A ruling this week from the U.S. Copyright Office could strengthen the defense in a copyright infringement lawsuit by Lexmark International that is expected to have broad effects on the market for low-cost, third-party printer cartridges.
Lexmark is suing manufacturer Static Control Components (SCC) of Sanford, North Carolina, which makes computer chips for third-party ink cartridges. The chips enable manufacturers to create clones of the cartridges used in Lexmark printers. Lexmark sued SCC last year, charging that SCC's chips contain copyrighted Lexmark computer code and consequently violate the Digital Millennium Copyright Act (DMCA) ban on circumventing digital technology that protects copyrighted material.
Without taking a position on whether SCC's chips illegally incorporate Lexmark code, the Copyright Office has ruled that the DMCA does not block such usage. Software developers can use reverse engineering to circumvent digital protection of copyrighted material, if they do so to achieve interoperability with an independently created computer program.
The SCC had asked the Copyright Office to recommend several DMCA exemptions that would protect its efforts to defeat Lexmark's protection technology. The requested exemptions are unnecessary because existing DMCA statutes already permit the kind of reverse engineering that SCC could use to thwart Lexmark's protections, the agency said in a lengthy memo of recommendations about DMCA exemptions.
Lawsuit Continues
SCC executives hailed the Copyright Office's statement as a watershed moment for their case.
"We think the Copyright Office put to rest all of the objections Lexmark has raised," said SCC CEO Ed Swartz.
Lexmark responded that it was pleased the Copyright Office refused SCC's exemption request.
"It is inconceivable to us how anyone can consider this ruling a victory for Static Control," said Vincent Cole, Lexmark's general counsel, in a prepared statement. Lexmark refused further comment on the agency's memo.
SCC pulled its Smartek chips for Lexmark clone cartridges from the market earlier this year in accordance with a preliminary injunction favoring Lexmark. U.S. District Court Judge Karl Forester found that SCC directly copied Lexmark's copyrighted Toner Loading Program--a charge SCC admits is accurate--and ruled that its efforts to bypass Lexmark's authentication controls violated the DMCA.
The latter half of that ruling could be affected by the Copyright Office's recommendation. SCC was already pursuing an appeal of the injunction, and the company expects the appeal to be heard later this year.
Combating Clones
The fight between Lexmark and SCC may have implications throughout the lucrative market for printer cartridges, according to some industry analysts. Printer manufactures earn substantial margins selling printers cartridges. Third-party manufacturers have carved out a chunk of that market by offering refurbished cartridges for a fraction of the cost of those from the printers' original makers.
Last year Lexmark began using a chip in some of its cartridges that communicates with the company's printers and verifies that the cartridge is from Lexmark. Without that verification, the cartridge won't work. SCC's Smartek chips mimic the Lexmark chips so third-party cartridges can pose as official ones.
SCC is confident that the Copyright Office memo green-lights its Smartek chips, Swartz said. Of the court's finding that SCC's chips illegally use Lexmark code, Swartz said that the Copyright Office ruling may excuse the code use--but if not, SCC will develop new code that meets the requirements of the reverse-engineering exemption.
Other Routes
A research report from Merrill Lynch suggests that Lexmark could thwart SCC by advancing its software so that reverse engineering would be technically infeasible, but Swartz brushed off such concerns.
SCC already offered to show Lexmark the software it has developed to replace the infringing code in its Smartek chips, Swartz said. Lexmark refused to authorize that approach, citing DMCA protections against any authentication bypass maneuver, according to Swartz.
"I think that what the Copyright Office saw here was that what was taking place was a test case," Swartz said. "If they came down on the side of Lexmark, what they would be doing would be to provide a path for companies to develop a legal electronic monopoly that would make the oil trust and the steel trust that Teddy Roosevelt broke up at the turn of the century look small."
