Sunday, February 2, 2003

Lexmark targets N.C. firm over ink replacement cartridges

By Paul Nowell
The Associated Press

SANFORD, N.C. - The endless e-mail and fax pitches for replacement printer cartridges point to a desktop printing reality - profits reside in the ink.

Now a North Carolina firm that makes the replacements finds itself in the copyright crosshairs of printer giant Lexmark International Inc. in a legal tussle over ink cartridges.

In a federal lawsuit, Lexmark claims Static Control Components, based in Sanford, N.C., violated the 1998 Digital Millennium Copyright Act to swipe a large chunk of its aftermarket printer supply sales.

The conflict arises from the way the computer printer business operates. Since printers are relatively inexpensive to buy, manufacturers make most of their income selling the replacement ink or toner cartridges - just as razor blades bring in more money than the shavers for which they're made.

Consumer demand led to the creation of a new industry: companies like Static Control that collect discarded cartridges, refill them and sell them at steep discounts.

Lexmark, one of the top U.S. manufacturers of computer printers, tried to fight its new rivals by installing tiny computer chips. They cause Lexmark printers to malfunction if the replacement cartridge isn't made by Lexmark, which is based in Lexington, Ky.

In response, Static Control designed its own "Smartek" chip that enables its replacement cartridges to work in the Lexmark printers.

That led to the Dec. 30 lawsuit, in which Lexmark alleges Static Control's microchip includes copies of its copyrighted software in violation of the 1998 copyright law. The claim is scheduled for a hearing Feb. 7 in federal court in Lexington.

Lexmark spokesman Tim King declined to comment, citing the pending litigation. In a recent news release, Lexmark accused Static Control of profiting from Lexmark's investment.

"Lexmark spends hundreds of millions of dollars annually on research and development, and the company intends to vigorously protect its intellectual property rights," the Jan. 9 statement said.

Static Control founder Ed Swartz contends Lexmark attacked his company as part of its strategy to grab a larger slice of the lucrative printer supply market - a strategy he says hurts consumers and the environment.

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