SCC Takes Aim at Lexmark--Again

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Static Control Components has begun selling three new chips that allow third-party printer cartridges to work in printers from Lexmark International. The move, announced Tuesday, is the latest salvo in an ongoing dispute between SCC and Lexmark.

Lexmark printer cartridges for the T520, T620, and T630 laser printer families use chips to verify that the cartridge is one manufactured by Lexmark, and cartridges from third-party vendors without those chips will not work in Lexmark printers.

Last year, Lexmark won an injunction in a Kentucky court prohibiting SCC from distributing its Smartek chips that replicate the signals sent from Lexmark's chips in the T520 and T620 printers. After reviewing the text of that decision, SCC has come back with three new Reengineered Replacement chips that provide additional benefits such as ink management and maintenance features.

The new chips will allow third-party vendors to once again sell toner cartridges that work with the T520 and T620 printers, and to add cartridges for the T630 printers to their product lines, SCC says.

SCC has been selling the chips for a week, and has yet to hear anything from Lexmark about the new chips, SCC Chief Executive Officer Ed Swartz says in a statement Tuesday.

The Sanford, North Carolina, company will file for copyrights for the new chips with the U.S. Copyright Office, Swartz says.

Ongoing Dispute

Lexmark issued a statement Tuesday.

"The United States District Court in the Eastern District of Kentucky has previously enjoined Static Control to cease making, selling, or otherwise trafficking in the Smartek microchip used in the remanufacturing of laser toner cartridges developed for the Lexmark T520/522 and T620/622 laser printers. Lexmark is in the process of obtaining copies of the new chips described in the Static Control press release in order to determine whether they are illegal chips," the company says.

"Lexmark spends hundreds of millions of dollars annually on research and development, and the company intends to vigorously protect its intellectual property rights," it says.

Lexmark had sued SCC in 2002 under the Digital Millennium Copyright Act, claiming that SCC's chips violate a section of that act prohibiting duplication of digital technology that protects copyright material.

The Lexmark cartridges used copyright software to produce the data allowing Lexmark printers to only accept Lexmark cartridges, and SCC duplicated that software in order to produce those chips, according to the initial ruling in the case handed down last year.

The U.S. Copyright Office later ruled that the DMCA does not prohibit reverse engineering if the intent is to make the duplicated product work with a separate computer program. SCC had requested a ruling on possible exemptions to the DMCA that would allow them to produce their chips, and the Copyright Office dismissed those requests after ruling the DMCA had always protected SCC's type of reverse engineering.

SCC's new chips do not contain any Lexmark code, unlike the Smartek chips, said Skip London, vice president and general counsel, on a conference call Tuesday. It now believes the only issue related to the chips are the provisions within the DMCA, he said.

In the Ink

The real money in the printer market isn't in the printer itself, but rather in the consumables market for products such as ink cartridges that provide a steadier cash flow. The printer manufacturers claim that their cartridges are far superior in quality to those remanufactured or refurbished by third-party vendors, but the third-party cartridges usually sell for far less than the ones made by the original manufacturers.

Other printer companies such as Hewlett-Packard, Dell, and Epson America do everything they can to encourage users to purchase original factory cartridges, but Lexmark is the only major printer vendor so far to include a chip in its printers and cartridges that ensures only Lexmark cartridges will work with Lexmark printers.

Lexmark also offers cartridges without the chips that users can purchase and return to Lexmark or a third party for refilling or remanufacturing, as well as cartridges that it has remanufactured itself, a Lexmark spokesperson says. The chips are present only in cartridges that the user agrees to return just to Lexmark after receiving an up-front discount, she says.

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