OEMs Search for Infringing Products on Both Sides of the Atlantic

Going into 2014, there was every indication that it would be another busy year for attorneys representing hardware manufacturers. As last year ended, Canon, Epson, HP, Lexmark, and Samsung were pursuing cases in either Europe or in the United States, and some had cases pending in both regions. While some of these suits appear to have been resolved, most of the court actions filed by OEMs during the past year or so continue to move forward. In fact, the number of patent-infringement cases now pending has grown worldwide as Canon, HP, and Samsung have all initiated new suits in 2014.

The frenetic legal activity is an attempt by OEMs to curb the proliferation of infringing cartridges that continue to flood the world’s markets. Certain third-party supplies manufacturers have set up shop in regions where intellectual-property laws governing copyrights, patents, and trademarks either don’t exist or are enforced laxly, if they are enforced at all. The companies in question take advantage of the lack of IP enforcement to manufacture ink and toner cartridges that are simply copied from OEM originals. These freshly minted, infringing cartridges, which are often referred to simply as “clones,” are produced en masse and shipped into regions where IP protections are taken seriously. Those importing and marketing the clones must then contend with the ire of the OEMs and their lawyers.

Unfortunately, the situation is not new. For roughly two decades, OEMs have struggled to limit the market opportunities for knock-off consumables. Beginning in the 1990s and right up to the present, OEMs have battled with firms in Europe and the U.S. marketing cloned ink cartridges and infringing toner containers used in office devices. More recently, hardware manufacturers have dedicated an increasing amount of resources to protecting markets from cloned all-in-one toner cartridges that are employed in desktop printers and MFPs.

The European Theater

Historically, courts in Europe have witnessed numerous lawsuits triggered by the sale of digital-imaging supplies that were eventually proven to encroach on OEM IP. Since the beginning of the new century, Canon, Epson, and HP have all prevailed in hard-fought legal battles waged in European courts over infringing ink cartridges including those marketed under some of the region’s leading brands such as Jet Tec and Pelikan. All of three OEMs mentioned above remain active in the region. Last summer, Epson settled a case with one of Europe’s largest vendors of compatible Epson tanks, Dynamic Cassette International Limited (DCI), which markets Jet Tec products. DCI has since stopped marketing new ink tanks for Epson machines. Similarly, over the past couple of years HP has settled cases in Germany and Poland, which has resulted in the removal of millions of infringing HP ink cartridges from various markets.

While Canon has also had some success in the past of ridding European markets of cloned ink cartridges, more recently the firm has focused on companies marketing infringing consumables for its electrophotographic devices. The company has reached out-of-court settlements with several UK-based distributors resolving IP-infringement claims related to toner bottles used in imageRUNNER machines. In September 2013, Canon settled with Allcopy Products U.K. Limited, which markets compatible toner containers along with copier parts. In late 2013 and early 2014, Canon reached similar settlements with two other UK-based distributors, Parsia International Limited and PPC Solutions. The accused firms each agreed to cease importing and marketing the infringing toner bottles.

Canon is also asserting its patent rights on all-in-one cartridges used in HP- and Canon-branded desktop printers and MFPs. As HP’s supplier of laser print engines, Canon owns much of the IP found in LaserJet-brand machines and cartridges. Canon claims various companies are marketing cartridges across Europe that infringe European patent number 2 087 407, which covers technology in “process cartridge, electrophotographic image forming apparatus, and electrophotographic photosensitive drum unit.”

Canon filed its first suit related to the 2 087 407 patent in April against Aster Technology Holland B.V. in the District Court of The Hague. The Venlo-based firm is the Chinese manufacturer Aster Graphics’ European distribution, marketing, and sales arm. The accused Aster products are replacement toner cartridges employed in various LaserJet printers. After its original filing, Canon amended its complaint before The Hague to include Seine (Holland) B.V. Formerly known as Ninestar Image (Holland) B.V. Seine Holland is the overseas sales company for the Seine and Ninestar group of companies.

After filing complaints in the Dutch court, Canon then moved on to initiate similar suits in other European countries related to the 2 087 407 patent. In May, the OEM sued wta Carsten Weser GmbH and KMP PrintTechnik AG in the German District Court of Düsseldorf. Canon later added Thomas Zenkel, who owns the domain tintenalarm.de, to the Düsseldorf case. In the Paris First Instance Court, Canon sued Zephyr SAS, whose trade name is Green Eco, along with Aster Graphics Company Limited. In the High Court of Justice of England and Wales, Canon filed suit against European Cartridge Warehouse Limited and Printer Supplies Technology Limited and returned a few weeks later to add Badger Office Supplies Limited, Inkjet Direct Limited, and Greentrees International Limited to the defendant list. As the summer closed, Canon filed a complaint in Russia with the Moscow City Economic Court claiming that X-Com Shop Ltd. sold infringing toner cartridges at www.xcom-shop.ru.

