ip and competition considerations

7/28/2019 IP and Competition Considerations

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Recycling

RechargingRemanufacturing

Printer Cartridges

IP and Competition Considerations

By Poorvi Chothani, Esq.

Mumbai


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Why?

The earth is full of natural resources like mineral depositsforests, fish, soil, air, flora and fauna and drinkable water.

Human behavior is becoming threat to the natural resources and

is close to deplete the nature in our greed and lust for progressand progression. We take these resources without any regardfor their supply, or even how the loss of them could disrupt anyother part of the eco-system, transforming it into useless waste.

Some of this waste is visible and useful but on the other side

most of the waste is hazardous to the life on earth creatinginvisible pollution, the fumes from exhausts, industrialemissions, and water pollutants.


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Recycling

Recycling is a creative act that involves thought and dedication to extendthe life and usefulness of something that seems to have no more purposeonce it has been used for its initial purpose.

By the OEM By the Manufacturer

By the Purchaser

By a Third Party.

The compliance with the recycling varies from country to country, andalso from original equipment makers (OEMs) to rechargers andaftermarket suppliers.


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Remanufacturing

Its reusing and refilling ink and toner printer

cartridges to make them reusable.

Worldwide, cartridge remanufacturing is anestablished industry with players like Xerox, IBM,NCR, Staples, Wall-Mart, Cartridge World etc,holding approximately 30 percent stake in the marketoffering 100% quality


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Reconstruction

a USSC Ruling clarifies that if theproduct has become spent as a whole,

the revival of the product is deemed asreconstruction


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Advantages of

remanufacturing

Environment friendly Reduction in greenhouse gas emissions

Reduction in weight of the cartridge,

Costs reduction


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Recycling by OEM

OEM- Original Equipment Manufacturer

Brand name,

Quality, and product is with licence agreement HP has its own program that offers free

recycling of HP inkjet or LaserJet cartridge.

Lexmark operates return Program Cartridgesthat offers lifetime warranty on the purchasedproducts


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Recycling by the Purchaser

Recycling by Individual purchaser is forown purpose.


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Recycling by Third Party

Recycling by third party for individualpurpose or commercial usage is the

main issue. If for individual propose then it may not

become issue of controversy, but

If for commercial purpose then it raisesseveral questions


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Issues

Local municipal policy

National policy

Legal issues Corporate responsibility

Responsibility towards the consumer

Responsibility towards the manufacturer

Warranty, quality of the product Litigation against the infringement


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Challenges

Unorganized sector

No government support

OEMs(original equipment manufacturer) are forcingall users to use new products to keep their service &warrantee intact to avoid any violation of MRTP act.

Fast changing technologies by OEMs make recyclingmore and more difficult.

Lack of representation in policy making. High custom duty and taxes on the imported

components on the contrary a new cartridge attractlower custom duty & other taxes.


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International Scenario

UN-sponsored SustainableDevelopment Programme to lobby

Governments for targets andagreements upon reducing waste,Carbon emissions, with the view to

create eco friendly environment


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India

There are several small and medium scaleindustries those deal in remanufacturing &recycling of printer cartridges.

This industry entered into this field withrefilling of printer ribbons and has history ofmore than 20 years.

No established brands Intellectual Property rights

Legal issues


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US Law

The Copyright Laws

The Digital Millennium Copyright Act

Anti-Trust Laws Patent Laws


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Patents Exhaustion Doctrine

Or the Implied License Right to use the product, including right to repair Denies right to reproduce Reproduction constitutes an infringement on the

patentees monopolistic right to make the patentedproduct Difficult to distinguish between permissible repair

and impermissible reconstruction Jazz Photo Corp. v. Intl Trade Commission

Recycling is permissible repair depending on how therecycling is done

Component is not replaced but reused then it is neither repairnor reconstruction


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Patent Exhaustion Patentee can control patent exhaustion by contract but not by patentees

unilateral intention (because there is no meeting of minds)

Lexmark's Differential Pricing to Encourage Cartridge Returns is an example ofpatent control by contract

Generally: If a part of a patented product is designed to be replaceable If such a part itself is not an object of a patent; and If the part cannot be used because it is worm on broken The person who bought the patented product can replace the relevant part.

