ACRA v. Lexmark

Lexmark one of the largest makers of laser printers is a believer in the "give away the razors but charge them for the blades" tactic counting on the fact that consumers routinely underestimate "life cyle costs" for products like printers. In other words if you low- ball you customers on the price for the printer you can gouge them later for ink. Until now those kinds of business practices have been held in check by secondary markets that restrain a manufacturer's ability to overcharge for "consumables." That's where cartridge remanufacturers come in — they refill Lexmark cartridges and sell them for less than new cartridges sold by Lexmark.

Now Lexmark (which already unsuccessfully tried to use the DMCA to wipe out the refills market) has turned to patent law to prop up this effort to keep its customers in bondage. According to Lexmark the "single use only" labels on the boxes for their "Prebate" printer cartridges creates an enforceable contract between Lexmark and consumers. You step outside the bounds of the contract (by giving your spent cartridge to a remanufacturer) and you're suddenly a patent infringer. More importantly Lexmark will argue that cartridge remanufacturers are inducing patent infringement by making and selling refills.

An association of cartridge remanufacturers sued Lexmark to block this anti-consumer use of patent law. EFF filed an amicus brief on their behalf before the Ninth Circuit. Unfortunately the Ninth Circuit ruled in favor of Lexmark agreeing that the "single use only" notice contained in the "box-wrap license" on the package could create an enforceable contract between Lexmark and its customers and that a violation of the contract could be a patent infringement. The consequences for consumers innovators and competition are are potentially dire. 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" notices on more and more products? Will innovators stumble over labels announcing "modifications prohibited"? Will patent holders use "label notices" to encumber products with "field of use" restrictions and bring infringement actions to clear the field of aftermarket competitors? Only time will tell.

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