Lexmark International, Inc. v. Static Control Components, Inc., is an American legal case involving the computer printer company Lexmark, which had designed an authentication system using a microcontroller so that only authorized toner cartridges could be used. The resulting litigation (described by Justice Scalia in 2014 as "sprawling",Supreme Court ruling, at fn. 2 and by others as having the potential to go on as long as Jarndyce v. Jarndyce) has resulted in significant decisions affecting United States intellectual property and trademark law.
In separate rulings in 2004 and 2012, the United States Court of Appeals for the Sixth Circuit ruled that:
circumvention of Lexmark's ink cartridge authentication does not violate the Digital Millennium Copyright Act (DMCA), and Static Control Components had standing basis under the Lanham Act to sue Lexmark for false advertising in relation to its promotion of the program, which was unanimously affirmed in 2014 by the Supreme Court of the United States.Lexmark International, Inc. v. Static Control Components, Inc., (March 25, 2014).
The Supreme Court's 2014 ruling also affects statutory interpretation in the area of standing in pursuing lawsuits on statutory grounds in a wide variety of areas in federal court.
Background Lexmark is a large manufacturer of laser and inkjet printers,Circuit Court ruling, Page 2. and Static Control Components (SCC) is a company that makes "a wide range of technology products, including microchips that it sells to third-party companies for use in remanufactured toner cartridges."
In an effort to control and reduce the refilling and redistribution of toner cartridges, Lexmark began distributing two distinct varieties of its toner cartridges. Under its Prebate Program (now known as the Lexmark Return Program), through a shrinkwrap license, Lexmark sold certain printer cartridges at a discount (as much as $50 less)District Court ruling, Page 3. to customers who agreed to "use the cartridge only once and return it only to Lexmark for remanufacturing or recycling". Lexmark's "Non-Prebate" cartridges could be refilled by the user without restrictions and were sold without any discount.
Lexmark touted the Prebate Program as a benefit to the environment and to their customers, since it would allow customers to get cheaper cartridges, and the benefit to Lexmark was that it could keep empty cartridges out of the hands of competing rechargers. Many users purchased such cartridges under the stated conditions.
To enforce this agreement, Lexmark cartridges included a computer chip that included a 55-byte computer program (the "Toner Loading Program") which communicated with a "Printer Engine Program" built into the printer. The program calculated the amount of toner used during printing: when the calculations indicated that the original supply of Lexmark toner should be exhausted, the printer would stop functioning, even if the cartridge had been refilled.Sixth Circuit opinion, page 3. In addition, if the chip did not perform an encrypted authentication sequence, or if the Toner Loading Program on the chip did not have a checksum matching exactly a value stored elsewhere on the chip, the printer would not use the cartridge.Sixth Circuit opinion, page 4.
In 2002, SCC developed its own computer chip that would duplicate the "handshake" used by the Lexmark chip, and that also included a verbatim copy of the Toner Loading Program, which SCC claimed was necessary to allow the printer to function. A Prebate cartridge could successfully be refilled if Lexmark's chip on the cartridge was replaced with the SCC chip. SCC began selling its "Smartek" chips to toner cartridge rechargers.
Copyright and DMCA claims: 2004 Circuit Court ruling
At the district court On December 30, 2002, Lexmark sued SCC in the United States District Court for the Eastern District of Kentucky. The suit claimed that SCC had:
violated copyright law by copying the Toner Loading Program, and violated the DMCA by selling products that circumvented the encrypted authentication sequence between the Lexmark cartridge chip and the printer.
On March 3, 2003, Judge Karl S. Forester granted a preliminary injunction to Lexmark, blocking SCC from distributing its cartridge chips. The ruling was seen to be controversial.
On the copyright claim, the court found that:
the use of the Toner Loading Program was indeed a likely copyright violation,District Court ruling, page 23. because the Toner Loading Program was not a "lock-out code" that SCC was entitled to copy under the DMCA,District Court ruling, page 7.District Court ruling, page 24. and because the Toner Loading Program could be rewritten in different ways (and therefore had enough creativity to qualify for copyright protection).District Court ruling, page 9. the Copyright Office's decision to grant copyright registration to the two programs showed that the programs were probably copyrightable.District Court ruling, page 11. because of the complexity of the authentication system, SCC could not have known that it could bypass the authentication without using Lexmark's copyrighted program; but it held that this did not matter because "Innocent infringement, however, is still infringement."District Court ruling, page 25. fair use did not apply.District Court ruling, page 28.
On the DMCA claims, the court found that the SCC microchip circumvented Lexmark's authentication sequence,District Court ruling, page 18.District Court ruling, page 42. and that the reverse engineering exception to the DMCA did not apply, because it only covers the independent creation of new programs that must interoperate with existing ones, and SCC did not create any new program.District Court ruling, page 47.
