Legal cases
Lexmark pioneered the use of profits from ink cartridges as a business model, with the result of modifying the legal models of product ownership and patent exhaustion over several years.[39]
Arizona Cartridge Remanufacturers Ass'n Inc. v. Lexmark International Inc., also referred to as ACRA v. Lexmark, was a 2005 decision by the United States Court of Appeals for the Ninth Circuit, which ruled that an End User License Agreement on a physical box can be binding on consumers who signal their acceptance of the agreement simply by opening the box. The decision holds that Lexmark can enforce the "single use only" policy written on the side of Lexmark printer cartridge boxes sold to large customers at a discount, with the understanding that the customers will return the cartridges to Lexmark after using them (so that the cartridges would not be diverted, refilled, and then resold), or else face legal liability for not returning them to the company as agreed.
Lexmark had introduced various authentication mechanisms into its printers that rejected third-party cartridges and resisted any attempt to refill spent ones. ACRA, a consumer group representing manufacturers of third-party authentication microchips and third-party ink and toner cartridges, had challenged this policy as deceptive and unenforceable. The Ninth Circuit disagreed, allowing Lexmark to prevent the use of third-party cartridges and the re-use of empty ones. These restrictions are achieved with a combination of encryption hardware within the cartridges and printer firmware that attempts to verify their authenticity as being first-party (i.e. manufactured or distributed by Lexmark). The firmware tracks cartridge ink levels, and will permanently disable any cartridge that it has determined to have been refilled, regardless of whether it actually has been.
Subsequent challenges to the "single use only" policy were more successful. Lexmark lost the Supreme Court case Impression Products, Inc. v. Lexmark International, Inc., in a 7–1 ruling that partially reversed and remanded the Ninth Circuit decision in ACRA v. Lexmark on May 30, 2017:
When a patentee chooses to sell an item, that product is no longer within the limits of the monopoly and instead becomes the private, individual property of the purchaser, with the rights and benefits that come along with ownership. A patentee is free to set the price and negotiate contracts with purchasers, but may not, by virtue of his patent, control the use or disposition of the product after ownership passes to the purchaser. The sale terminates all patent rights to that item.[40]
The decision holds that Lexmark cannot sue third-party manufacturers or resellers for patent infringement; notably, it does not mean that Lexmark cannot use firmware to detect, reject or disable third-party ink cartridges or attempted refills. As of 2024, the company continues to do so.
In 2023, Ninestar, a majority owner of Lexmark, was banned from importing goods into the United States under the Uyghur Forced Labor Prevention Act.[41] While Lexmark claimed its investors had no operational control over Ninestar, it did not respond to whether Lexmark sources products from Ninestar.[42]
