The World is changing and we must change with it.
Ragnar Lothbrok, Viking leader
The aftermarket is increasingly lining up into two distinct methodologies. In the U.S. and western markets like Europe, the industry leaders’ business models are at least 90 percent invested in producing high quality, higher price remanufactured cartridges. However, in Asia more than 90 percent of cartridges produced now are lower cost, lower quality new-build compatibles.
I believe in 2018 and beyond we are going to see increased competition between the companies involved in these two different aftermarket strategies as they fight for share in a shrinking market.
Let me give you the backstory of how we got here:
Around 2008, there was one legitimate alternative to OEM cartridges—remanufactured.
Then, once Lexmark sued 60 companies for importing empty cores into the U.S., Chinese aftermarket companies began to get serious about producing cartridges built from new shells. Perhaps the burden of recording where cores came from and where they then had to be returned to be sold was the tipping point that made remanufacturing in China less attractive than the capital investment and business model changes required to manufacture new compatibles. Or, as I and many others came to derogatorily refer to them as, clones.
The clone term wasn’t accidental, either. What do you think of when you hear this term? Counterfeit? Low quality? Mea culpa…I’ve worked in remanufacturing for 16 years and actively promoted this narrative. In 2017, I moved to a new company, travelled to China and was forced to confront a new reality. The vast majority of “clones” do not infringe OEM intellectual property and, moreover, not all clones are low quality, either.
What is the difference between a reman and a new-build compatible?
Today there are more similarities than differences because remanufactured cartridges do not contain as much recycled content as they used to. The drive towards OEM quality has meant that nearly every component inside is now exchanged for new. Few items have been designed by the OEM to go a second lifespan, so they have to be replaced. The toner, chip, OPC, PCR, mag roller, doctor blade, wiper blade, drive gears, etc., are usually changed 100 percent of the time. Today, little more than the plastic casing is reused, which means that the fundamental difference between a reman cart and a new-build is the sourcing strategy of the shell—new or used.
Is a remanufactured cartridge more environmentally friendly than a new compatible?
Well, maybe. Let’s examine that.
A new OEM cartridge and a new compatible are made from new plastic, but the carbon cost of these consumables can be lowered by utilizing recycled plastics in the manufacturing process and by how much recycling the company does of its sold/expired product.
A remanufactured cartridge reuses the plastic shell, but how much of this carbon saving is used by shipping the empty cartridge to plants overseas for remanufacture? Then, as most/all of the components inside are replaced, what happens to these items? Are they properly recycled or simply disposed of into the waste stream?
I now believe the environmental benefits of a cartridge are largely determined by what happens to all spent cartridges after they are sold, regardless of whether they are OEM, reman or compatible. To determine (or dictate) this, the decision to recycle is as much the responsibility of the end user and reseller as it is of the manufacturer.
The OEMs, for example, shred (and recycle) the entire used cartridge down to its plastics and metals in the local market and claim this is a more environmentally-friendly solution than remanufacturing a cartridge just once. I had always been a skeptic and believe they did this to take useable cores out of the remanufacturers’ supply chain. However, in light of what is reused in a reman cartridge today, I’m not sure I can fully dismiss the OEM argument anymore. Sorry…
Is a new-build cartridge a counterfeit?
Yes, if it is put into fake OEM packaging and attempted to be sold as an OEM. It also is if the new-build shell is an exact replica of the OEM shell with no regard given to the IP ownership of the OEM.
Does a new build cartridge infringe OEM IP?
It can, but in this respect, both a reman and new-build are judged equally:
Every year millions of new-built cartridges are legally imported into the U.S. and Europe. For that matter, so are most remanufactured cartridges. Most remans are now built in low-cost markets outside of the primary western economies in which they are sold.
Both categories are subject to the same importation standards of IP compliance and are scrutinized by the same customs organizations before being successfully imported. In the U.S., we have the USITC. For the last five years, the OEMs have done an excellent job of training and working with customs agents to help them understand all the patents/GEOs and seize non-compliant product. As a result, it is my opinion—backed up by a huge decline in the number of inbound shipment seizures at the ports—that very little infringing product now makes it into the country.
That is significant because it forces us to confront a new paradigm:
The act of producing a new-built (clone) shell cartridge does not infringe OEM IP. If it did, the millions of new-built cartridges that are sold in western markets primarily into the retail channel would not be allowed in by customs officials. In fact, if you search through the databases of past and active USITC investigations (I recommend the excellent website www.action-intell.com) you will be hard pressed to find any litigation or seizures made around the shell of the cartridge.
What you will find is that both remanufacturers and new builders are both held to the same standards around the components inside the cartridge. I reiterate, not a new shell or, thanks to the Supreme Court ruling in 2017, a used core.
The reason lies with the goal of the patent system. A patent is awarded for “An invention that is a solution to a specific technological problem” (Wikipedia definition). Therefore, the OEMs have concentrated their product development around creating new components inside the cartridge that have specific purposes. Obtaining a patent around the shell/cartridge case is almost impossible.
The reason being that all of the OEMs have used shells for decades and there has been no way (to date) that the OEMs could prove that their shell was a new invention that solved a specific technological problem.
So why are remanufactured cartridges associated with high quality and new-builds low quality?
Well, capitalism! Until recently, the builders of new compatibles concentrated on the internet buyer looking for the lowest cost/acceptable quality level of cartridge and it has taken nearly a decade for them to perfect their trade. Today, though, it is possible to find non-infringing new-build compatibles that marry the two business models together to create a compatible that is built using the high-quality components typically found in a reman cartridge, but are housed inside a low-cost compatible shell.
Low cost and high quality? That sounds like having your cake and eating it, too! If you are intrigued to know more, please contact me at Christianp@ldproducts.com.
