Arizona Cartridge Remanufactures Association Inc. v. Lexmark International Inc. Patent Infringement

Facts

Lexmark International Inc. sells and makes printer cartridges and laser printers while Arizona Cartridge Remanufacturers Association Inc. (ACRA) refills and sells empty Lexmark printer cartridges. Lexmark, in 1997 started remanufacturing its own cartridges and started a ‘Prebate’ program that makes it possible for consumers to save on cartridges whenever they return the used Lexmark cartridges.

Lexmark International Inc. also printed an agreement on its license outside the Prebate package cartridge. This agreement stated consumers opening the package or using it agree that they will use the cartridges once then return them to Lexmark for purposes of recycling.

Consumers who do not agreed to these terms were advised to return the cartridges then buy the non-Prebate cartridges which were more costly. The Prebate cartridges also had chips in them and they would cause errors if the printers were refilled by any other party that is not Lexmark.

The case

Arizona Cartridge Remanufactures Association Inc. sued Lexmark alleging that it had violated California’s unfair competition laws.  ACRA argues that in a deceptive manner, Lexmark suggest terms printed on the outer part of its package creates an agreement that is enforceable to return used cartridges.

Summary judgment was granted by the District Court which held that Lexmark had the right to enforce post sale restriction legally as it was the patent holder hence it could limit use of the product after sales and that the restriction stated on the product’s package was a valid agreement with its consumers. Since then, Lexmark renamed the Prebate cartridges to Lexmark Return Program Cartridges.

The Ruling

The court of appeal also affirmed the ruling of the District Court. It concluded that Arizona Cartridge Remanufactures Association, Inc. did not provide enough evidence to prove or determine that the advertisements made by Lexmark on the product package constituted unfair or deceptive business practices.

As such, the judgment summary it offered was in favor of Lexmark International Inc. The court also determined that ACRA was not able to show that the post sale restrictions made by Lexmark did not have any legal basis. In addition to this the court also stated that the claims made by ACRA that Lexmark wanted its consumers to believe the discount they were receiving was based on the cartridges  returned back to the company was not supported in its records.

In the case, the court did not state whether consumers could challenge the contract. ACRA is Lexmark’s competitor and as such, not part of the license agreement.   The permit makes it possible for Lexmark to limit use of its patented product and also gives it the legal basis to assert the ability to enforce the restriction.

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