Recycling Recharging Remanufacturing

Printer Cartridges

IP and Competition Considerations

By Poorvi Chothani, Esq.

Mumbai

Why?
The earth is full of natural resources like mineral deposits forests, fish, soil, air, flora and fauna and drinkable water. Human behavior is becoming threat to the natural resources and is close to deplete the nature in our greed and lust for progress and progression. We take these resources without any regard for their supply, or even how the loss of them could disrupt any other part of the eco-system, transforming it into useless waste. Some of this waste is visible and useful but on the other side most of the waste is hazardous to the life on earth creating invisible pollution, the fumes from exhausts, industrial emissions, and water pollutants.

Recycling
Recycling is a creative act that involves thought and dedication to extend the life and usefulness of something that seems to have no more purpose once it has been used for its initial purpose.
By the OEM By the Manufacturer By the Purchaser By a Third Party.

The compliance with the recycling varies from country to country, and also from original equipment makers (OEMs) to rechargers and aftermarket suppliers.

Remanufacturing
Its reusing and refilling ink and toner printer cartridges to make them reusable. Worldwide, cartridge remanufacturing is an established industry with players like Xerox, IBM, NCR, Staples, Wall-Mart, Cartridge World etc, holding approximately 30 percent stake in the market offering 100% quality

Reconstruction
a USSC Ruling clarifies that if the product has become spent as a whole, the revival of the product is deemed as reconstruction

Advantages of remanufacturing
Environment friendly Reduction in greenhouse gas emissions Reduction in weight of the cartridge, Costs reduction

Recycling by OEM
OEM- Original Equipment Manufacturer Brand name, Quality, and product is with licence agreement HP has its own program that offers free recycling of HP inkjet or LaserJet cartridge. Lexmark operates return Program Cartridges that offers lifetime warranty on the purchased products

Recycling by the Purchaser

Recycling by Individual purchaser is for own purpose.

Recycling by Third Party

Recycling by third party for individual purpose or commercial usage is the main issue.
If for individual propose then it may not become issue of controversy, but If for commercial purpose then it raises several questions

Issues
Local municipal policy National policy Legal issues Corporate responsibility Responsibility towards the consumer Responsibility towards the manufacturer Warranty, quality of the product Litigation against the infringement

Challenges
Unorganized sector No government support OEMs(original equipment manufacturer) are forcing all users to use new products to keep their service & warrantee intact to avoid any violation of MRTP act. Fast changing technologies by OEMs make recycling more and more difficult. Lack of representation in policy making. High custom duty and taxes on the imported components on the contrary a new cartridge attract lower custom duty & other taxes.

International Scenario
UN-sponsored Sustainable Development Programme to lobby Governments for targets and agreements upon reducing waste, Carbon emissions, with the view to create eco friendly environment

India
There are several small and medium scale industries those deal in remanufacturing & recycling of printer cartridges. This industry entered into this field with refilling of printer ribbons and has history of more than 20 years. No established brands Intellectual Property rights Legal issues

US Law
The Copyright Laws The Digital Millennium Copyright Act Anti-Trust Laws Patent Laws

Patents Exhaustion Doctrine

Or the Implied License
Right to use the product, including right to repair Denies right to reproduce Reproduction constitutes an infringement on the patentees monopolistic right to make the patented product Difficult to distinguish between permissible repair and impermissible reconstruction Jazz Photo Corp. v. Intl Trade Commission
Recycling is permissible repair depending on how the recycling is done Component is not replaced but reused then it is neither repair nor reconstruction

Patent Exhaustion
Patentee can control patent exhaustion by contract but not by patentees unilateral intention (because there is no meeting of minds) Lexmark's Differential Pricing to Encourage Cartridge Returns is an example of patent control by contract Generally: If a part of a patented product is designed to be replaceable If such a part itself is not an object of a patent; and If the part cannot be used because it is worm on broken The person who bought the patented product can replace the relevant part.

But this is applied to different issues on a case-by-case basis. The US Courts have in some instances held that permissible repair also includes replacement of parts that are neither broken nor worn out Surfco Hawaii v. Fin Control Systems Pty. Ltd.

Conditional Sale
Lexmarks Conditional Sale v. Fuji Films Conditional Sale
Japanese Judgment in Cannon v. Recycle Assist Co (2005)
In this case the box-wrap indicated that the ink will be for single use only and by opening the package, it is understood that one has agreed to the terms. This is similar to click Wrap and Shrink Wrap Agreements in the software world.

Challenges
Several OEMs are working on strategies to combat the entry of compatible cartridges, with advertising their products and educating customers about the negative effects of refilling A Boston man has filed a class-action lawsuit accusing hardware maker HP and office supply retailer Staples of colluding to inflate the price of printer ink cartridges in violation of federal antitrust law. According to the suit, HP allegedly paid Staples $100 million to refrain from selling inexpensive third-party ink cartridges, although the suit doesn't make it clear how plaintiff Ranjit Bedi arrived at that figure. For most printer companies, ink is the bread and butter of their business. The price of ink for HP ink-jet printers can be as much as $8,000 per gallon, a figure that makes gas-pump price gouging look tame. HP is currently the dominant company in the printing market, and a considerable portion of the company's profits come from ink. The printer makers have been waging an all-out war against third-party vendors that sell replacement cartridges at a fraction of the price. The tactics employed by the printer makers to maintain monopoly control over ink distribution for their printing products have become increasingly aggressive. In the past, we have seen HP, Epson, Lenovo and other companies attempt to use patents and even the Digital Millennium Copyright Act in their efforts to crush third-party ink distributors. The companies have also turned to using the ink equivalent of DRM, the use of microchips embedded in ink cartridges that work with a corresponding technical mechanism in the printer that blocks the use of unauthorized third-party ink. Adding insult to injury, most printers are lying, filthy ink thieves, according to a recent study, misreporting that they are low on ink when they are not. Bedi's suit asks for unspecified damages and an injunction barring the two companies from engaging in anticompetitive business practices.

