Who Owns a Core: It May Be the Supplier By J. D. Biersdorfer A recent decision in the Ninth Circuit Court of Appeals reinforced the right of companies, in this case Lexmark International, the printer maker, to legally limit what customers can do with a patented product, given that the company spells out conditions and restrictions on a package label known as a box-top license. Clickable license agreements are common practice in software, where the buyer agrees not to tamper with the code or copy the program. But slapping post- sale regulations on patented goods could deny buyers the ability to make modifi- cations or remanufacture the products as well. Box-top licenses could also theo- retically hinder third parties from offer- ing replacement parts or supplies for fear of a patent-infringement lawsuit (mean- ing, for example, that a lighter might have to be refueled only with the manu- facturer’s brand of butane). In the lawsuit, the Arizona Cartridge Remanufacturers Association (ACRA), a trade group of companies that sell refilled printer cartridges, claimed that Lexmark was engaging in unfair and deceptive business practices by promis- ing price discounts on its laser car- tridges if the customer promised to return the empty cartridge (the “core’”) to Lexmark. Lexmark’s packaging for laser car- tridges sold under this system (called the Lexmark Cartridge Rebate, or the Pre-bate program) includes a label on the outside of the box stating: “Opening this package or using the patented car- tridge inside confirms your acceptance of the following license agreement.” Cartridges that are not part of the Pre- bate program and not subject to the restriction are available to customers as well, but without the discount. At the time of the case, Lexmark estimated that cartridge returns had increased 300 per- cent since the Pre-bate program began. Lawyers for the remanufacturers’ association argued that Lexmark decep- tively suggested that the notice on the outside of the package created an enforceable agreement with consumers to return the used cartridges, and that the promise of a price discount was false because Lexmark could not control prices charged by retailers. Lexmark also uses an electronic chip on the car- tridges to communicate with the printer, which refuses to operate with cartridges that lack the chip; the association cited that as an unfair business practice. The court ruled in Lexmark’s favor on August 30, 2005 citing the previous case of Mallinckrodt Inc. v. Medipart Inc., a 1992 Circuit Court decision in a medical equipment case that allowed patent owners to limit the use of their products after sale. The court also con- cluded that Lexmark’s pricing claims were accurate and that ACRA failed to establish that Lexmark’s cartridge chip amounted to unfair competition. Some frugal printer owners won- dered if the decision would make it illegal to refill their inkjet cartridges at home, a concern that a Lexmark spokesman dismissed. “Lexmark’s cartridge-return program deals exclusively with laser printer toner cartridges. It does not involve any inkjet products,” said Tim Fitzpatrick, the vice president of corporate communications for Lexmark, who said that the program almost entirely involved business cus- tomers. “The court’s decision was very specifically about this program,” he said. Fred von Lohmann, a senior attor- ney with the Electronic Frontier Foundation and author of a 2004 amicus brief supporting ACRA, said he was more concerned about future implications of the decision. “This certainly sent a very strong message to patent holders generally, and Lexmark in particular, that you can use these labels in order to restrict what your customers can do with the product after they buy it,’ he said. von Lohmann gave several hypotheti- cal examples of how box-top licenses could be used, including automobile manufacturers who might put a label on anew car stating that by opening the door for the first time, the new owner agreed to use only the manufacturer’s replacement parts and to avoid modifying the car. “Owners of patents would love to be able to control what you can do with a product after you buy it,’ he said. “That’s new. The rule for most of a cen- tury has been, “You buy it, you own it.’” Lexmark was recently involved in another lawsuit against a North Carolina- based company, Static Control Com- ponents. In the case, Lexmark sued under provisions in the Digital Millennium Copyright Act to keep Static Control from reverse-engineering Lexmark’s car- tridge chips so that remanufactured car- tridges from other vendors would work in Lexmark printers. Static Control ulti- mately won the copyright fight after the United States Supreme Court declined Lexmark’s petition in June 2005. Ronald S. Katz, a lawyer for Manatt, Phelps & Phillips, which represented ACRA in the suit, said that while the continuation of Lexmark’s return pro- gram would not put companies that reclaim and refill laser printer cartrid