Lawsuits are nothing new to third-party supplies vendors. Companies that remanufacture spent cartridges or reverse-engineer and manufacture new compatible SKUs routinely face lawsuits. I’ve been following the consumables markets since the late 1990s and have written plenty about various cases over the years including more than a few articles for ENX magazine. In all my years of following the industry, however, I don’t think I’ve ever witnessed as many suits as I did last year. And, if the opening weeks of this year are any indicator of what’s to come, the courts will see even more OEM filings in 2014 than they did 2013.
Hardware vendors active in the courts last year included Canon, Epson, HP, Lexmark, and Samsung. The suits pertained to patents on ink and toner cartridges and in some cases both. At the start of the year, for example, HP filed complaints alleging Long Beach, CA-based LD Products had misled consumers by selling newly built ink and toner cartridges as remanufactured. After putting up a little stink, LD Products opted to settle and the matter was resolved last fall.
Many cases related to our industry were filed in the United States, but OEM attorneys were also active abroad especially in Europe. Epson, for example, reached a settlement in the U.K. with Dynamic Cassette International Limited (DCI) last summer and DCI stopped selling Epson compatible ink tanks. HP also settled a couple of inkjet cases in Poland in 2013. At the close of the year, Samsung filed suit against distributors in Germany and in Holland for selling new compatible toner cartridges that the OEM claimed infringed its patents.
This year, OEMs have remained active in Europe. In rather dramatic fashion, various representatives from hardware vendors including HP, Konica Minolta, Lexmark, and Samsung accompanied German customs officials as they raided booths looking for infringing cartridges at the Remanexpo event, which is part of the giant Paperworld tradeshow held in Frankfurt each January. Conversely, at the end of January, Canon quietly filed individual suits against various third-party supplies vendors in U.S. federal court for violating a collection of patents on the firm’s latest all-in-one toner cartridge designs. Canon’s stealth filings came almost two years to the day after it initiated similar actions alleging several dozen firms had infringed older patents on gears used to rotate the imaging drum in its toner cartridges. That case resulted in a general exclusion order, which was issued by the U.S. International Trade Commission last June restricting the importation of cartridges with infringing gears into the U.S.
The Latest Canon Suits
In the most recent action, attorneys for Canon, Inc., filed 11 separate complaints in the U.S. District Court for the Southern District of New York on January 29. The complaints allege 18 companies (see table below for defendant names) violated 9 Canon patents covering drums or rollers found in certain toner cartridges and how they are rotated. The 2012 case, which involved only 2 patents, received a lot of attention because it related to virtually all Canon and HP all-in-one cartridges released prior to 2012. The patents in the latest case are relatively new and have been issued within the past two years—one as recently as January 2014. The patented technologies allegedly violated are found only in 5 Canon monochrome SKUs and four HP SKUs as well as the HP CE31X series of color toner cartridges.
The 9 patents involved in the most recent case are similar to the 2 patents involved in the 2012 case in that they are all related to mechanisms used to rotate a drum. The similarities end there, however. The two patents in the earlier lawsuits covered a rigid protrusion with a slight twist that allowed drums to couple easily and synchronize with a printer’s drive motor. The coupling mechanism described in the more recent patents is not rigid. Instead, it features a hinged component that provides a degree of flexibility so a cartridge can be easily inserted into and removed from a printer. Because the mechanism can move, I have sometimes seen it referred to as a “dongle” gear.
Regardless of what it’s called, I assume that Canon will deploy some variation of the newly designed coupling mechanism in its future machines. While it varied in size depending on the toner load, for more than a decade the twisted-protrusion design was used for the coupling mechanisms in virtually all Canon and HP LaserJet cartridges. I would expect Canon will do the same with the dongle design and use it in a wide variety of machines. If so, third-party cartridge makers and their part suppliers—especially OPC drum manufacturers—better learn how to make non-infringing alternative coupling mechanisms or face the wrath of Canon’s lawyers.
Because the market is so enormous, lawsuits involving Canon’s integrated cartridges get a lot of attention. The company, however, has been litigious when it comes to protecting patents on its less-complex toner bottles, which are used in digital copiers and production devices. In 2011, Canon filed suit against Color Imaging, UniNet Imaging, and UI Supplies, a UniNet subsidiary and distributor, for marketing infringing toner containers used in various monochrome and color imageRUNNER and imageRUNNER ADVANCE copiers/MFPs. While UniNet and its subsidiary elected to settle, the suit against Color Imaging continued to wind its way through the courts last year. The case involves the so-called ‘012 patent (U.S. patent 7,647,012) that Canon asserted successfully in its infringement complaints against Copylite Products, Densigraphix, and Polek & Polek as well as UniNet, which are now permanently enjoined from selling the infringing toner bottles.
In addition to actively pursuing complaints against vendors in the U.S., Canon has filed suits over its toner containers in the United Kingdom with Allcopy Products UK and Parsia International Limited. The OEM and the accused firms resolved both matters separately in the second half of last year.
