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Here we'll explore the nexus of legal rulings, Capitol Hill policy-making, technical standards development, and technological innovation that creates -- and will recreate -- the networked world as we know it. Among the topics we'll touch on: intellectual property conflicts, technical architecture and innovation, the evolution of copyright, private vs. public interests in Net policy-making, lobbying and the law, and more.

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September 2, 2005

The Latest IP Crime: "Box-Wrap" Patent Infringement

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What's that, you ask? Evidently, it's when you ignore the terms written on the side of Lexmark printer cartridge box, refilling the cartridge with ink even when the company has designated it "single use only." According to the Ninth Circuit ruling [PDF] this week in ACRA v. Lexmark, opening the package means you agree to Lexmark's wishes. And if you break that agreement, you could face claims under contract and patent law.

As Fred von Lohmann explains it, it's sort of like when you buy those fancy Gillette Sensor razors, then purchase cheap replacement razor heads -- except that a court has ruled that if the package says "single use," then by opening it you've agreed you can't have any cheap replacements (but you can buy another Gillette "single use" razor). And that means the company that makes the replacement heads is out of luck, too.

Writes Fred:


[The strategy here is] a variant on the "shrinkwrap license" that used to appear plastered on software. Lexmark is bringing this practice to the world of patented goods. If you step outside the bounds of the "contract" (by giving your spent cartridge to a remanufacturer), you're suddenly a patent infringer. More importantly, Lexmark can sue cartridge remanufacturers for "inducing" patent infringement by making and selling refills.

Yes, Lexmark is the company that already tried and failed to control the printer cartridge after-market using the Digital Millennium Copyright Act (DMCA). Contract and patent law are clearly proving more amenable. The question is, how will the ruling impact the way companies do business in the future? Asks Fred:

Will patent owners exploit this decision as an opportunity to impose over-reaching restrictions on formerly permitted post-sale uses, repairs, modifications, and resale? Will consumers soon confront "single use only, not for resale" notices on more and more products? Will innovators stumble over labels announcing "modifications prohibited"?

Obviously, we can't know yet. But the danger is there.

Via trackbacks to my earlier post on the decision in the case formerly known as Blizzard v. BnetD, here are three more posts offering reactions to the Lexmark ruling:


  • Michael Madison: EULA Developments: "In the contracts arena, consumer advocates won the UCITA battle but are losing the ProCD war. (And they're losing it on the authority of the patent law experts at the Federal Circuit!) What remains of a meaningful 'assent' requirement is slowly, but surely, disappearing altogether."
  • Mark McKenna: Blizzard and Arizona Cartridge: "I'm not sure I agree that, as a general rule, it would be okay to contract away all the protection of copyright law as long as consumers clearly understood that."
  • Lauren Gelman: The Problem of Online Contracts: "But this wouldn't really be an issue except for the fact that companies are purposely making contracts difficult to find and read to bind users to terms they ordinarily would disagree with...What is the appropriate scope of online contracts? Should the fact that we know that users don't read them (or can't understand them) inform the scope of what we allow the contracts to bind?"

Update (Sept. 5): Dennis Crouch weighs in:

Commentary:

1. For me, the interesting part of this opinion is that restrictions on alienation (resale/repair) of consumer goods are generally not enforceable unless the good in question is patented.

2. In the wake of this and other cases, pundits are predicting that we will be seeing more "shrink-wrap" licenses restricting repair and modification attached to products that might need repair or modification.

3. If you plan to take such an action, be sure that your product is patented. (Query — will a design patent be sufficient?)

Comments (75) + TrackBacks (0) | Category: Laws and Regulations


COMMENTS

1. Kate on September 4, 2005 2:07 AM writes...

We have reached Insanity. Everyone off the bus.

Permalink to Comment

2. Doug Dingus on September 4, 2005 5:31 AM writes...

Will other companies try to leverage this ruling? You bet. I'm sure quite a number of them will be watching this play out. Their shareholders will demand no less.

How long before this gets slapped on a new car? Imagine only being able to get service at an authorized dealer... Or, perhaps a camp stove that only accepts fuel from authorized sources. I think this is going to happen quicker than we think. The temptation toward lock-in profits is just too high.

The Lexmark approach is wasteful and nothing more than a profit grab. I'm sure they can just drop the cost of the printers to near zero as they lock users into their supplies.

The more I look at IP, the more I find our world being divided into little fiefdoms. The current political climate opened up a big "land grab" of sorts that benefits nobody but the companies involved.

I've been worried about the growing power of corporations for a while now. Rulings like this, supported by a growing amount of purchased legislation is becoming a nasty problem. Why work to add value and actually compete for dollars when it's possible to just litigate and legislate your way into easy money?

My first reaction is corporate reform, but they are already too powerful for that to happen. Nothing short of a full-scale revolt would help things and even then...

