Download Post as PDFPrint this PostThis week’s Patent and Design...Read More
Redrawing the boundaries of ownership
Imagine the situation where the manufacturer of your car restricts you to drive your car only on weekdays or compels you to fill fuel at a specified fuel station. Yes, this could be a reality if the US Federal court judgement in the Lexmark vs Impression Products is not reversed by the US Supreme Court.
Earlier this year, the Federal Circuit ruled en banc in Lexmark v. Impression the most significant exhaustion ruling since the Supreme Court’s Quanta decision. The ruling of US Federal court in Lexmark case has invited sharp criticism from the antitrust perspective. The ire from antitrust lobby seems to be pre-empted by the court as the judgement itself has the mention of the word “antitrust” as many as 21 times.
Among the companies redefining the ownership are modern aggregator-based transport services like Uber and Ola, short-term property lending platforms like Airbnb, cutting-edge media-delivery platforms like Spotify and a printer company( Lexmark) founded in 1991.
The printer manufacturer, Lexmark International, did not invent any new path breaking technology but its smart use of contracts and interpretation of laws could well redefine the very understanding of ownership.
Lexmark was founded as an offshoot of IBM’s typewriter and keyboard-manufacturing business. With the advent of digital technologies the company quickly turned to manufacturing laser printers, and soon after to inkjet. But Lexmark faced stiff competition from Hewlett-Packard and others which were well-established in the business.
In such situation Lexmark did what an ambitious printer company would do. Taking cue from automobile industry it focused less on initial profits (printer profits) and more on after-sale supplies—inkjet and toner cartridges. It was indeed a clever strategy. The Company sold its printers in two business models, one full-price unrestricted free-to-use model and another to lock buyers with lesser-price and post-sale restrictions.
To make windfall profits from sale of ink and toner cartridges, Lexmark had to be the principal vendor of those cartridges. That was limited by the competitors that refilled and refurbished those cartridges, eating into Lexmark’s profits. To overcome this hurdle Lexmark created licenses, probably borrowing from software industry’s licensing model, that barred buyers from reselling cartridges to anyone other than Lexmarkand it printed these licenses on the shrinkwrap packaging of its cartridges.
Only time will tell whether the basic law of property ownership – that the owner of an object (such as an ink cartridge) has the right to use the object however desired, still holds good.
Authored By- Akshay Kumar