Last October Canon lost their legal action against wta and KMP in the German courts. The “David v Goliath” defeat for Canon surprised most in the industry, but it is worth understanding the key points in the decision.
Canon was the OEM sleeping giant for many years as counterfeit and clones entered the market and Canon took no action to defend theirs and HP’s market share. HP insiders expressed their frustrations in private at the OEM’s lack of action while counterfeit and clone products penetrated the market. A Canon insider suggested in 2014 that clones and counterfeits hurt the aftermarket more than the OEM’s. One HP insider suggested that the Samsung acquisition was, in part, a response to the lack of action by Canon to stem the flow of counterfeit and clone cartridges.
Once the sleeping giant was awakened the Canon legal steam roller got underway and a slurry of patent infringement actions followed. The actions were targeted in the first instance towards clone manufacturers. The actions had the support of both OEM and aftermarket communities. At times, the cross-industry support for Canon’s action was more akin to a love affair. As the Frank Sinatra record goes “Then they go and spoil it all by…” suing wta and KMP and the love affair ends. The good will was expended in one action.
Canon argued that the OPC unit within the cartridge (flange, dongle gear and OPC) were a sub unit of the cartridge and that the patent on the dongle gear was valid. Thereby in changing the OPC and reusing the dongle gear, the cartridge was still under the dongle gear patent and further argued that if the OPC replaced this constituted more than a permissible repair as more than 70% of the sub unit was being replaced. The court in Dusseldorf accepted this argument and found in favour of Canon. With the support of the remanufacturing community wta and KMP appealed that decision and last October it was overruled.
The appeal court determined that the dongle gear patent was exhausted once the cartridge had been legally placed on the market and both companies could demonstrate that the cartridges had, indeed, been legally placed on the market. They also found that the dongle gear was only a small part of the cartridge and its reuse did not “re-patent” the whole cartridge.
The court also commented that a different entity of the EU may wish to look at this case in detail as it appears to conflict with the EU industry voluntary agreement to improve the environmental performance of imaging equipment placed on the European market that Canon Europe is a signatory to. In the voluntary agreement, the OEM’s agree that for all new product models first placed on the EU market after 1 January 2015 any cartridge produced by or recommended by the OEM for use in the product shall not be designed to prevent its reuse and recycling and that the machine shall not be designed to prevent the use of a non-OEM cartridge.
A great win for the two companies and for the aftermarket where the decision provides more clarity for the scope and scale of permissible repair and remanufacturing. For makers of hybrid (high capacity / yield remanufactured) and non-OEM cartridges the decision does not provide any material benefit. Indeed, the argument would be more centred on whether the cartridges were legally placed on the market in the first instance by the IP holder.
The impact for both companies involved stopping production of some cartridge models for several months and the subsequent lost business as well as management time and legal costs and time is money.
According to wta’s CEO Carsten Weser “Our customers and suppliers have been very loyal and supportive during this time, and it reinforces our brand loyalty.” Asked what advice he had for others who might find themselves in a similar situation he said, “we have always believed in our process and we focus on the risk management and so don’t give up.”