The only real solution, I can see is more accountability in the form of education for citizens. We need a venue that can get the word out on these things in simple terms, or we are never going to see any solid changes.

Companies are using their superior knowledge of our law, plus their greater ability to influence law makers toward their own goals. They are exploiting our inability to organize and inform like they can.

Those of us aware of these things advocate and avoid, but we are not enough.

Permalink to Comment

3. Skipper-John on September 4, 2005 10:45 AM writes...

What an stupid ruling...

If I can't refill the cartridge, does it mean that Lexmark still owns it? Am I renting it?

I can see it now. The car manufacturers buy oil companies and specify that only their own brand of gasoline, oil, and other commodoties can be used in their cars. No refills from another brand.

This ruling could be applied to any item that uses supplies. Houses (any item used in a house for cleaning, painting, repair, etc.), Guns (bullets and cleaning supplies), Thermos's (only the matching brand of coffee or whatever could be used in the thermos). TV's (only the company's accessories - VCR, DVD, TIVO device could be attached to the TV).

For any manufacturer who instigates single use licenses, consumers need to vote with their wallets and buy exactly zero of the items with those type of licenses.

Lots of things are written on merchandise, but because they are there does not make them lawful.

Permalink to Comment

4. Mark on September 4, 2005 10:47 AM writes...

The problem here is that the courts are allowing contract law to skew to the provider side of things. If they want to treat this kind of thing as entering into a contract then they have to provide for -both- parties to make terms and allow the other to accept, reject or renegotiate.

Consumers should be allowed to present terms such as "by agreeing to accept my money the vendor explicitly allows me to refill this cartridge as I see fit". And in the interest of full disclosure Lexmark should be required to include a disclosure in at least 12 point font along the lines of "Notice to consumers: users of this printer must purchase only Lexmark toner/ink supplies under penalty of law. Use of third party substitutes and/or refill kits are explicitly prohibited. If you do not agree to these terms do not purchase this product."

Permalink to Comment

5. pffffft on September 4, 2005 12:26 PM writes...

If someone else opened the package for you then who is bound by the contract? Can they prove that you opened it thereby agreeing to the terms?

How about we put our own contract on the dollar bills we use to pay for those products. If the merchant excepts them than they are bound to the agreement. Like those checks in the mail that if you sign and cash you are now signed up for phone service.

The dollar wrap contract.

Permalink to Comment

6. richus on September 4, 2005 12:51 PM writes...

Are you all fn kidding...?
What's wrong with experimenting on new models of business? These products provide much less initial investment. There'll be models that allow generic cartridges eventually.
People will never buy a car that requires only dealership maintaining, so shut up.

Permalink to Comment

7. richus on September 4, 2005 12:52 PM writes...

Are you all fn kidding...?
What's wrong with experimenting on new models of business? These products provide much less initial investment. There'll be models that allow generic cartridges eventually.
People will never buy a car that requires only dealership maintaining.

Permalink to Comment

8. BigPawz on September 4, 2005 1:36 PM writes...

So, this means that hacking those CVS one-time use camcorders is a punishable offense? This country has to get its collective head out of its A _ _. Things like this get passed *way* too often. This is wrong. And a shame!

Permalink to Comment

9. Steve on September 4, 2005 1:40 PM writes...

Quote: Are you all fn kidding...?
What's wrong with experimenting on new models of business? These products provide much less initial investment. There'll be models that allow generic cartridges eventually.
People will never buy a car that requires only dealership maintaining.


What's wrong with experimenting with new models of business? Nothing is wrong with that, but if the new model of business is evil and hurts the economy, then YES, there IS something wrong with it.
If corporations use money and the law to squelch all competition and innovation, then we have something called a MONOPOLY, which free market economies abhorr. Monopoly drives up prices, stifles innovation, and hurts every single person involoved in a free market system except the corporation involved.
Yes, the startup costs are better, but the harm to society is more. Simple economic gains do not justify action. For example, if your end goals are to make a lot of money, hiring a hacker to disrupt a competitor or lying on your accounting reports have a high gain for little investment, but such actions are clearly not in the best interests of the company or society.

Finally, the argument that "people will never buy it" is a misplaced hope at best. The simple fact of the matter is that people have no idea about these rules, and companies will not begin to enforce them until their system of absolute control is complete. As we can see from DRM and music companies, people will buy products even if all of their rights are gone. Once companies begin to sue, people will be pissed, but what can they do about it? By that point in time, the laws will be passed, the cases will be won. What options will they have? Especially so if this type of behavior is the norm for all product manufacturers. Who can they buy from to 'vote with their wallets' if everyone does it? Competition has been thrashed, free market is gone, and we have one or two megacorporations in every market enforcing a sort of private-sector communism. I for one don't want to let that happen.

Permalink to Comment

10. James on September 4, 2005 2:24 PM writes...

Those of you who are excoriating Lexmark and the Ninth Circuit have apparently NOT read the decision. (Isn't it a prerequisite to informed debate that you actually INFORM yourself before criticizing?)

