Last May’s Supreme Court decision in the landmark Impression Products vs. Lexmark case seemingly set the remanufacturing world on its ear while dealing a blow to global OEMs. Now that a precedent has been established that all patent rights have been exhausted following the initial sale, what impact will be felt among the major players in the consumables industry? Will a flood of empty cartridges litter the U.S. landscape, providing a gateway for Chinese remanufactured product to gain a foothold in a market that already sees severe competition?
As part of our February state of the industry look at consumables, we have lined up a cast of major players in the space—including remanufacturers, distributors and consultants—to provide their perspective on the market’s initial reaction and the long-term ramifications.
Monte White, vice president of Product Marketing, Supplies Network
Monte White,
Supplies Network
“It’s certainly a landmark case in terms of the precedent that was set. Up to this point, however, we haven’t seen material changes in the marketplace. Lexmark had done a good job of managing the aftermarket supplies business with their programs. You would think it would have a greater impact on the reman business. The reman market, in our view, is becoming a more challenging marketplace. Low-cost Chinese product is gaining share, and those that are remanufacturing domestically are often getting squeezed between pricing from the OEM’s win-back programs or by Chinese product that is just cheaper.”
Luke Goldberg, executive vice president, sales and marketing for Clover Imaging Group (CIG)
Luke Goldberg,
Clover Imaging Group (CIG)
“We haven’t seen a dramatic decrease in empties prices, which some people thought might happen, that the global empties markets would open up. There’s been no dramatic change, whether positive or negative. I think everybody thought there would be this earth-shattering impact, but we haven’t seen that. In our markets, it’s business as usual.”
Charles Brewer, president of Actionable Intelligence
“What that has done is effectively open up the U.S. to overseas empties and changed the inflow of empties into the country, bringing the price of empties down. Empties are bought and sold on a commodities market, based on supply and demand, and supply is up. The availability being up is good news for remanufacturers because it brings the price of cores down. It didn’t happen overnight…there were certain restrictions that customs and the U.S. ITC had put in place, and it took a while for those restrictions to come down. Our understanding is the flow of empties coming into the U.S. is picking up. It also opens the market up to product that was remanufactured overseas.
Charles Brewer,
Actionable Intelligence
“If you were an overseas company, in order to comply with the old law, you had to buy empties from the States, ship them to your factories overseas, remanufacture them and then ship them back. But in doing that, the economics didn’t really work out. Now, because you can get empties anywhere in the world and bring them back to U.S., companies can source and remanufacture them where they are and ship them here. So now U.S. remans have to compete with foreign product.”
Neal Becker, partner and co-founder of Q2 LLC
Neal Becker,
Q2 LLC
“This basically allows remanufacturers to produce product at a lower cost, which should lower the cost for the dealers and end users as well. They just need to be wary of low-quality product and work with a partner such as Q2 to help navigate their supply choices.”
Bob Willmes, CEO and founder of Supplies Wholesalers
Bob Willmes,
Supplies Wholesalers
“The Supreme Court ruling is a huge win for the aftermarket and all consumers, since it eliminated the requirement that a remanufactured cartridge had to be first sold in the United States, which has reduced costs and increased availability. In addition to the ruling on the first sale doctrine, eliminating the prebate requirement further reduces the ability of the OEM to take advantage of the consumer and bully the aftermarket, ultimately leveling the playing field.”
Christian Pepper, president of Channel Partner Division, LD Products
Christian Pepper,
LD Products
“Sadly, I don’t think it will have much impact now in the U.S.A. This litigation originally caused fear and doubt issues for North American-based remanufacturers and helped speed up vendor consolidation to a point where the largest remanufacturer is significantly bigger than the next 5-10 competitors combined. Unfortunately, press reports and rumors circulate that most North American-based remanufacturers have been affected by declining revenues and margins over the past couple of years as print volumes shrink. The unintended consequence of this litigation was that the regulatory burden of tracking where empty cores came from and needed to be returned to spurred the major remanufacturers in China to invest and move their businesses towards producing new-build compatibles instead of remanufacturing cartridges.
“Today, we have a situation where most Chinese producers are more than 80 percent invested in producing new-build cartridges and few U.S.-based remanufacturers are left to take advantage of the Supreme Court decision. My prediction is that we will see the remanufacturing business model continue to shrink as more producers realize that the costs of collecting a core and the labor to remanufacturer it does not make as much financial sense as learning how to build a non-infringing, new-build compatible.”
