Printer cartridges - licensing restrictions

From Ed Foster's GripeLog -

The sneakwrapping of American law took another fateful step last week
with a decision rendered by the U.S. District Court in the case of
Lexmark versus the Arizona Cartridge Remanufacturers Association
(ACRA).

The court's ruling - dismissing ACRA's charges of deceptive
practices against Lexmark - implies that a manufacturer can
deprive mass-market consumers of their rights just by slapping a
license agreement on its product.

The case revolves around what Lexmark used to call its "Prebate"
program for laser printer toner cartridges. Prebate cartridges come
with a shrinkwrap license agreement saying "opening this package
confirms your acceptance of" a restriction that the cartridge can be
used only once and then should be returned to Lexmark.

Lexmark said it wanted the empty cartridges for remanufacturing or
recycling purposes, but no one can doubt the company's primary motive
was to keep the cartridges out of the hands of re- manufacturers.

ACRA argued the Prebate program was deceptive because it
misled consumers into thinking they did not have the right to
dispose of the cartridges as they chose.

ACRA assumed the court would conclude Lexmark customers have
that right due to what is called the "doctrine of exhaustion."
Roughly the patent law equivalent of the first sale doctrine in
copyright law, the doctrine of exhaustion says the patent holder's
rights cease - are "exhausted" - once the product is actually sold.

Buyers have an implied license to use the patented product as
they see fit, including reselling it or fixing it. As the judge put
it in her ruling, the doctrine of exhaustion "includes the authority
to repair a patented device (e.g. refill an empty printer cartridge.)"

But ACRA assumed wrong in thinking the court would uphold the
doctrine of exhaustion in this case. That doctrine only applies in
unconditional sales, the judge said. Conditional sales in which one
negotiates a better price in return for agreeing to certain
restrictions are not uncommon in business-to-business transactions.

Most laser printer customers are businesses, the court noted, and
Lexmark's license was visible on the outside of the product "so the
Lexmark purchaser is on notice that Lexmark has imposed a single- use
condition on the cartridge."

The court also bought Lexmark's description of its Prebate price as a
$30 discount or upfront rebate off the "regular" price of its
theoretically available non-Prebate cartridge. ACRA had argued that
the Prebate price was the actual regular price, and $30 more for a
cartridge without the usage restriction was actually a surcharge. But
the judge concluded that the Prebate offer constituted a special price
that reflects an exchange for the single- use condition.

"Based on these circumstances, the court concludes that Lexmark
has not exhausted its rights," the ruling read. "The Prebate is a
conditional sale and the single-use condition is enforceable. Because
of its patents, Lexmark has the right to impose conditions on the sale
of its patented product. It may restrict a purchaser's ability to
repair it, which is what in essence the single-use condition does."

In other words, a federal judge is saying that a patent holder can
impose usage restrictions on its customers just by having some
legalese on the package. And the usage restrictions are enforceable
even when they are clearly intended to limit competition.

Indeed, giving Lexmark the right to prevent its cartridges from
being acquired by the remanufacturers makes it all the more likely
Lexmark printer customers will have no other options when they need a
toner cartridge.

Of course, Lexmark customers did have another option - they
could have purchased a different brand of printer to begin with.

As we've seen, Lexmark isn't the only printer company trying to
lock customers into using their consumables, but none of the
others have gone so far as to employ UCITA-style legal tricks to do
it. Either we make it clear we will have nothing to do with companies
that deprive us of our rights this way, or we can bet that very soon
all companies will do the same.

http://www.gripe2ed.com/scoop/story/...0/9/9193/72265