Issue #0435/2 - Remanufacturing is a means of preventing used toner and ink cartridges from simply being deposited in landfill sites. But there is a lot more than that at stake for the OEM printer manufacturers. There is also a lot more at stake where potential future use of technology is concerned.
Ultimately, the motivation for any OEM taking a stand such as the litigation taken by Lexmark, or for incorporating killer chips into its cartridges, is to protect the revenue stream created by the inevitability that customers need to buy cartridges for their printer of choice on an ongoing basis.
TCPglobal has commented on the ‘multiple monopolies’ effectively operated by printer OEMs on a number of occasions, so there is no need to tackle that issue again now. However, it is the attempt to take this monopoly situation to the extreme by incorporating what have become known as ‘killer chips’ into cartridges, so that users cannot refill them, that has angered users and the third party industry alike and caused bodies such as the European Union to express concern over anti-trust activity.
Static Control’s Smartek chip is a replacement microchip that is applied to a remanufactured Lexmark cartridge to allow the printer to read it as a new cartridge instead of an exhausted cartridge.
Similarly, a device to reset the chip on Epson inkjet cartridges has been available on the open market for a considerable period of time and replacement chips are available from a source in the Pacific Rim to fit several Hewlett-Packard ink cartridges, including the No.10/11 and No.14 cartridges, for some of its business oriented printer and MFP devices.
Static Control itself also produces Smartek chips for several models of Hewlett-Packard and Samsung printer cartridge.
While not liking the fact that potential revenue is being lost, both Epson and Hewlett-Packard recognise that competition is not unhealthy. Indeed, this has created an opportunity for Hewlett-Packard to implement an educational advertising campaign extolling the virtues of using Hewlett-Packard original supplies because of the high levels of technology that go into the development of these print systems.
If a third party cartridge is inserted into one of the current range of Hewlett-Packard laser printers where smart chips are used, the user is presented with a message indicating that the cartridge is not an original, that lower quality printing may result and that reliability may be compromised. However, the machine will allow the use of that cartridge. Without replacing the chip on used Lexmark cartridges, they would remain unusable even when refilled.
Lexmark Prebate – Return Program scheme
Lexmark was pleased with comments made by one of the appeal court judges in the US who “referenced favourably” Lexmark’s cartridge return program in his written opinion.
Lexmark 12A6835Return Program cartridge
for T520 and T522
Lexmark also makes reference to “other court opinions that have found that Lexmark’s cartridge return program is a valid business practice, and the single-use patent license condition requiring the cartridge return only to Lexmark is enforceable”.
Clearly, on this basis, anyone not returning a ‘Return-Program’ (or so-called ‘Prebate’) cartridge to Lexmark is in breach of contract and should be open to prosecution.
This is a key point in that other major OEMs in the printer industry have long criticised Lexmark for this Prebate program because it requires that the customer returns the cartridge only to Lexmark – and in return the customer pays a significantly lower up-front price for the cartridge.
However, in an environment where recycling and environmental responsibility is a key issue in business and manufacturing (particularly in Europe with the WEEE directive), a scheme that guarantees the return of cartridges has to be considered to be laudable. The Lexmark Prebate (on laser cartridges only) is typically around the 16-18% mark on the normal price for the regular toner cartridge but is as high as 25% on cartridges for several low-end mono laser printers and a massive 32% on the 5,000-page cartridges for the T630/T632/T634 printers – very attractive to the customer and the environment!
Perhaps we should be asking the question – ‘shouldn’t the same incentive be offered by all printer and copier manufacturers’? After all, if the OEM industry is as concerned about its cartridges falling into the hands of refillers and remanufacturers as it makes out, surely a return program that really incentivises customers to return the cartridges to them, and only them, is the best way to deprive that industry of its raw materials?
In view of Lexmark’s typically high consumables pricing, perhaps the reality is not that buyers of Prebate cartridges are saving money but that that buyers of standard cartridges are actually paying a premium for the privilege of not having to return the cartridge to Lexmark. In which case, the questions, ‘why are these customers prepared to pay more than they need?’ and ‘are they disposing of the used cartridges in an environmentally friendly manner?’ have to be asked.
Lexmark 140127T cartridgefor Hewlett-Packard
LaserJet 4000 and 4050
Lexmark claims to be one of the world’s largest remanufacturers of laser printer toner cartridges. Now, it is not clear whether that includes its range of cartridges for Hewlett-Packard printers or not – presumably it does. But, that aside, would you, as a printer user, be more comfortable buying a remanufactured cartridge for your Lexmark laser printer from Lexmark itself or from a third party remanufacturer?