Appellate ruling SCC appealed the district court's ruling to the Sixth Circuit Court of Appeals. As is usual for federal appeals in the United States, a three judge panel heard the appeal – for this matter, the panel consisted of appellate judges Gilbert S. Merritt and Jeffrey S. Sutton, and John Feikens (a district court judge temporarily assisting the appeals court). On October 26, 2004, the judges issued their ruling, in which all three judges wrote separate opinions.
Majority opinion In the majority opinion, Judge Sutton (with Judge Merritt agreeing) reversed the lower court's ruling and vacated the temporary injunction, holding that Lexmark was unlikely to succeed in its case. The case was remanded to the district court for further proceedings consistent with the opinion.
On the copyright claim, the court noted that unlike patents, copyright protection cannot be applied to ideas, but only to particular, creative expressions of ideas.Sixth Circuit opinion, page 6. Distinguishing between an unprotectable idea and a protectable creative expression is difficult in the context of computer programs; even though it may be possible to express the same idea in many different programs, "practical realities"—hardware and software constraints, design standards, industry practices, etc.—may make different expressions impractical.Sixth Circuit opinion, page 7. "Lock-out" codes—codes that must be performed in a certain way in order to bypass a security system—are generally considered functional rather than creative, and thus unprotectable.
With these principles in mind, it was held that the district court had erred in three ways: It had held that the Toner Loading Program was copyrightable simply because it "could be written in a number of different ways", without considering the practical realities.Sixth Circuit opinion, page 9. Because of this mistaken standard, it had refused to consider whether or not the alternative Toner Loading Programs proposed by Lexmark were practical.Sixth Circuit opinion, page 10. It had concluded that the Toner Loading Program was not a "lock-out code", because it had not sufficiently considered how difficult it would be for SCC—without Lexmark's knowledge of the code's structure and purpose—to alter the code and still pass the printer's authentication mechanisms.Sixth Circuit opinion, page 11.
On the DMCA claims, the majority first considered Lexmark's claim that the SCC chip circumvented the access controls on the Printer Engine Program. It held that Lexmark's authentication sequence did not "control access" to the program; rather, the purchase of the printer itself allowed access to the program:
Likewise, the majority opinion held that anyone purchasing a printer and toner cartridge could read the Toner Loading Program from the printer; so SCC did not circumvent an access control on the Toner Loading Program either.Sixth Circuit opinion, page 18.
The court also rejected the district court's conclusion that the interoperability defense did not apply. Since SCC had offered testimony that its chips did indeed contain independently created programs in addition to Lexmark's Toner Loading Program, the Toner Loading Program could be seen as necessary to allow interoperation between SCC's own programs and the Lexmark printer.Sixth Circuit opinion, page 19.
Concurring opinion In a concurring opinion, Judge Merritt agreed with Judge Sutton on the outcome of this particular case, but also indicated that he would go farther:
He opined that even if the programs involved were more complex (and thus more deserving of copyright protection), the key question would be the purpose of the circumvention technology. Under his proposed framework, if a third-party manufacturer's use of a circumvention technology was intended only to allow its products to interoperate with another manufacturer's—and not to gain any independent benefit from the functionality of the code being copied—then that circumvention would be permissible.Sixth Circuit opinion, page 21.
Concurring/dissenting opinion Judge Feikens also wrote an opinion, agreeing with many of the majority opinion's results (though sometimes for different reasons), but disagreeing with its conclusion on the Toner Loading Program.Sixth Circuit opinion, page 23.
Concerning the copyrightability of the Toner Loading Program, he found that the record supported Lexmark's claim that the program could have been implemented in any number of ways, and therefore Lexmark's implementation was creative and copyrightable. Agreeing that the record was inadequate for the district court to conclude that the Toner Loading Program was a "lock-out code", he noted that Lexmark's expert had testified that the entire Toner Loading Program process could be turned off by flipping a single bit in the chip's code, and that it should have been possible for SCC to discover this; so copying the program may not have been practically necessary too.Sixth Circuit opinion, page 24.
On the DMCA counts, Feikens agreed that Lexmark had not established a violation with regards to the Toner Loading Program, but for a very different reason than that found by the majority opinion. He noted that SCC had testified that it had not even been aware that the Toner Loading Program existed; it had copied the data on the Lexmark printer chip (including the Toner Loading Program) purely in an attempt to bypass the protection on the Printer Engine Program. Since the DMCA requires that an infringer knowingly circumvent access controls on the protected program, SCC could not have knowingly circumvented protections on a program it did not know existed.Sixth Circuit opinion, page 30. With regards to the Printer Engine Program, he agreed with the majority opinion, but also noted in his belief that the consumer had acquired the rights to access this program by purchasing the printer, and therefore the DMCA would not apply to attempts to access it.Sixth Circuit opinion, page 31.
Request for a rehearing Lexmark filed a request for the full Sixth Circuit to hear the case en banc. The Sixth Circuit rejected this request in February 2005.