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ITC Awards Lexmark General Exclusion Order for Mono Toner Ca

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Post ITC Awards Lexmark General Exclusion Order for Mono Toner Ca
Posted: Sat Jul 02, 2011 12:48 PM
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ITC Awards Lexmark General Exclusion Order for Mono Toner Cartridges

The ITC has awarded Lexmark a GEO that will bar the door into the U.S. for many non-OEM monochrome toner cartridges for Lexmark printers. Image source: Photos.com.
The U.S. International Trade Commission (ITC) recently issued its initial determination on violation of Section 337 and recommended determination on remedy and bonding in investigation 337-TA-740, “Certain Toner Cartridges and Components Thereof.” In a resounding win for Lexmark, Judge Carl C. Charneski has recommended that the commission issue a general exclusion order, barring the importation and sale within the United States of cartridges, regardless of manufacturer, that infringe the 15 Lexmark patents named in the complaint: U.S. patents 5,337,032, 5,634,169, 5,758,233, 5,768,661, 5,802,432, 5,875,378, 6,009,291, 6,078,771, 6,397,015, 6,459,876, 6,816,692, 6,871,031, 7,139,510, 7,233,760, and 7,305,204. (For a complete list of our coverage of this Lexmark ITC investigation, click on the 337-TA-740 tag below this article.)

In his initial determination, Judge Charneski upheld the validity of each claim in the asserted patents, pointing out that none of the respondents contested their validity. He found that the 23 defaulting respondents (all the respondents named in the original complaint and shown in the table at right, minus (SEE THIS) Holdings, which was terminated from the investigation on the basis of a settlement agreement) have violated Section 337 of the Tariff Act of 1930 by infringing Lexmark’s patents.

Judge Charneski found that the stronger remedy of general exclusion order was necessary, as Lexmark was able to prove widespread violation of its patents and the difficulty in identifying the source of infringing SKUs. In addition, the judge indicated a limited exclusion order would be circumvented by manufacturers and sellers seeking to “mask their identities.” The ITC has also issued a cease-and-desist order against the defaulting domestic respondents and the defaulting foreign (SEE THIS) respondents, ordering them to cease selling infringing SKUs in the United States.

What Is Barred?
All the patents in this investigation are related to Lexmark’s monochrome toner cartridges. The products that Lexmark accused of infringing its intellectual property are remanufactured, cloned, compatible, and/or counterfeit cartridges and components for the T520, X520, T522, X522s, T610, T612, T614, T616, T620, X620e, T622, T630, T632, T634, T640, T642, T644, E120, E220, E230, E232, E234, E238, E240, E250, E320, E322, E321, E323, E330, E332, E340, E342, E350, E352, and E450 monochrome laser printers and MFPs.

While the general exclusion order will bar the sale in the United States of compatible or cloned cartridges for these products, Lexmark’s complaint also targeted remanufactured SKUs that used empty cores first sold outside the United States. U.S. courts have held in rulings such as Jazz Photo Corp. v. International Trade Commission that a product retains certain U.S. patent protections if the first sale of that product occurs outside of the United States. Judge Charneski agreed with Lexmark’s expert witness that both the cloned and the remanufactured cartridges at issue in the case infringe Lexmark’s patents and wrote, “The uncontroverted evidence shows that the accused products infringe the asserted claims.”

Using cores first sold outside the United States would have been unwise for a remanufacturer selling products in the United States before this determination. Now, it appears that remanufacturers looking to sell Lexmark monochrome toner cartridges will have to pay even closer attention to where they are sourcing their empties. Should the initial determination become final and the President approve the commission’s recommendations, it appears that U.S. Customs and Border Protection (CBP) will be instructed to closely examine shipments of remanufactured cartridges, as well as compatibles.

Shotgun Gets the Job Done
When we first wrote about Lexmark’s toner cartridge patent-infringement complaint before the ITC, we compared it to similar action brought by Canon against (SEE THIS) and certain (SEE THIS) affiliates and distributors (337-TA-731) and wrote, “If Canon’s weapon of choice is a high-powered rifle, Lexmark’s is a shotgun.” A shotgun, it now appears, is the better weapon of choice when hunting a general exclusion order. While Canon targeted just (SEE THIS), Lexmark targeted also targeted (SEE THIS), and significantly, a little known group of manufacturers from South Korea, the so-called Jahwa respondents, presumably to show that infringement was widespread and not limited to just China-based compatible makers. While Canon named just a pair of patents, Lexmark followed Epson’s lead in the successful ITC action that won Epson a general exclusion order for its ink tanks by naming many patents. Lexmark’s goal was clearly to win a general exclusion order. Canon never overtly aimed that high with its complaint. Still, we felt that for either firm to succeed in winning a general exclusion order, particularly Canon, the complainant would have to follow Epson’s model and add more defendants to prove that respondents worldwide were infringing its intellectual property to win a general exclusion order. But, it appears that the ITC was swayed by the evidence of infringement that Lexmark provided and found that a general exclusion order was merited.

We are surprised that Canon’s patent-infringement complaint did not also follow Epson’s model. We had expected the firm would add more defendants and seek a general exclusion order. We are not privy to the firm’s legal strategists, however. It may be that the firm felt its patents were not strong enough to merit a general exclusion order. It may have felt that a consent order from (SEE THIS) agreeing not to import or sell in the United States all-in-one cartridges infringing its patents was enough of a victory. It may also be that the OEM plans to name further non-OEM supplies makers in future legal actions.

What Is Next?
Now that the ITC’s initial determination has been issued in the Lexmark complaint, parties may petition the commission for review of the determination. Without any petition for review, the determination will become final. The commission’s orders are then sent to the President who has a 60-day review period. During this Presidential review period, importers can import infringing SKUs as long as they post bond. In this instance, to deter such activity and because of the variations in pricing for remanufactured and cloned cartridges, the ITC adopted a bond of 100 percent of entered value. In general, it is unusual for a President to of disapprove of the ITC’s remedy.

Thus, it seems that U.S. CBP will soon be barring non-OEM monochrome toner cartridges for many Lexmark models from entering the United States. This win is enormous for Lexmark. As Judge Charneski wrote in his initial determination in the Lexmark complaint states, “Respondents admitted that they sell Lexmark accused cartridges because there was, and is, a demand for them.” The judge pointed to evidence showing that cartridge brokers placed some of the accused cartridges on their list of “most wanted empties.” This general exclusion order should help Lexmark win back much of the monochrome toner cartridge market share lost in the United States to the aftermarket following Judge Gregory F. Van Tatenhove’s 2009 ruling that opened up Lexmark’s toner cartridge business to remanufacturing.

The ITC has issued printer OEMs some key general exclusion orders in recent years, including Epson’s historic ink tank general exclusion order of 2007 and HP’s ink tank general exclusion order granted this year (see “HP Reveals the Breadth of the ITC’s General Exclusion Order for Ink Tanks”). Now, Lexmark joins the club. We feel that the ITC’s recent decisions will inspire OEMs to file additional complaints and seek further protection for their products.

Read ITC’s initial determination.

Tags: 337-TA-740, ITC investigations, Jahwa Electronics, lawsuits, Lexmark, (SEE THIS), non-OEM cartridges, (SEE THIS)

For those who would like to see the enotire story and all it's links:


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