But this is applied to different issues on a case-by-case basis. The US Courtshave in some instances held that permissible repair also includes replacementof parts that are neither broken nor worn out Surfco Hawaii v. Fin ControlSystems Pty. Ltd.


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Conditional Sale

Lexmarks Conditional Sale v. Fuji Films Conditional Sale

Japanese Judgment in Cannon v. Recycle Assist Co (2005)

In this case the box-wrap indicated that the ink will be for

single use only and by opening the package, it is understood

that one has agreed to the terms. This is similar to click Wrapand Shrink Wrap Agreements in the software world.


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Challenges

Several OEMs are working on strategies to combat the entry of compatible cartridges, withadvertising their products and educating customers about the negative effects of refilling

A Boston man has filed a class-action lawsuit accusing hardware maker HP and officesupply retailer Staples of colluding to inflate the price of printer ink cartridges in violationof federal antitrust law. According to the suit, HP allegedly paid Staples $100 million torefrain from selling inexpensive third-party ink cartridges, although the suit doesn't make itclear how plaintiff Ranjit Bedi arrived at that figure.

For most printer companies, ink is the bread and butter of their business. The price of ink

for HP ink-jet printers can be as much as $8,000 per gallon, a figure that makes gas-pumpprice gouging look tame. HP is currently the dominant company in the printing market, anda considerable portion of the company's profits come from ink.

The printer makers have been waging an all-out war against third-party vendors that sellreplacement cartridges at a fraction of the price. The tactics employed by the printermakers to maintain monopoly control over ink distribution for their printing products havebecome increasingly aggressive. In the past, we have seen HP, Epson, Lenovo and othercompanies attempt to use patents and even the Digital Millennium Copyright Act in theireffortstocrush third-party ink distributors.

The companies have also turned to using the ink equivalent of DRM, the use of microchipsembedded in ink cartridges that work with a corresponding technical mechanism in theprinter that blocks the use of unauthorized third-party ink. Adding insult to injury, mostprinters are lying, filthy ink thieves, according to a recent study, misreporting that they arelow on ink when they are not.

Bedi's suit asks for unspecified damages and an injunction barring the two companiesfrom engaging in anticompetitive business practices.
http://www.ebusinessforum.com/index.asp?doc_id=7159&layout=rich_storyhttp://arstechnica.com/news.ars/post/20031029-3043.htmlhttp://arstechnica.com/news.ars/post/20050329-4749.htmlhttp://arstechnica.com/news.ars/post/20061129-8323.htmlhttp://arstechnica.com/news.ars/post/20070628-cryptography-company-develops-chip-to-lock-out-third-party-ink-jet-cartridges.htmlhttp://arstechnica.com/news.ars/post/20070618-study-inkjet-printers-are-filthy-lying-thieves.htmlhttp://arstechnica.com/news.ars/post/20070618-study-inkjet-printers-are-filthy-lying-thieves.htmlhttp://arstechnica.com/news.ars/post/20070628-cryptography-company-develops-chip-to-lock-out-third-party-ink-jet-cartridges.htmlhttp://arstechnica.com/news.ars/post/20061129-8323.htmlhttp://arstechnica.com/news.ars/post/20050329-4749.htmlhttp://arstechnica.com/news.ars/post/20031029-3043.htmlhttp://www.ebusinessforum.com/index.asp?doc_id=7159&layout=rich_story


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Legal actions

Epson lodged a complaint on Feb. 17 2006, against 24companies operating in US, with the United States InternationalTrade Commission (ITC). Epson has also filed a lawsuit in theU.S. District Court in Portland, Ore. against these same 24companies, including prominent Asian inkjet producers and U.S.distributors, for patent infringement claims.

Japanese Court Reverses, Rules Imported Ink CartridgesIllegal (March 2006)while passing on a judgment in Canonsmatter, a Japanese Intellectual Property High Court ruled thatcertain imported ink cartridges violate Canons patent rights.

The high court opined that Canon, the patent holder, has theright to prohibit the sale of the recycled products in Japan.


