Spilt Ink

Chances are that the dirt-cheap printer you bought a year or two ago has been paid for twice over with the purchase of costly ink cartridges. And that’s no accident. Printer manufacturers realize that while the printer is a one-time purchase, profits from ink cartridges last a lifetime. "Supplies account for probably more than 90 percent of [their] gross profit," says Keith Gay, an analyst with Thomas Weisel Partners in San Francisco.

Printer manufacturers such as Hewlett-Packard and Canon make big money by selling ink cartridges. Can they block resellers?
Brian Howard

As cartridges run a hefty $30 to $40 apiece, many people have turned to remanufacturers, which offer refilled units. Remanufactured cartridges not only save money, but also keep the parts from being landfilled, where they may leak toxic substances into the soil.

Low-priced aftermarket cartridges, however, face obstacles from manufacturers. Lexmark International, Epson, Hewlett Packard (HP) and Canon—the four largest printer companies—have all installed smart chips in their cartridges. Some of these chips, such as Hewlett Packard"s, only disable key features. Others, including Lexmark"s, lock out any non-Lexmark cartridge from being used in the printer. These smart chips effectively wipe out the aftermarket by forcing consumers to buy new cartridges.

"Such measures have serious environmental consequences," says Bill Sheehan of the Grassroots Recycling Network. Every large laser printer cartridge requires about three quarts of oil and 2.5 pounds of plastic to make—and the plastic used is industrial grade, taking around 1,000 years to decompose. Without the option of recycling, customers are forced to add cartridges to the five to seven million tons of electronic waste produced annually in the U.S.

The European Union recently banned the use of smart chips that block aftermarket cartridges. The move, says Dermot Jewell of the Consumers Association of Ireland, is "designed to inject some sort of reason into the business regarding recycling."

Here in the U.S., no such law exists. And with the market for ink and toner growing, Lexmark, in particular, is campaigning hard to eliminate competition from the aftermarket. The company is suing Static Control Components, a cartridge remanufacturer, for creating a chip that imitates a smart chip’s effects.

Lexmark claims Static Control violated the Digital Millenium Copyright Act (DMCA), which is a statute intended to protect access to copyrighted technology. But the printing process is not a copyrighted technology, argues Ed Swartz, founder and CEO of Static Control. If Lexmark is allowed to keep using its smart chips, it will essentially hold a monopoly on printer cartridges, says Swartz. He believes a ruling favorable for Lexmark could have far-reaching effects. "Such a misapplication of the DMCA could then be used to regulate the brand of film in your camera, or the tires on your car."

HP has publicly disagreed with Lexmark’s position, saying the use of the DMCA is unfounded. Although remanufactured cartridges do cut into HP’s sales, HP Senior Vice President Pradeep Jotwani believes there should be a place for them in the market. Lexmark declined comment.

California passed a law in 1999 prohibiting state agencies from buying non-reusable printer cartridges, and a few states have followed suit. The International Imaging Technological Council estimates that more than 100 million printers will be shipped in 2003.