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Lexmark International, Inc. v. Static Control Components, Inc.

Civ. Act. No. 02-571-KSF (E.D. Kentucky, February 27, 2003)

Court issues preliminary injunction, enjoining defendant from continuing to manufacture and sell Smartek microchips for use in connection with plaintiff's toner cartridges.  Defendant's chips contain software that circumvents authentication procedures installed by plaintiff in its own toner cartridges, which authentication procedures prevent use of unauthorized cartridges in printers manufactured by plaintiff.  These chips also contain a copy of Toner Loading software programs in which plaintiff holds a copyright, which programs are used in the operation of the printer.  In issuing this injunction, the Court finds that plaintiff is likely to prevail on its claim that defendant's conduct infringed plaintiff's copyright in its Toner Loading Programs, as well as on its claim that defendant's chips are products which circumvent technological measures used by plaintiff to restrict access to its copyrighted works in violation of the Digital Millennium Copyright Act ("DMCA").

Plaintiff Lexmark International Inc. ("Lexmark") manufactures laser printers and toner cartridges.  Lexmark sells two types of toner cartridges for use in its T-series printers, "prebate" and regular cartridges.  A consumer who purchases a prebate cartridge is given a discount of approximately $50 off the price of a regular cartridge.  In exchange, he agrees, via a shrink-wrap agreement, to only use the cartridge once, and to return it to Lexmark after his use is complete.  There are no such restrictions on a regular cartridge.  Consumers can use these cartridges more than once, and have them refilled by Lexmark or independent third parties.  Approximately 90% of the cartridges Lexmark sells are "prebate" cartridges.

Lexmark's printers use both a Printer Engine Program and a Toner Loading Program.  The Printer Engine Program controls various operations of Lexmark's printers, including paper feed and paper movement.  The Toner Loading Program notifies the user when the toner cartridge is low on ink.  Lexmark holds copyrights in both programs.  The Toner Loading Program is contained on a microchip that is part of the prebate and regular toner cartridges sold by Lexmark.

To ensure that only authorized toner cartridges are used in its machines, Lexmark also installed an "authentication sequence" in its printers.  These sequences run whenever a toner cartridge is installed in the printer, the printer is powered on, or the printer is opened and closed.  The "sequence" causes both the printer and the microchip on the toner cartridge to perform a calculation and compare the results.  If the results are the same, the cartridge is authenticated and authorized for use by the printer.  If the results do not match, the printer will issue an error message and will not run the Printer Engine Program, effectively preventing the printer from operating.

Defendant Static Control Components ("Static") sells a number of products to the toner cartridge remanufacturing industry.  These products include the Smartek microchips at issue.  Static installed a copy of Lexmark's Toner Loading Programs on its Smartek chips.  Smartek chips will also perform the authentication calculation required of Lexmark's toner cartridges, and supply the expected result to Lexmark's printers.  This, in turn, circumvents Lexmark's authentication sequence, and permits the consumer to use unauthorized cartridges with those machines, including prebate cartridges refilled by third parties.  Static's advertisements for its Smartek chips highlight this feature, advising the consumer that they circumvent "secret code" and "send the right messages" to Lexmark's printers.

Upset with Static's activities, Lexmark brought suit, charging Static both with infringing its copyrights in its Toner Loading Programs, as well as violating the DMCA.  The Court found that Lexmark was likely to prevail on both claims, and issued a preliminary injunction, enjoining Static from continuing to market its Smartek chips.

To prevail on a claim of copyright infringement, a plaintiff must show "(1) that its owns a valid copyright and (2) that [Static] copied protectable elements of the copyrighted work."  The Court found that Lexmark was likely to prevail on this claim.  In reaching this conclusion, the Court held that Lexmark held a valid copyright right in its Toner Loading Programs, which had admittedly been copied by Static.

The Court rejected Static's claim that its activities were protected by the fair use doctrine.  This determination was supported both by the fact that Static copied Lexmark's programs for the commercial purpose of selling Smartek chips, and by the fact that Static copied Lexmark's programs in their entirety, which in turn led to a presumption of significant market harm.

The Court also found that Lexmark was likely to prevail on its DMCA claims.  "The DMCA … prohibit[s] … the trafficking of products or devices that circumvent the technological measures used by copyright owners to restrict access to their copyrighted works."

Section 1201(a)(2) of the DMCA prohibits the manufacture, distribution and/or sale of any product or device that:

(a)  is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to a work protected under this title;

(b)  has only a limited commercially significant purpose or use other than to circumvent a technological measure that effectively controls access to a work protected under this title; or

(c)  is marketed by that person or another acting in concert with that person with that person's knowledge for use in circumventing a technological measure that effectively controls access to a work protect under this title.

According to the Court "a technological measure 'controls access' to a copyrighted work if that measure 'requires the application of information, or a process or a treatment with the authority of the copyright owner, to gain access to the work.'  In addition, the [DMCA] provides that a product or device 'circumvents' a technological measure by 'avoiding, bypassing, removing, deactivating or otherwise impairing' the operation of that technological measure."

Applying these standards, the Court held that Lexmark's authentication sequence was a technological measure that controls access to a copyrighted work, namely Lexmark's Printer Engine and Toner Loading Programs.  Said the court:

The authentication sequence that occurs between Lexmark's printers and the microchips contained on authorized Lexmark toner cartridges constitutes a 'technological measure' that 'controls access' to a copyrighted work.  This authentication sequence requires the application of information and the application of a process to gain access to Lexmark's copyrighted Toner Loading Programs and Printer Engine Programs.  Lexmark's authentication sequence effectively 'control access' to the Toner Loading Programs and the Printer Engine Program because it controls the consumer's ability to make use of these programs.

The Court further found that Static's Smartek chips "avoid or bypass Lexmark's authentication sequence … As a result, the Smartek chips are able to deceive the Lexmark T-series printers into thinking that the Smartek chips are, in fact, original microchips contained on authorized Lexmark toner cartridges."

This in turn led the Court to conclude that Lexmark was likely to prevail on its DMCA claims for three independent reasons:  (1) the chips were specifically developed to circumvent the authentication sequence;  (2) the chips had no commercial purpose other than circumventing that sequence; and (3) the chips are marketed as being capable of circumventing that authentication sequence.

The Court held that Static's actions were not protected under the DMCA's reverse engineering sections, 1201(f)(2) and (3).  These sections only protect copying if done "solely for the purpose of enabling interoperability of an independently created program with other programs, and to the extent that doing so does not constitute infringement under this title or violate applicable law other than this section."  Because Static's chips utilize Lexmark's own Toner Loading Program, they do not make an independently created program interoperable with Lexmark's printers, and thus fall outside the protection of section 1201(f).

Lastly, the Court rejected Static's arguments that the DMCA was not intended to protect a toner cartridge manufacturing against competition from remanufacturers. 

The DMCA was not "only intended to protect copyrighted works from digital piracy … [Nor is] the DMCA … limited to the protection of "copies of works (such as book, CD's and motion pictures) that have an independent market value.' … Quite simply, if a work is entitled to protection under the Copyright Act, trafficking in a device that circumvents a technological measure that controls access to such work constitutes a violation under section 1201(a)."

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