[svfig-open] Fwd: [Ed Foster's GripeLog] The Exhaustion of Our Rights

Kevin Appert forther at comcast.net
Thu Oct 9 11:24:27 PDT 2003

Lexmark is the LAST company I'll ever buy a printer from!!!   Anybody 
'chipping' their ink or toner cartridges isn't going to get a nickle from me.

>The Reader Advocate Column
>The Exhaustion of Our Rights
>Thursday, October 9, 2003
>By Ed Foster
>Would you pay extra when buying a new car for the right to re-sell it? How 
>about for the right to take it to any repair shop you choose? Those are 
>decisions you might have to make in the not-too-distant future.
>The sneakwrapping of American law took another fateful step last week with 
>a decision rendered by the U.S. District Court in the case of Lexmark 
>versus the Arizona Cartridge Remanufacturers Association (ACRA).  The 
>court's ruling  -- dismissing ACRA's charges of deceptive practices 
>against Lexmark -- implies that a manufacturer can deprive mass-market 
>consumers of their rights just by slapping a license agreement on its product.
>The case revolves around what Lexmark used to call its "Prebate" program 
>for laser printer toner cartridges. Prebate cartridges come with a 
>shrinkwrap license agreement saying "opening this package 
 confirms your 
>acceptance of" a restriction that the cartridge can be used only once and 
>then should be returned to Lexmark.  Lexmark said it wanted the empty 
>cartridges for remanufacturing or recycling purposes, but no one can doubt 
>the company's primary motive was to keep the cartridges out of the hands 
>of re-manufacturers.
>ACRA argued the Prebate program was deceptive because it misled consumers 
>into thinking they did not have the right to dispose of the cartridges as 
>they chose. ACRA assumed the court would conclude Lexmark customers have 
>that right due to what is called the "doctrine of exhaustion." Roughly the 
>patent law equivalent of the first sale doctrine in copyright law, the 
>doctrine of exhaustion says the patent holder's rights cease - are 
>"exhausted" -- once the product is actually sold. Buyers have an implied 
>license to use the patented product as they see fit, including reselling 
>it or fixing it.  As the judge put it in her ruling, the doctrine of 
>exhaustion "includes the authority to repair a patented device (e.g. 
>refill an empty printer cartridge.)"
>But ACRA assumed wrong in thinking the court would uphold the doctrine of 
>exhaustion in this case.  That doctrine only applies in unconditional 
>sales, the judge said. Conditional sales in which one negotiates a better 
>price in return for agreeing to certain restrictions are not uncommon in 
>business-to-business transactions.  Most laser printer customers are 
>businesses, the court noted, and Lexmark's license was visible on the 
>outside of the product "so the Lexmark purchaser is on notice that Lexmark 
>has imposed a single-use condition on the cartridge."
>The court also bought Lexmark's description of its Prebate price as a $30 
>discount or upfront rebate off the "regular" price of its theoretically 
>available non-Prebate cartridge. ACRA had argued that the Prebate price 
>was the actual regular price, and $30 more for a cartridge without the 
>usage restriction was actually a surcharge. But the judge concluded that 
>the Prebate offer constituted a special price that reflects an exchange 
>for the single-use condition.
>"Based on these circumstances, the court concludes that Lexmark has not 
>exhausted its rights," the ruling read. "The Prebate is a conditional sale 
>and the single-use condition is enforceable  
. Because of its patents, 
>Lexmark has the right to impose conditions on the sale of its patented 
>product. It may restrict a purchaser's ability to repair it, which is what 
>in essence the single-use condition does."
>In other words, a federal judge is saying that a patent holder can impose 
>usage restrictions on its customers just by having some legalese on the 
>package.  And the usage restrictions are enforceable even when they are 
>clearly intended to limit competition. Indeed, giving Lexmark the right to 
>prevent its cartridges from being acquired by the remanufacturers makes it 
>all the more likely Lexmark printer customers will have no other options 
>when they need a toner cartridge.
>Of course, Lexmark customers did have another option - they could have 
>purchased a different brand of printer to begin with.  As we've seen, 
>Lexmark isn't the only printer company trying to lock customers into using 
>their consumables, but none of the others have gone so far as to employ 
>UCITA-style legal tricks to do it.  Either we make it clear we will have 
>nothing to do with companies that deprive us of our rights this way, or we 
>can bet that very soon all companies will do the same.
>Read this column on-line and post your own comments at 
>http://www.gripe2ed.com/scoop/section/Columns, or write me directly at 
>Foster at gripe2ed.com. Also in my weblog this week at http://www.gripe2ed.com:
>Reader Voices: Re-licensing Fees
>Readers react to the policies of Cisco, NetApp and other manufacturers who 
>require that those who purchase used equipment pay to re-license the 
>company's software.
>Attacks on Anti-spam Sites Show Unresponsiveness of Legal System
>An anti-spam activist laments law enforcement's unwillingness to take 
>action over denial-of-service attacks by vengeful spammers.
>Copyright 2003 Ed Foster's GripeLog.  You are granted permission to 
>forward this column to friends who would have an interest in this topic.
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