Supreme Court Wont Hear Lexmark Appeal

Lexmark had sought to overturn a ruling that allowed Static Control Components to continue selling chips that allow re-filled or remanufactured toner cartridges.

The U.S. Supreme Court ruled this week it would not hear an appeal from Lexmark International Inc. on its suit against a printer chip maker it says violates the companys intellectual property rights.

Lexmark had sought to overturn a ruling made last October by the 6th U.S. Circuit Court of Appeals in Cincinnati, Ohio, that let Static Control Components Inc. of Sanford, N.C., continue selling chips that allow re-filled or remanufactured toner cartridges, typically sold at a 30 percent to 50 percent discount, to be used in Lexmark printers.

Static Control believes the Lexington, Ky., printer powerhouse is improperly citing the Digital Millennium Copyright Act of 1998 (DMCA) and other copyright laws in the suit, which began in December 2002, and said the Supreme Courts ruling effectively ended that argument.

"The case itself is far from over, but these issues relating to DMCA are over," said William "Skip" London, Static Controls general counsel. "At the trial, Lexmark will be forced to defend their anti-competitive activities without the distraction of Lexmarks baseless DMCA claims."

Despite Mondays ruling, Lexmark says it will fight on.

"This deals only with the issue of an injunction. The case itself continues at the District Court level," Lexmark said in an e-mail statement to "We will continue to ask the courts to enforce existing laws governing contracts and intellectual property so that our laser cartridge customers can get the benefit of full and fair competition."

Essentially, Lexmark has argued that it offers its own discounted laser cartridge under the companys Return program, in which customers return cartridges to Lexmark for remanufacturing, and by using "improper methods" to create a chip that circumvents the security of Lexmarks own chips, Static Control and its customers gain an "unfair advantage."

While the Supreme Court regularly chooses to ignore cases, Paul Garrity, a partner from the law firm Kelley Drye and Warren in New York who has argued numerous cases regarding the DMCA, copyrights and intellectual property, told that Lexmark faces a major uphill battle now that appeals have reached the end of the road.

"The lengths that the 6th Circuit Court went to in denying their DMCA claims make this a real setback for Lexmark," Garrity said.

He noted that the 6th Circuits opinion threw out the companys DMCA claims because in order to claim a violation, there must be a security mechanism in place protecting copyrighted material.

Essentially, the court ruled there was no such mechanism in place and a person only had to purchase a Lexmark printer to gain access to that material—Lexmarks printer engine.

/zimages/3/28571.gifRead more here about Lexmarks color laser printers.

As for bearing on overall DMCA law, Garrity saw less impact.

"The denial is significant, and opponents of the DMCA will be happy with the ruling, but I dont think it gives any more clarity to the field of DMCA litigation," he said.

Meanwhile, Static Control also countersued Lexmark in March 2003, alleging that the company attempted to monopolize the market for all cartridges and components that go into their printers.

Static Controls London expects this antitrust suit to continue alongside Lexmarks suit in Kentucky, where both cases are being heard.

Those likely wont go to trial, however, until at least 2006, as London said the cases will now be mediated this summer in an attempt to resolve these issues.

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