Canon Files Suit Against Remans and Distributors: Dealers Beware!
During the closing days of June, Canon, Inc., along with its U.S. subsidiaries, Canon U.S.A. and Canon Virginia, filed complaints with the U.S. International Trade Commission accusing some 20 companies of importing and marketing toner cartridges in the U.S. that infringe the Japanese firm's intellectual property. Canon and its affiliates are requesting that the commission bar the importation of the offending toner cartridges and stop the firms from selling infringing cartridges already in the U.S. Canon also filed a related lawsuit against the firms in the U.S. District Court for the Southern District of New York in New York City.
(Note: At the time of this writing, Canon's attorneys had not submitted an electronic version of the federal court complaint. As a result, only the ITC filing was available for review.)
At the center of the dust-up are two patents covering a coupling that connects the printer's drive motor with the OPC drum in the toner cartridge. The patented coupling allows toner cartridges to be replaced easily, while ensuring the drum connects quickly with the drive motor and doesn't slip. Specifically, the patents that Canon says have been violated cover a "twisted polygonal prism" projection on an assembly at the end of OPC drum. The projection helps to establish a "stable and secure coupling" between the drum and the printer.
The Chinese third-party supplies vendor Ninestar Image International is alleged to have violated the patented design along with nine other companies that form what Canon calls the Ninestar Group. According to the ITC filing, the Ninestar Group companies include Ninestar Image Co., Ninestar Management Co., Ninestar Tech. Co, Ninestar Technology Co., Nano Pacific Corp., Seine Image International Co., Town Sky, Inc., Zhuhai Seine Technology Co., and Ziprint Image Corp. Canon claims these firms designed, manufactured and imported into the U.S. toner cartridges with infringing coupling for use in Canon printers and MFPs, as well as in Hewlett-Packard laser devices based on Canon print engines. In addition to the ten companies in the Ninestar Group, Canon named ten U.S. based cartridge distributors in its compliant claiming they sold the infringing Ninestar cartridges. The retailers include 123 Refills, ACM Technologies, Compu-Imaging, Copy Technologies., Direct Billing International, EIS Office Solutions, LD Products, Printer Essentials.Com, Red Powers, and XSE Group.
The shear number of companies implicated in Canon's legal actions make this set of matched ITC and federal cases unique. I've been following the digital imaging supplies industry since the 1990s, and this is the first instance I'm aware of where so many companies been accused of infringing intellectual property related to toner cartridges. In 2006, Epson hauled 24 companies including Ninestar and several of its affiliates before the ITC and sued them in federal court, but that action was initiated to stop third-party firms from copying Epson's ink tanks. Aside form a limited number of actions filed by Canon and several other firms, such as Ricoh, not much has happened in terms of infringed toner supplies. But all that may be changing, and Canon's flurry of lawsuits could be a sign of things to come.
Most folks in the industry, including me, have been saying for years that the market is full of infringing toner cartridges. Travel to any of the various supplies trade shows around the world and you'll find thousands of toner cartridges that are just blatant copies. Forget about a gear with a "twisted polygonal prism," I'm talking about complete clones. Consider several years ago, when HP released the LaserJet P1005 and P1006—dozens of firms with non-HP CB435A toner cartridges were at shows within a few short months of the release of the new machines. There was no way that enough time had lapsed for an ample supply of legitimate empties to be established to support so many remanufactured cartridges. The only way so many companies could have brought to market all those non-HP cartridges would have been to copy the OEM's cartridge and produce clones.
The number of cloned toner cartridges has been growing over the past two years. For a number of reasons, the availability of empty cores has diminished significantly. Last year, all of the OEMs shipped fewer new cartridges—fewer new cartridges means fewer empties. And, people are printing less so again less empties are being generated. Also, OEMs have implemented new, more effective collection programs so more empties are going back to the manufacturers and not into the empties stream. Likewise, many of the larger remanufacturers are working with their channel partners and large customers to get empties back.
I'm not saying that the so-called Ninestar Group and the retailers named in Canon suit were selling cloned cartridges. Canon's suit is restricted to one patented coupling and only after the defendants get their respective days in court will we know if they even violated Canon's IP at all. What I am saying, however, is there is a lot of bogus toner cartridges out there and everyone including the OEMs know it.
Dealers must be extremely skeptical these days when it comes to offering non-OEM products. First and foremost, if you see a product that seems too good to be true, either in terms of how inexpensive it is or how quickly it came to market, it's probably a clone. Don't touch it! Secondly, know your suppliers and your suppliers' suppliers. What are their legal track records like? Are they in and out of court? When they are in court, are they able to resolve matters quickly or does the case last forever? Also, dealers need to be sure they know how much legal support their suppliers provide if allegations of IP violations should arise.
In today's mature market, with print volume falling, you can bet OEMs will be scrutinizing the competition very closely. While they may have let some IP infractions slip in the past, I'm skeptical they'll continue to turn a blind eye to it. Just ask Canon.
Posted by Charlie Brewer on 07/12/2010