Bonum Certa Men Certa

Lexmark Demonstrates Patents Against Public Interests and Against Competition

Ink
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Summary: A review of press coverage regarding the Lexmark patent case, where gross overpricing of ink was defended by the Federal Circuit

THE news has been dominated, to some degree, by reports about the Federal Circuit doing a disservice to society (yet again).



As the EFF put it this week: "The Federal Circuit’s rule privileges patent owners over consumers, and helps ensure even less competition in the resale market. We hope the Supreme Court takes a hard look at this case, and restores consumers’ rights in products they purchase."

“The Federal Circuit’s rule privileges patent owners over consumers, and helps ensure even less competition in the resale market.”
      --EFF
Without a doubt, many lawyers' firms and lawyers' sites are writing about it right now, e.g. [1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14].

Worth noting is the fact that legal sites wrote like 10 times more articles than general news sites (or technology sites) about this case, e.g. [1, 2]. A lot of people don’t ‘get’ patents; neither do journalists. They’d use silly phrases like “invent patents” or “make patents”. The propaganda worked on them.

“Here, the court held that this type of restriction is enforceable for Lexmark, but only because Lexmark’s product is covered by patent rights.”
      --Dennis Crouch
Here is the best report we've found on this subject (so far). TechDirt, which has covered this subject for over a decade (going back to 2004 if not earlier), wrote: "if you fail to block competition with one kind, apparently you can try, try again with another kind -- and eventually you'll end up in the Court of Appeals for the Federal Circuit, who will mess everything up and kill off the competition. Printer company Lexmark has been at war with alternative suppliers of ink for well over a decade. As you may be aware, printer ink is sold at a ridiculously high markup, such that one estimate (from over a decade ago) noted that in order to fill an Olympic-sized swimming pool with printer ink, it would cost you $5.9 billion (yes, with a "b") at the checkout counter of your local office-supply retailer. The printer makers have notably taken a "give away cheap crappy printers at a low cost, and make it up in seriously overpricing the ink" strategy to their businesses. This kind of thing works great until someone tries to step in and sell competing ink."

Suffice to say, this case is about keeping the prices artificially high (higher by several orders of magnitude than the production cost). A response posted by Dennis Crouch said: "I was surprised at the en banc Federal Circuit’s decision in Lexmark to re-affirm Mallinckrodt — giving a seller power to block future resale and reuse of a patented product. My surprise is grounded in the longstanding tradition in American property law of promoting the free-flow of commerce by refusing to enforce servitudes that limit the alienation or use of goods. To be clear, courts have often enforced contracts between willing parties to this end, but those same courts have refused to allow restrictive covenants to cling to the good and bind any subsequent purchaser. Here, the court held that this type of restriction is enforceable for Lexmark, but only because Lexmark’s product is covered by patent rights."

"Remember that CAFC is responsible for many other equally tactless decisions."It was not the first time that Crouch's blog covered this case in recent days (we mentioned this a few times in last week's posts). Basically, Lexmark twists and bends the law for price-fixing/price hikes. Other companies, such as HP, would no doubt benefit from this, at the expense of the public. To quote Crouch's blog: "The presumptions are of some importance for those operating on the ground. Here, the US court will presume that foreign sales of a product do not exhaust the US patent right. Thus, an importer must obtain a release/license of those rights to avoid liability (assuming a valid and otherwise infringed patent). Of course, that license right may be implied based upon providing notice of the importation intent. In addition, depending upon the location of sale, UCC 2-312 (or its foreign equivalent) may create a presumption of license depending upon the situation."

When laws are being passed to protect the business models or large corporations at the expense of the public, are the laws at all legitimate? Should we not feel free to challenge them or better yet, engage in civil disobedience? Remember that CAFC is responsible for many other equally tactless decisions. It was also CAFC that got software patents started, not just in the US but in the whole world. In the past we showed evidence of institutional corruption inside CAFC.

"A cynic is a man who knows the price of everything and the value of nothing."

--Oscar Wilde

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