Thursday, June 1, 2017

Take That, Lexmark

How a Supreme Court ruling on printer cartridges changes what it means to buy almost anything
 
A Supreme Court ruling in favor of Impression Products over Lexmark challenges patent laws and the purchasing process. See what the court case was about, and how it affects companies and consumers in the future. (Jhaan Elker/The Washington Post) 
 
Last week, the Supreme Court dealt a major blow to corporations that try to use patent law as a weapon against other firms, saying that companies can only be sued for patent infringement in the places they actually do business.

Now, the Court has ruled again along those same lines, handing a victory to consumer groups in a case about printer cartridges — or more specifically, toner cartridges, the kind used by laser printers. The case has huge implications for the way we think about technology ownership in America, and your rights as a user. Here's what you need to know.

What's this case all about?

The case is called Impression Products v. Lexmark. Lexmark does a lot of business with corporate customers, so if you work in an office, you might know the name from seeing it on your printers there. Those machines rely on toner cartridges, which must be changed every so often when they run out, just like ink cartridges in your home printer. And just like home printing, laser printing hinges on a razor-and-blades business model where much of the manufacturer's income depends on the reliable sale of new toner cartridges.

To protect its business model, Lexmark basically did some things that made it harder for people to get cheap, used cartridges on the secondhand market. Those tactics were designed to make it more likely for customers to choose Lexmark's own cartridges, according to the Court. While there's nothing specifically illegal about this, the Court said, a company such as Lexmark can't try to use patent law to stop other companies, such as Impression, from reselling its old cartridges.

What did Impression do, exactly?

Companies like Impression make money by buying up old toner cartridges, refilling them with more toner and then selling them at a lower price than what Lexmark charges.

Lexmark argued that by refurbishing and reselling its cartridges without permission and outside the terms of Lexmark's service agreement with end-users, Impression was violating the patent that Lexmark held on the cartridges. Essentially, Lexmark was saying that its patent rights extended beyond the initial sale of the cartridge to cover even future resales.

So what's the big deal?

The practical question is how much Lexmark or any other company can control what you do with the things you buy. This debate isn't limited to printer cartridges. If you buy a car, how do you know you really own it? What does ownership actually entitle you to do with your property, anyway?

These issues fit into a broader fight over what some experts call the “right to tinker.” The thinking goes: If you buy something, you should be free to do whatever you want with it — sell it, modify it, even destroy it. But some companies, even car manufacturers, have sought to put limits on that freedom. They make arguments such as Lexmark's, where handling a product in a way that potentially undermines the company's business leads to an alleged violation of patent or copyright protections. In this view, the customer may think she owns the physical property outright, but she is still constrained by an invisible cage made of corporate intellectual property.

The Supreme Court disagreed with this view. To help make its case, Chief Justice John G. Roberts Jr. used an analogy:
Take a shop that restores and sells used cars. The business works because the shop can rest assured that, so long as those bringing in the cars own them, the shop is free to repair and resell those vehicles. That smooth flow of commerce would sputter if companies that make the thousands of parts that go into a vehicle could keep their patent rights after the first sale.
Roberts went on to say that the used car shop could be sued by patent holders under such a system, and that even if the parts makers didn't follow through, the implied threat of lawsuits would be enough to force the shop to spend lots of money to safeguard against them.

What Roberts is saying has enormous implications for the economy, which depends not only on consumers buying things from companies, but also companies buying from consumers, and individual consumers trading with each other. It also affects people building new innovations in their garage out of off-the-shelf products. In short, what you can do with the stuff you buy has real ramifications for America's way of life.

What happens next?

This debate over ownership is only getting more complicated as the world moves increasingly to digital goods, including subscription-based streaming. With apps like Spotify, for example, consumers are choosing to rent, not buy. The sprawling digital economy raises new questions for legal experts about access and ownership.

“The next logical step will be for courts to recognize that people who buy digital goods are owners of those goods, not mere licensees, and can resell and tinker with their digital goods to the same extent as purchasers of tangible property,” said the Electronic Frontier Foundation, a consumer group that supported Impression in the case, on Tuesday in a blog post.

Other analysts predict companies will get more creative in the courts.

“In view of Lexmark, I expect that technology owners will diversify their legal strategies used to protect their products,” said Seth Heller, an intellectual property lawyer at Axinn, Veltrop & Harkrider.
In fact, while the Supreme Court specifically said Lexmark can't use patent law to go after cartridge resales, it didn't rule out other methods of getting what the company wanted.

Lexmark runs a program where customers get a discount on toner cartridges if they agree to use the cartridge just once, and return the spent cartridge back to the company. This deal is subject to a contract that customers have to sign if they want to participate in the program. So, the Court said, assuming these contracts are lawful, there's nothing preventing Lexmark from going after those customers if they resell the cartridges, thereby violating the agreement.

Still, this reflects only part of Lexmark's issue with Impression. And it doesn't help Lexmark's patent argument at all.

“The single-use/no-resale restrictions in Lexmark’s contracts with customers may have been clear and enforceable under contract law,” wrote Roberts, “but they do not entitle Lexmark to retain patent rights in an item that it has elected to sell.”

Brian Fung covers technology for The Washington Post, focusing on telecommunications, Internet access and the shifting media economy. Before joining The Post, he was the technology correspondent for National Journal and an associate editor at the Atlantic.

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