Lexmark Int'l V. Static Control Components - Facts of The Case

Facts of The Case

Lexmark is a large manufacturer of laser and inkjet printers.

Static Control Components (SCC) is a company that makes "a wide range of technology products, including microchips that it sells to third-party companies for use in remanufactured toner cartridges."

In an effort to control and reduce the refilling and redistribution of toner cartridges, Lexmark began distributing two distinct varieties of its toner cartridges. Under what was then known as the Prebate Program (now the Lexmark Return Program), Lexmark sold certain printer cartridges at a discount to customers who agreed to “use the cartridge only once and return it only to Lexmark for remanufacturing or recycling.” Lexmark's "Non-Prebate" cartridges could be refilled by the user without restrictions and were sold without any discount. "Prebate" cartridges were as much as $50 cheaper, but the user agreed (through a shrinkwrap license) to use the cartridge only once and return it to Lexmark.

Lexmark touted the Prebate Program as a benefit to the environment and to their customers, since it would allow customers to get cheaper cartridges. For Lexmark, the benefit of the Prebate Program was that they could keep empty cartridges out of the hands of competing rechargers. Many users agreed to Lexmark's condition against purchasing unauthorized refills of the prebate cartridges.

To enforce this agreement, Lexmark cartridges included a computer chip that communicated with a "Printer Engine Program" built into the printer. The chips built into "Prebate" cartridges also included a 55-byte computer program, the "Toner Loading Program", that calculated the amount of toner used during printing. When the calculations indicated that the original supply of Lexmark toner should be exhausted, the printer would stop functioning, even if the cartridge had been refilled. In addition, if the chip did not perform an encrypted authentication sequence, or if the Toner Loading Program on the chip did not have a checksum matching exactly a value stored elsewhere on the chip the printer would not use the cartridge.

In 2002 SCC developed its own computer chip that would duplicate the 'handshake' used by the Lexmark chip. SCC's chip also included a verbatim copy of the Toner Loading Program, which SCC claimed was necessary to allow the printer to function. A Prebate cartridge could successfully be refilled if Lexmark's chip on the cartridge was replaced with the SCC chip. SCC began selling its "Smartek" chips to toner cartridge rechargers.