Samsung’s European Campaign

Like Canon, Samsung has been active in courts across Europe. In 2013, attorneys for the Korean firm filed the first lawsuits I am aware of from the OEM in Europe against distributors selling clones. In Germany, a Munich court awarded Samsung preliminary injunctions against seven unnamed distributors last November prohibiting them from selling infringing new-build compatible toner cartridges. The enjoined products were alleged to infringe European patents 1 975 744 and 2 357 537, which cover cartridges used in the color Samsung CLP-610/620 series and monochrome ML- 1660 series, respectively. Also alleged to be violated were European patents 2 325 701 and EP 2 256 559, which cover the designs for cartridges used in color laser printers such as the CLP-310, CLP-320, and CLP-360.

Several weeks after filing complaints in the Munich court, Samsung alleged four resellers were selling patent-infringing toner cartridges in the Netherlands and filed for injunctions in The Hague. The firms included Digital Revolution, which operates the website www.123inkt.nl and Maxperian and sells cartridges on various other websites. Samsung also sued Print About, which operates the www.printabout.nl site and Yorcom Computers and runs the www.yorcom.nl website. No word has been given as to the outcome of the case in Holland, but in August Samsung requested that the District Court of Munich issue additional injunctions against another six unnamed German resellers.

The latest case before the Munich court involves marketing illegal, newly manufactured toner cartridges for use in Samsung’s CLP-310/CLX-3170, CLP- 320/CLX-3180, CLP-365/CLX-3305, Xpress M2825/M4025 2875 and ProXpress/4075 series devices, which are the same cartridges at the center of earlier complaints. The SKUs in question are alleged to infringe European patent 2397914 B1, which is related to the patents that the OEM claims were violated in its earlier suits.

In addition to its court filings in Germany and the Netherlands, Samsung reportedly dispatched warning letters to European resellers of Uprint cartridges alleging potential IP violations. The report came from The Recycler, a trade publication that caters to the European remanufacturing industry. Based in France, Uprint has approximately 250 resale partners in the region. Samsung claims a total of a dozen Uprint cartridges infringe European patents 2 325 701 B1 and 2 037 327 B1, which relate to ink and/or toner-supplying apparatus and methods for the ink and/or toner supply. Samsung had demanded an “adequate reply” by April 14 but the deadline came and went without any further action that I know of from Samsung. We’ll have to see what happens next.

On This Side Of The Pond

While Samsung has not filed any suits that I am aware of in the U.S., Canon is suing a number of third-party supplies vendors in federal court, alleging they have encroached on IP similar to that involved in its European cases. Canon has also requested that the U.S. International Trade Commission (ITC) investigate the widespread importation of infringing cartridges for sale in the U.S. At one point, more than 30 firms were accused of infringing nine Canon patents, which cover technologies found in a coupling used to rotate drums in the latest Canon and HP toner cartridges. The OEM has dropped some of the defendants from the case as well as a couple of patents, but the scope of the matter remains significant. Canon’s case in federal court is stayed until the ITC determines the extent to which the OEM’s business has suffered because of the infringing imports. If Canon can prove that imported infringing cartridges have adversely affected its toner cartridge sales, the commission may issue a general exclusion order (GEO) and restrict the flow of products into the U.S. market to alleviate the harm done to the OEM.

At the present moment, Canon seems to be making good progress in its case before the commission. Nine firms in the ITC matter have currently been ruled as in default. Some are challenging that determination, however, so the final number of defaulting firms may be lower. The OEM appears to be prevailing in federal court as well. At this time, I know of at least eight defendants that have settled the federal case with Canon. I would expect an initial ruling from the ITC early next year. If a GEO is ordered, it should be in place before next summer, at which time the case in federal court will move forward if defendants elect to challenge Canon’s claims.

While Canon is pursuing those that would infringe its gear patents, HP filed a couple of suits in 2014 against firms alleged to have violated its chip IP. In June, the OEM filed suit in the U.S. District Court for the Northern District of California against Datel Holdings, a UK-based firm with U.S. subsidiaries. HP alleges that the firm stole trade secrets by cracking the code used in chips found on certain HP inkjet cartridges. Datel then designed its own third-party replacement chips for use on non-HP compatible ink tanks. According to HP, Datel shared its designs with other companies, including firms that manufacture chips used on clone cartridges.

HP has asked the court to rule that Datel misappropriated trade secrets and it seeks injunctions prohibiting the defendants from using those trade secrets. Specifically, HP wants the court to stop the unauthorized manufacture and sale of chips for the HP 930 and 950 inkjet cartridges. HP is seeking over $30 million in damages “plus the amount that Defendants were unjustly enriched by their misappropriation of HP’s trade secrets.” The OEM also asked the court to declare the misappropriation of trade secrets willful and malicious. If successful, such a ruling would double HP’s actual losses plus award it other costs and attorneys’ fees.