Paperworld Raids
Identifying infringing toner bottles for copiers was one of the reasons that German customs visited Paperworld this year. About a dozen German customs agents entered Hall 3.1 at Messe Frankfurt just hours after the doors to Remanexpo@Paperworld opened on January 25. Flanked by executives from HP, Konica Minolta, and Lexmark, the agents moved from stand to stand removing infringing products on display and issuing fines. The agents also issued orders to exhibitors that they must remove any signage and marketing materials promoting infringing products from their stands.
I understand that German law provides accused firms with a degree of anonymity so no official list of the actual companies raided was released. However, The Recycler Magazine reported that during the first day of the show “between 8 and 12” separate raids were conducted “on exhibitors suspected of selling counterfeit products.” I witnessed customs agents at various booths including Chinamate Technology Company, Doliami (China) Limited, HK HaoYinBao Group, Ninestar Image Technology, and Uniplus Technology.
No raids were conducted on the second day of the show, but on January 26 the agents were back at the Messe ensuring their orders were being followed and no infringing products had been returned for display. According to a report posted on the German-language website www.di-branche.de, German customs also raided the Maetone Image Company booth and confiscated infringing Samsung toner cartridges. I heard some rumors that Brother was involved on the second day of raids and some of the OEM’s product was confiscated, but I couldn’t confirm that for sure.
A representative from HP told me that a wide range of infringing products were seized by German customs, including various HP ink cartridges with integrated print heads as well as HP 364, 920, 930, 940, and 950 series tanks. The Lexmark products that I saw being inspected were exclusively toner cartridges. I understand that under the direction of Lexmark representatives, the customs agent seized infringing Lexmark 501 toner cartridges in the Ninestar booth. While they acknowledged that customs had been on their stand, the staff I spoke with in the Ninestar booth flatly denied Lexmark’s allegation and vowed they would appeal the seizures. I understand that it was infringing consumables for Konica Minolta bizhub MFPs that brought customs to the HK HaoYinBao Group booth. As the customs entourage was exiting, I saw signage for Konica Minolta compatibles being covered up at the booth.
The raids in Frankfurt were significant for several reasons. First, when it comes to searching for infringing consumables, OEMs are clearly no longer focused exclusively on the U.S. market. While it may be easier to work with the single federal court system in the U.S. rather than the various courts in the E.U., OEMs are willing to do whatever it takes to get infringing products off European markets. It was also interesting to see Konica Minolta and Samsung actively participating in the raids. Neither company has filed suit in the U.S. as far as I know, although as noted above Samsung did file a couple of suits in Europe last year. If the pair is now active in Europe, I would guess that U.S. suits will follow in the near future. Likewise, if the rumors about Brother turn out to be true, it would suggest that the Japanese printer maker will become active in the U.S. courts, which would make sense given the fact that Brother’s share of the U.S. market is growing along with the installed base of its machines.
The 2014 Docket
Look out for some important court decisions in the U.S. this year. Perhaps the most important will be the case that Lexmark has been pursuing against scores of vendors over the past several years. The case dates back to 2010 and Lexmark has grown increasingly active in the matter since 2012. For almost three years, the OEM added names to a list of defendants marketing remanufactured and new-build compatible toner cartridges that infringe its patents. At the beginning of January, Lexmark was awarded default judgments against seven defendants, Enviro Green Technologies, MBC Trading, NGS S.A., Prinko Image Co. USA, Refiltoner, Shanghai Orink InfoTech, and Zhuhai Richeng. The companies were ordered to pay the OEM a grand total of nearly $34 million, but how much it will actually get is unclear. Many of the companies are based outside of the U.S. and may not heed the court’s order.
At Remanexxpo@Paperworld in Germany – a part of a booth sign bein covered to remove compatibles alledged to be infringing
In addition to Lexmark, watch and see what HP does in court this year. The firm had also been quite aggressive protecting its inkjet cartridge patents, but it did little with toner cartridge intellectual property. My assumption was that because the technology is sourced from Canon, HP owned little of the IP on LaserJet toner cartridges. Last year, however, the firm demonstrated that it will protect the markets from infringing LaserJet cartridges. I noted the LD Products case earlier.
HP also began warning chip makers to be more respectful of the IP used in chip sets for LaserJet cartridges. The firm published a technical white paper explaining to third-party chip vendors how to tweak the code they use so it does not violate HP’s trademark and the firm dispatched representatives to tradeshows to get the word out. When they weren’t out in the hall with German customs agents rooting out infringing ink cartridges, HP representatives recently discussed chips at the Paperword event. After all this effort, it seems unlikely that the company will remain idle if third-party supplies vendors continue to market cartridges that do not comply with the guidelines it has spelled out.
Of course, you should also follow the case filed by Canon in January. Because the number of cartridges is somewhat limited, the impact of the case will not be very profound, at least not initially. If, however, third-party supplies vendors can not figure out how to manufacturer alternative gears that do not violate Canon’s patents, this case will have a huge market impact as more and more OEM cartridges with the dongle gear are released and non-infringing, non-OEM product are not available.
And as if all this wasn’t enough to make you keep an eye on the courts, there is also the prospect of new companies like Brother, Konica Minolta, and Samsung filing suits this year at home and abroad. There are a wide range of third-party supplies available for machines from these three OEMs, so it will be interesting to see if the companies begin asserting patent protections on these consumables.
All in all, it should be a very interesting year. Stand by!
