News Releases

Contact : Mark Yost

A federal judge in California has ruled against the Arizona Cartridge Remanufacturers Association, Inc. (ACRA) in its lawsuit challenging Lexmark International, Inc.’s (NYSE: LXK) Cartridge Return Program (formerly known as Prebate).

ACRA alleged in the lawsuit that the Lexmark Cartridge Return Program violated California Business and Professions Code sections 17200 and 17500, which prohibit unfair and deceptive business practices and deceptive advertising. The court confirmed that post-sale conditions on a patented article lie fully within the rights granted patent holders under federal patent law.

“In light of the Court’s ruling that the Prebate condition falls squarely within Lexmark’s patent right, Lexmark has adequately shown that there is little if any evidence to support ACRA’s contention that the Prebate program is misleading, deceptive or unfair under Sections 17200 and 17500,” wrote Judge Saundra Brown Armstrong of the United States District Court for the Northern District of California. The court concluded “that as a matter of law Lexmark’s Prebate is not a deceptive practice.” The court further stated: “Because of its patents, Lexmark has the right to impose conditions on the sale of its patented product.”

Lexmark’s Cartridge Return Program provides customers with an up-front discount in exchange for their agreement to return the used cartridges only to Lexmark for remanufacturing or recycling. This program has been widely supported by Lexmark’s customers and has helped divert millions of cartridges from landfills while enabling Lexmark to become one of the largest toner cartridge remanufacturers in the world.

Lexmark’s customers have more toner cartridge choices than with any other laser printer manufacturer: new cartridges under the Cartridge Return Program, new Lexmark cartridges with no post-sale conditions (that can be remanufactured by anyone), remanufactured cartridges from Lexmark, or cartridges from a third-party remanufacturer.

According to ACRA’s Web site, the ACRA lawsuit was sponsored in part by Static Control Components, Inc., a North Carolina company. In February, a federal court ordered Static Control to cease making, selling or otherwise trafficking in the Smartek microchip used in the remanufacturing of certain Lexmark laser toner cartridges. In issuing the preliminary injunction, the court ruled that Static Control engaged in a case of wholesale, identical copying of Lexmark's software for commercial exploitation and profit in violation of Lexmark’s intellectual property rights under the Copyright Act. The court also ruled that Static Control's further act of circumventing a Lexmark technological measure violated the Digital Millennium Copyright Act.

The California ruling coincides with newly enacted legislation in North Carolina, which Static Control claims renders the Lexmark Cartridge Return Program unlawful in that state. “The North Carolina legislation, in my opinion, has no effect on the Lexmark Cartridge Return Program,” said Vincent J. Cole, Lexmark’s vice president, general counsel and secretary. “That legislation voids agreements that prohibit remanufacturing, whereas Lexmark's Cartridge Return Program agreements actually facilitate Lexmark's ability to remanufacture its used cartridges.

“Furthermore, the U.S. Constitution reserves authority to regulate patent matters, including patent licenses, to the federal government. In my opinion, anyone other than Lexmark that remanufactures our Return Program Cartridges infringes Lexmark’s intellectual property rights under federal law wherever in the United States that activity occurs. Lexmark intends to continue to vigorously protect its intellectual property rights,” Cole said. “Let me stress again the fact that Lexmark offers a choice in toner cartridge purchases, including a readily available cartridge with no post-sale conditions that may be legally remanufactured by anyone.”

About Lexmark
Lexmark International, Inc. is a leading developer, manufacturer and supplier of printing solutions -- including laser and inkjet printers, multifunction products, associated supplies and services -- for offices and homes in more than 150 countries. Founded in 1991, Lexmark reported approximately $4.4 billion in revenue in 2002, and can be found on the Internet at www.lexmark.com.

Lexmark and Lexmark with the diamond design are trademarks of Lexmark International, Inc., registered in the U.S. and/or other countries. All other trademarks are the property of their respective holders.