At the end of August, Datel enter a motion to dismiss the case arguing that for various reasons HP cannot prove that Datel misappropriated trade secrets and it is not plausible that the chipmakers did such a deed. No ruling has been handed regarding the motion.

HP vs. APEX and Ninestar

On October 6, HP initiated another lawsuit involving chips at the same Northern California federal court hearing the Datel matter. This time, HP named various Ninestar companies in the U.S. and China as defendants along with the Zhuhai, China-based chipmaker Apex Microelectronics Co. The OEM alleges the firms marketed chips and finished cartridges that violate U.S. patents 6,089,687 (‘687), 6,264,301 (‘301), and 6,454,381 (‘381). Specifically, HP claims that Apex chips for use with the HP 564, 920, 932/933, 950/951, or 970 series ink tanks along with Ninestar’s compatible equivalent tanks infringe one or more of the three patents in question.

This is not the first time that HP has accused Ninestar of infringing certain patents asserted in the new lawsuit. In 2006, HP sued Ninestar and various distributors for infringing seven patents, including the ‘687 and ‘301 patents. In addition to the earlier case being filed in the district court, HP requested that the ITC investigate the matter. The lawsuit was eventually settled in March 2007, and Ninestar acknowledged the validity of the patents-in-suit and agreed to pull its infringing compatible inkjet cartridges from the U.S. market. The ITC also ultimately awarded HP a GEO.

Given the history of Ninestar and the HP patents in question, it seems like the firm has a lot at stake in this case. If Ninestar is indeed selling infringing cartridges, it is doing so in violation of its 2007 agreement. Moreover, if HP’s allegations prove to be true, both Ninestar and Apex would seem to be flouting the ITC’s GEOs. As of this writing, I was not aware of HP involving the ITC but these are early days yet. Such a complaint may well be forth coming.

Stand By!

All of the cases I’ve discussed could have huge implications for companies that market supplies in the U.S. and Europe. Canon’s decision to conduct parallel U.S. and European lawsuits is likely to yield evidence in one region that can be used in cases being tried in other courts. If this is true, the due diligence being done in preparation pending in European courts may very well provide the OEM with evidence to strengthen its cases in the U.S. or to add new defendants. The same is true for Samsung. Although the giant Korean OEM has yet to file any lawsuits related to its printer supplies in the U.S., it may decide to move on legal action here based on what the discovery phase of its European cases yield.

The stakes are high for the HP defendants as well. As noted, Datel stands to lose a lot of money if it is found to have willfully and maliciously stolen HP’s trade secrets. Obviously, writing a check for $60+ million will put severe strain on the firm’s resources.

Of all the defendants in HP cases, however, it seems to me that Ninestar has the most to lose. In 2009, a judge at the ITC found that the Chinese firm had “egregiously” violated a GEO issued on Epson cartridges. The judge slapped Ninestar with a $20,504,974.16 fine for the infraction, the largest fine at the time ever levied by the ITC. The fine was eventually lowered to $11.1 million, which, incidentally, I don’t think has been paid yet. What would the commissioners do if they found the firm to be ignoring its orders again? At the very least, the Chinese firm will be forced to pony up the past fine along with even more cash. Presumably, U.S. authorities will also closely scrutinize Ninestar’s products in the future, which may delay the importation of legitimate products as well as limit the access of Ninestar’s clones to the U.S. market. Apex, which has some legal affiliation with Ninestar, is also likely to incur the wrath of the commission if it is determined to have violated the GEO issued in 2007. Like Ninestar, it seems likely that the free flow of Apex chips into the U.S. will be curtailed to some degree if HP proves its case.

Clearly, markets in the West will be materially influenced by the ongoing cases noted above. Vendors in Western markets are well advised to keep a close eye on the various pending suits to see if any of their suppliers are involved. It is a company’s responsibility to ensure that it does not market infringing products and ignorance is no excuse. Monitoring suppliers is not just prudent in terms of avoiding supply-chain disruptions, it may keep a vendor out of a devastating legal mess. More than one firm has been forced to fold up its tent after being sued for selling infringing consumables. Hopefully, that will not continue and the number of firms caught selling clones will drop in 2015. It seems unlikely, however, given all the attention that infringing cartridges are getting from OEM legal teams these days.



Charles Brewer
About the Author
CHARLES BREWER is the president of Actionable Intelligence, the digital imaging industry’s leading market research firm. A veteran of the U.S. Navy and the Massachusetts National Guard, he holds a BA and MA from the University of Massachusetts-Boston and was an editor for Inc. magazine and ComputerWorld during the 1990s. He was the managing editor of The Hard Copy Supplies Journal, which was published by Lyra Research. In 2009, Brewer launched Actionable Intelligence and its website (www.Action-Intell.com), which is visited by thousands of industry decision-makers each week. In addition to the website, Actionable Intelligence provides custom research to hardware and consumables manufacturers as well as to various industry stakeholders such as Wall Street analysts and law firms.