Legal actions
Epson lodged a complaint on Feb. 17 2006, against 24 companies operating in US, with the United States International Trade Commission (ITC). Epson has also filed a lawsuit in the U.S. District Court in Portland, Ore. against these same 24 companies, including prominent Asian inkjet producers and U.S. distributors, for patent infringement claims. Japanese Court Reverses, Rules Imported Ink Cartridges Illegal (March 2006) while passing on a judgment in Canons matter, a Japanese Intellectual Property High Court ruled that certain imported ink cartridges violate Canons patent rights. The high court opined that Canon, the patent holder, has the right to prohibit the sale of the recycled products in Japan.

Interoperability

Overview
Member of the World Trade Organization (WTO) Trade Related Aspects of Intellectual Property Rights TRIPS Compliant Berne Convention Paris Convention Universal Copyright Convention Patent Cooperative Treaty

Some Relevant Indian IP Laws

The Copyright Act, 1957 and the Copyright Rules 1958 The Patents Act, 1970 and the Patents Rules, 2003 The Trademarks Act, 1999 and the Trademarks Rules, 2000 The Biological Diversity Act, 2002 The Geographical Indication of Goods (Registration and Protection) Act, 1999 The Designs Act, 2000 and the Designs Rules, 2001

Significant Provisions
Inalienable moral rights
Waiver Concept does not apply to computer software

Work For Hire Compulsory Licensing Version Recordings Broad fair use exceptions
Non-commercial personal use deemed as fair use and does not constitute infringement.

Significant Provisions
Patents Joint Owners Consent Accounting Rights Infringement Responsibilities Computer Programs and business methods per se not patentable Protect Computer Programs as trade secrets

Controller of Patents First to File vs. First to Invent Compulsory License

Research and Experimental Use

Assignment of IP Rights
Of Copyright
Territory Term Lapse Consent

Of Patents
Joint Owner Needs Consent of other owner (s) to assign rights Valid only if in writing and registered in India

Indian Patent Applications

Patent Applications for:
inventions originating in India; or involving an Indian resident inventor

must first be filed in India, unless a foreign filing license has been granted by the Indian Patent Office

Patents - Some Special Provisions

Compulsory licenses for export of medicines to countries which have lack of infrastructural or production capacity for meeting public health emergencies. In case of Infringement - Only civil remedy of injunction, damages, and accounts for profits.

Data Privacy and Protection

No Specific Statute Existing legislation provides limited protection Information Technology Act - limited protection against certain types of data misuse or computer offences involving unauthorized access to data on computers and networks
E.g. hacking, damage to computer source code, virus introduction Civil and criminal remedies available

Legal framework for Data Privacy

The Constitution of India The Information Technology Act, 2000
Protects against computer offences Provides for both civil and criminal remedies

The Specific Relief Act, 1963

To enforce specific performance provisions in the contract against the Indian service provider

The Indian Penal Code, 1860 and The Indian Criminal Procedure Code of 1973 (corporeal property)
To prosecute incidents of theft and criminal breach of trust and fraud

Legislative Action
Amendment to the Information Technology Act of 2000:
Negligence in implementing and maintaining reasonable security practices damages payable INR 1 Crore (approximately US$ 243,902 at USD1 = INR 41) Disclosing personal data without the data subjects consent - damages are limited to INR 25 lakhs (approximately US$ 60,976 at USD1 = INR 41)

Data Privacy Pending Legislation

An amendment (approved in 2006 by Indian cabinet) to the IT Act to expressly addresses data privacy yet to be passed by Parliament The new bill:
Stipulates security practices to be followed by corporations that handle personal data Impose civil and criminal penalties for negligent handling or intentional misuse of personal data Imposes liability on intermediary only in limited situations Permits private enforcement for civil remedies

Other Protection
Specific Relief Act to Enforce Protective Contractual Provisions Indian Penal Code: Limited criminal recourse available:
To prosecute incidents of theft, criminal breach of trust and fraud involving data Laws extend to offenses against corporeal property only

Common Law Remedies: Civil damages and injunctive relief available:

Breach of contract Breach of confidence

Enforcement
In India, the enforcement system for IP rights includes:
Civil remedies Criminal penalties Settlement out of court without trail

Compensatory damages No punitive damages Registration of copyrights Criminal prosecution in trademark and copyright cases, but not in patents or designs cases

Recommendations
Consumers always opt for products of best quality, price and performance. So if recyclers need to grow well, it is time that they look a little more closely at quality and ensure the same. Make themselves legally correct with relevant permissions Comprehensive operative contracts, specifically providing for ownership of IP Non-disclosure agreements directly with the Indian service providers employees and consultants assigned to the project wherever practicable

Thank You

522 Maker Chambers V 221 Nariman Point Mumbai 400 021, India. Tel: +91 22 6615 6555 Fax: +91 22 2287 2080 Email: info@lawquestinternational.com