appeals rule that US remanufacturer Impression Products had “infringed Lexmark’s patents by marketing refurbished Lexmark cartridges that originally were sold with ‘single use’ or ‘no resale’ restriction in the US and abroad”.
The case began when Impression was named in an IP infringement case in October 2013 referring to the “unlawful importation […] the sale for importation and/or the sale within the United States after importation” of a number of infringing remanufactured and cloned aftermarket cartridges. Impression moved to dismiss claims and overturn Jazz Photo, which impacts on patent exhaustion, or the “first-sale doctrine”, influenced by the Supreme Court’s ruling in the Kirtsaeng case in 2013, which prevented copyright owners from stopping imports and reselling content sold abroad. T
The ruling in February decided that Impression “infringed the patent rights of Lexmark […] when it imported Lexmark’s toner products back into the United States after they were first sold abroad”, as well as that it was “liable for selling refurbished Lexmark cartridges that were originally marketed for a single use under its return and recycle programme”. Recently however, the US government backed an “overturn” of the decision, and “urged” the Supreme Court to review it.
Banana IP’s view was that the issue of design patents are “redrawing the boundaries of ownership”, and used the example of the case’s implications if not reversed, including a situation “where the manufacturer of your car restricts you to drive your car only on weekdays or compels you to fill fuel at a specified fuel station”. The ruling was said to have “invited sharp criticism from the antitrust perspective”, while the “ire” from that side “seems to have been pre-empted by the court as the judgement itself has the mention of the word ‘antitrust’ as many as 21 times”.
The site notes that other companies trying to change ownership include Uber, Airbnb and Spotify, and while Lexmark “did not invent any new path-breaking technology”, its “smart use of contracts and interpretation of laws could well redefine the very understanding of ownership”. Having faced competition from HP among others since it was formed, Lexmark “did what an ambitious printer company would do”, and “focused less on initial profits” and more on “after-sale supplies”.
This “clever strategy” saw it sell printers in two business models, one free-to-use and unrestricted and another locking in buyers with “post-sale restrictions”, and to make “windfall profits” it needed to be the “principal vendor”, something limited by third-party competitors including remanufacturers. Creating licences, the OEM “barred buyers from reselling cartridges to anyone other than Lexmark”, as seen in its long cases with Static Control.
The site concluded that “only time will tell whether the basic law of property ownership”, that the owner of an object “has the right to use the object however desired”, still “holds good”.