In earlier issues, we have written about the torpedoing of Seiko-Epson's submarine patents and the sinking of Canon's flagship patent. Now there is another nautical metaphor about patents for aftermarket inkjet cartridge competitors -- an armada of HP's patents has been lost at sea.
In its litigation against Hewlett-Packard over ink cartridge refiller products, Nu-kote has recently won an important summary judgment ruling. This ruling found that Nu-kote has an implied license to practice nine HP patents as to all the Nu-kote refiller products at issue, and an implied license to practice a tenth HP patent as to most of the Nu-kote refiller products at issue. Although this ruling did not entirely dispose of the pending litigation, it found that a large portion of the patent claims in the case lacked sufficient merit to warrant a trial. Accordingly, while printer manufacturers such as HP may assert their patents as entry barriers to the very lucrative aftermarket for printer ink cartridges, this summary judgment victory for Nu-kote illustrates that it is possible for companies providing refiller products to overcome these barriers through litigation.
In a ruling this Summer, the trial court for the HP vs. Nu-kote litigation ruled in favor of Nu-kote's motion for summary adjudication of non-infringement with respect to ten of HP's patents-in-suit. Summary adjudication means that the facts are so clear that the judge does not need a jury to decide them. The judge decides the case simply as a matter of law without the need of a trial. Therefore, the party winning summary adjudication -- in this case Nu-kote -- has a very strong case and the losing party -- in this case HP -- has a very weak case.
The trial court's summary ruling in favor of Nu-kote was based on the broad implied license of use and repair that accompanies the authorized sale of all patented products. Legal authority on this implied license doctrine -- which is just a fancy way of saying that a customer can repair what he purchases -- goes back many decades, but this doctrine was most recently discussed by the court that hears all patent appeals in another litigation defeat for HP: the August 12, 1997 HP vs. Repeat-O-Type Stencil decision. In the Repeat-O-Type case HP had sued another ink jet refiller company, Repeat-O-Type Stencil, for patent infringement based on its sales of HP cartridges that had been modified so as to allow the refilling of ink. HP lost on its patent claims in Repeat-O-Type because the courts found that Repeat-O-Type's actions were within the implied license of use and repair. The Repeat-O-Type company used brand new HP cartridges in its refiller products; however, as Nu-kote's summary judgment victory establishes, this fact was not in any way necessary to the legal finding of an implied license. The Repeat-O-Type precedent applies to used cartridges as well
Unlike Repeat-O-Type, Nu-kote uses old cartridges in its refiller products, but an implied license was found to apply just the same. Indeed most of HP's argument in opposition to Nu-kote's motion for summary judgment was a repetition of arguments that had already been rejected by both the trial court and the appellate court in the Repeat-O-Type case.
The Repeat-O-Type appellate court found that when a seller sells a product without restriction, it in effect promises the purchaser that, in exchange for the price paid, it will not interfere with the purchaser's full enjoyment of the product purchased. Accordingly, the buyer has an implied license under any patents of the seller that dominate the product or any uses of the product to which the parties might reasonably contemplate the product will be put. For purposes of this implied license, it is not relevant whether the sale of the product is by the patentee himself or is by some subsequent purchaser like a distributor. In either case, the same implied license applies. Furthermore, as explained by the trial court in HP vs. Nu-kote, the broad implied license of use and repair encompasses more than temporary or minor repairs to the product. Rather, the implied license allows the purchaser to replace worn parts and to make appropriate modifications in order to continue to use the purchased article.
This ruling cuts the heart out of HP's position that the cartridge is for a single use only. As all refillers and their customers know, HP's position is not only legally incorrect, but also it is factually incorrect. HP cartridges can be reused many times with good results. It is quite significant that the courts have now rejected HP's single-use only position, with which HP has tried to intimidate refillers and their customers for years.
Both the trial court in Nu-kote vs. HP and the Repeat-O-Type court found that as a matter of law, the useful life of HP's ink jet printer cartridges is substantially longer than the life of a single reservoir of ink. Because the life span of HP's cartridges is greater than that of the initial ink supply, the Nu-kote trial court found that the modifications that Nu-kote makes to the HP cartridges in order to refill them bear on the usefulness of the cartridges and are within the scope of the implied license of use and repair.
As the trial court explained, the ink tank refiller products and services of Nu-kote simply allow the consumer to replenish the ink in order to use the HP cartridges to their full functional capacity. The trial court also observed that the nature of the modifications made by Nu-kote was largely dictated by HP's own anti-refiller policies. The trial court found that HP markets its cartridges as single-use products and purposefully designs them to be "refill-unfriendly."
In the context of HP's hostility to refilling, the refiller products developed by Nu-kote simply serve to provide the consumer with a clean and convenient way to refill HP cartridges. Nu-kote's refiller products and services are comparable to the installation of a means for refilling the gas tank in a car deliberately manufactured without any opening for the gas tank cap.
In a related vein, neither the appellate court in Repeat-O-Type nor the trial court in the Nu-kote decision attributed any legal significance to HP's unilateral desire that its cartridges be used only once. The Repeat-O-Type court noted that, although HP's instructions accompanying its cartridges advise the user to "Discard the old print cartridge immediately", HP's wishes were legally irrelevant because they were not part of an enforceable contract. Thus, without a valid contract between the purchaser and HP, HP's "advice" does not create any limitation on the right of a purchaser to use, sell, or modify a patented product. Yet HP continues to express its desires about refilling to consumers despite their lack of legal significance. It is difficult to believe that this expression of desire does not spring from a desire to intimidate aftermarket competitors and their customers.
For example, the instructions accompanying the ink cartridges for HP's new HP 2000 printer state: "Intended for single use only." This statement is precisely the type of expression of unilateral intent that the courts have found to be legally meaningless. By continuing to include such statements with its ink cartridges, HP is hoping that no one will notice the legal rulings against it in the Repeat-O-Type and Nu-kote cases. More likely, refillers and their customers will notice that the Inkjet Emperor (HP) has no clothes.
The products and services of Nu-kote and other refillers are akin to those of a gas station which refills the gas tank in an automobile. Like HP, the car manufacturer in its wildest dreams may hope that consumers purchase a brand new car every time that the car runs out of gas, but the facts are that, if a car or cartridge is refilled, it will continue to function and that such refilling is legally permissible. This is a great victory for refillers and their customers. It will result in more competition and, more importantly, in the benefits of competition; lower prices, higher quality, and more choice.
ConclusionIn this year alone, the three major inkjet OEMs -- HP, Canon and Seiko-Epson -- have lost major patent rulings to a much smaller aftermarket competitor -- Nu-kote. Indeed, none of these Nu-kote victories even required a trial because the patents were so weak. Even more importantly, these Nu-kote victories open up the aftermarket for all competitors. The moral is that fighting weak patents is good business for aftermarket competitors. The moral for OEMs is that a weak patent is worse than no patent at all.