The Ninth Circuit's opinion concerns Lexmark's "Prebate" program, in which customers are given a $30 discount on their printer cartridge in exchange for their agreement to return the used cartridge to Lexmark when they are done with it. That's an enforceable contract, plain and simple. Customers had the option of paying $30 more for a cartridge, without being obligated to send it back to Lexmark when they were finished with it.

The Ninth Circuit simply held that, in exchange for paying less for the cartridge, customers could be contractually bound to return it to Lexmark.

Now that you understand, tell me: is that so evil?

You folks might want to educate yourself on the concept of "freedom to contract."

Permalink to Comment

11. Skipper-John on September 4, 2005 2:33 PM writes...

"People will never buy a car that requires only dealership maintaining, so shut up."

If all car manufacturers (and there aren't that many left) used this model of business, you wouldn't be able to buy a car that could use products from other companies...

The only reason I could see that will keep this scenario from happening is that there is more profit to be made by not using this model of business.

However, if the courts allow it, the exclusivity license will surely apply to everything we buy in the future (if it will produce higher profits).


Permalink to Comment

12. Mark W. on September 4, 2005 4:46 PM writes...

Sounds like it's time for a Lexmark Boycott....they're printers are crap anyways!!!

Permalink to Comment

13. the screwed consumer on September 4, 2005 4:46 PM writes...

Welcome to the "Corporate States of America." Your already guilty, so goto jail and don't collect your 200.

Permalink to Comment

14. Andy Freeman on September 4, 2005 4:53 PM writes...

I'll take the "prebate" angle seriously when Lexmark tries to get their $30 discount back from someone who doesn't return the cartridge because they stomped it into tiny bits and can prove said stomping.

Permalink to Comment

15. Brad King on September 4, 2005 5:04 PM writes...

Time to re-read "The Space Merchants" by Frederick Pohl and Cyril M. Kornbluth. They predicted this way back in 1953...

Permalink to Comment

16. ttyp on September 4, 2005 5:28 PM writes...

To pffft:

It's beside the point whether they can prove who or not opened the package. The use of this ruling will be in going after refill ink suppliers. They dry up businesses selling to the aftermarket, it won't matter who opened the package.

Permalink to Comment

17. Jay Moore on September 4, 2005 5:30 PM writes...

what's really bad is with the price of fuel and the fact the US's major port is totally obliterated and will be YEARS before that area is inhabitable again...the prices of everything is going to go sky high. This is just a first sign of a collapsing economy. The comapnies are going to take advantage of the consumers now and it's only going to get worse. Pretty soon they'll stamp it on computers prohibiting upgrades.

Someone was right...insanity is here..everyone run for thier life.

Permalink to Comment

18. Abbie Gonzalez on September 4, 2005 5:50 PM writes...

Wow, that is incredibly stupid.
I only buy re-man cartridges. I would still refill if they decided to uphold that rediculous decision. If everyone ignores it, and fights it, they could not do much to restrict you from refilling.

Permalink to Comment

19. Kyle Ward on September 4, 2005 5:54 PM writes...

I'm not so worried about the mechanical things as I am the electronic things. This will never happen to anything mechanical, like cars. Its far too easy to get away with not doing as the contract says. How will they catch you? How will they know!? But electronics on the other hand. Kids are becoming more sophisticated and advanced every day. Im sure it wont be long know when we will see 1 year old completeing full sentences. With this huge increase of knowledge electonics will control us, we will be found out if anything happens at all to the equipment. Its far to easy to track, monitor, and to teach it what to do.
So the economy will collapse within the next 5 years. That means no investment for me, its all going to be put into food and tradeable goods. Splurge while you can. Alright, whats next? Do we just start over? I think its time for a new constition. The people dont change the constitution accordingly- its the corporations. Money changes what should only be changed by the will of the people. It is time to uprise. There are definitly enough of us in the poor bracket to see the corruption. We now have enough power to change things the way they need to be changed. Choose with your will, not what someone else tells you.

Permalink to Comment

20. Carl on September 4, 2005 5:58 PM writes...

I just filled my Aquafina water bottle with water from the faucet... I hope I don't get sued. Anyways, lets generate a little more waste by not allowing refills and reman cartridges. Woo!

Permalink to Comment

21. Kalli on September 4, 2005 6:01 PM writes...

Strange, you really have a interesting law system in the US. Here in Germany such terms that discriminate the user or include things that you normally not expect are not allowed. Lucky us.

Permalink to Comment

22. Jeffrey on September 4, 2005 6:09 PM writes...

Actually a car isn't very mechanical anymore, thousands of dollars of electronics go into them, it's not hard to setup sensors or chips that only work with other GM parts then say breaking their 'copyright protection' is illegal under the DMCA.