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Interoperability


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Overview

Member of the World Trade Organization(WTO)

Trade Related Aspects of Intellectual Property

Rights TRIPS Compliant Berne Convention

Paris Convention

Universal Copyright Convention Patent Cooperative Treaty


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Some Relevant Indian IP Laws

The Copyright Act, 1957 and the Copyright Rules 1958

The Patents Act, 1970 and the Patents Rules, 2003

The Trademarks Act, 1999 and the Trademarks Rules, 2000

The Biological Diversity Act, 2002

The Geographical Indication of Goods (Registration and Protection)Act, 1999

The Designs Act, 2000and the Designs Rules, 2001


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Significant Provisions

Inalienable moral rights Waiver Concept does not apply to computer software

Work For Hire

Compulsory Licensing

Version Recordings

Broad fair use exceptions Non-commercial personal use deemed as fair use and does not

constitute infringement.


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Significant Provisions

Patents Joint Owners Consent Accounting Rights

Infringement Responsibilities

Computer Programs andbusiness methodsper se not

patentable Protect Computer Programsas trade secrets

Controller of Patents

First to File vs. Firstto Invent

Compulsory License

Research andExperimental Use


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Assignment of IP Rights

Of Copyright

Territory

Term

Lapse Consent

Of Patents

Joint Owner Needs Consent of other owner (s) toassign rights

Valid only if in writing and registered in India


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Indian Patent Applications

Patent Applications for:

inventions originating in India; or

involving an Indian resident inventor

must first be filed in India, unless a foreign filing

license has been granted by the Indian Patent

Office


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Patents - Some Special Provisions

Compulsory licenses for export of medicines to countrieswhich have lack of infrastructural or production capacityfor meeting public health emergencies.

In case of Infringement - Only civil remedy of injunction,damages, and accounts for profits.


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Data Privacy and Protection

No Specific Statute

Existing legislation provides limited protection

Information Technology Act - limited protection againstcertain types of data misuse or computer offencesinvolving unauthorized access to data on computers andnetworks

E.g. hacking, damage to computer source code, virus introduction

Civil and criminal remedies available


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Legal framework for Data Privacy

The Constitution of India

The Information Technology Act, 2000 Protects against computer offences Provides for both civil and criminal remedies

The Specific Relief Act, 1963 To enforce specific performance provisions in the contract against the

Indian service provider

The Indian Penal Code, 1860 and The Indian CriminalProcedure Code of 1973 (corporeal property)

To prosecute incidents of theft and criminal breach of trust and fraud


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Legislative Action

Amendment to the Information Technology Actof 2000:

Negligence in implementing and maintaining

reasonable security practices damages payableINR 1 Crore (approximately US$ 243,902 at USD1 =INR 41)

Disclosing personal data without the data subjects

consent - damages are limited to INR 25 lakhs(approximately US$ 60,976 at USD1 = INR 41)


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Data Privacy Pending Legislation

An amendment (approved in 2006 by Indian cabinet) tothe IT Act to expressly addresses data privacy yet tobe passed by Parliament

The new bill: Stipulates security practices to be followed by corporations

that handle personal data

Impose civil and criminal penalties for negligent handlingor intentional misuse of personal data

Imposes liability on intermediary only in limited situations

Permits private enforcement for civil remedies


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Other Protection

Specific Relief Act to Enforce Protective ContractualProvisions

Indian Penal Code: Limited criminal recourse available:

To prosecute incidents of theft, criminal breach of trust and fraudinvolving data

Laws extend to offenses against corporeal property only

Common Law Remedies: Civil damages and injunctive

relief available: Breach of contract

Breach of confidence


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Enforcement

In India, the enforcement system for IP rights includes: Civil remedies Criminal penalties Settlement out of court without trail

Compensatory damages

No punitive damages

Registration of copyrights

Criminal prosecution in trademark and copyright cases,but not in patents or designs cases


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Recommendations

Consumers always opt for products of best quality, price andperformance. So if recyclers need to grow well, it is time that theylook a little more closely at quality and ensure the same.

Make themselves legally correct with relevant permissions

Comprehensive operative contracts, specifically providing forownership of IP

Non-disclosure agreements directly with the Indian serviceproviders employees and consultants assigned to the project

wherever practicable


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Thank You

522 Maker Chambers V221 Nariman Point

Mumbai 400 021, India.Tel: +91 22 6615 6555Fax: +91 22 2287 2080

Email: [email protected]
mailto:[email protected]:[email protected]

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