Bearing in mind that refilled and remanufactured cartridges, as a generalisation, do not command the best of reputations amongst users, with many organisations trying them once before reverting to OEM originals, I think there is no doubt that an OEM remanufactured cartridge would unanimously be viewed as preferable.
Taken one step further, because the source of new parts inserted into remanufactured cartridges (OPC drum in particular) by the third party industry is generally the same as that used by the OEMs themselves, what we must conclude from the lack of regard for remanufactured units is that some of the third party industry lacks the high standards of build quality and quality assurance of the OEMs.
In fact, when considering OEM manufacturing and the standards imposed, the wording ‘may contain remanufactured parts’ appears on the boxes of new toner cartridges from Xerox. In addition, both Hewlett-Packard and Canon disassemble and inspect used cartridges, from where parts may be reused in new-build cartridges as long as quality is deemed to be ‘as-new’.
Therefore, reality is that new cartridges from some of the major OEM manufacturers may already contain some remanufactured parts and the user will never know the difference. However, neither Hewlett-Packard nor Canon are specifically involved in cartridge remanufacturing in the third party industry sense of the word.
Remanufacturing
Remanufacturing of either toner or ink cartridges depends on the remanufacturer locating and collecting empty original cartridges to refill and/or remanufacture.Three major names in the printer hardware market also play the field in the third party supplies market – Lexmark, Xerox and IBM – but not Hewlett-Packard! Considering Hewlett-Packard’s perspective, why would it involve itself in this third-party manufacturing business? It virtually owns the market in some segments, claiming market shares of up to 80%. A much better target for third party activity is actually created by Hewlett-Packard’s huge market share and this is the specific area exploited by Lexmark, IBM and Xerox.
For Lexmark in particular, as “one of the world’s largest remanufacturers of laser printer toner cartridges”, little sympathy is expressed regarding a legal case of this nature simply because the company is behaving in what can only be described as a hypocritical manner.
In the past, the third party industry has been referred to by the core printer industry (including Lexmark) as ‘parasites’, feeding off the back of the OEMs. Since that time, the third party industry has diverged into four clear areas:
- manufacturing
- remanufacturing
- refilling
- counterfeiting
Most of the OEM printer vendors now tend to recognise the manufacturers and remanufacturers as legitimate competition. They are deeply critical of those companies that simply refill used cartridges but what they do not do, and never will do, is bow to the activities of the final group - the counterfeiters.
However, there is still a grey area in the middle where OEMs resent the activities of third party companies. It is this grey area that is the subject of this legal battle, and surrounds the replacement of these cartridge microchips.
Long term implications
It is certainly true that if Lexmark were to be successful in this action, it could set a very worrying precedent in all sorts of industries for use of technology to prevent competition. Taken to an extreme, technology could even be used in the situation that has often been used as a comparison with the toner and ink situation under discussion here – the automotive industry.Frequently it has been said “you don’t have to buy fuel for your car from the car manufacturer, do you?”
Suppose a car manufacturer decided to become a fuel retailer, with fuel pumps at all its car show rooms and perhaps with a chain of franchises. That manufacturer could build technology into its cars and fuel pumps that would prevent a car from being filled from any pump other than its own and that would shut the car’s fuel system down if the car ran for more miles than was possible from the amount of fuel last inserted by the proprietary pump.
Or, to take the extreme a little further, suppose a manufacturer of domestic cookers decided to create or buy a supermarket chain. Technology could be produced to exclude the use of any food that was not purchased in that manufacturer’s outlets.
Even worse, taking the extreme to the extreme, embedded chip technology is currently used as part of a ‘passport’ for identification of pets in international travel. Suppose this technology were adapted and enforced for humans to lock them into, or exclude them from, certain locations, practices, products or transactions?
How would we feel about that?
Surely, as consumers, what we are all looking for in any hardware purchase is the best performance at the right price – for us:
- At least one (and probably many more than one) performance car manufacturer is involved in fuel technology development with a member of the petroleum industry
- Washing machine manufacturers are involved with the washing detergent industry to produce the most effective washing processes and detergent combinations.
These products are recommended by the respective manufacturers as being ‘most effective’ or offering the user the ‘best performance’. Other products are often less expensive to buy but they still work in the machinery involved.
Exactly the same situation exists with inks and toners – the user risks compromising performance, reliability or effectiveness by using non-proprietary supplies but this litigation goes further than that, potentially involving the setting of legal precedents that could have wide-ranging implications for use of technology in the future.
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