With 38 years of experience in the aftermarket supplies industry — Print-Rite has invested tremendously in IP to ensure our products wouldn’t infringe OEM patents or any other third-party patents and to date Print-Rite has registered nearly 3,000 patents worldwide, says Mr. Arnald Ho — the founder and CEO of Print-Rite has found the best way for the company to operate is not stand in opposition to OEMs and to do the utmost to respect their IP. In an interview with Actionable Intelligence for “IP”, Mr. Ho explains the philosophy of Print-Rite for the past 38 years and its IP strategy that implemented over the past two decades.
APRIL 11, 2019 ACTIONABLE BRIEFINGS
Print-Rite has long made developing noninfringing new-build cartridges its mission. The Hong Kong and Zhuhai-based maker of aftermarket consumables has been around for 38 years now. In that time, the firm has expanded into new markets but has always retained its focus on research and development (R&D) and innovation. Actionable Intelligence recently had the opportunity to hear more about two of the industry’s hottest topics—intellectual property (IP) and OEM lawsuits—from Arnald Ho, Print-Rite’s founder and CEO.
Arnald Ho, CEO of Print-Rite, featured on an advertisement in Times Square, NYC, in 2014
The Print-Rite Philosophy
The Print-Rite tower in Zhuhai
Mr. Ho explains that Print-Rite began implementing its IP strategy in 1999, developing a department dedicated to IP. Since then, he says, “We have spent a lot of money and effort to ensure our products wouldn’t infringe OEM patents or any other third-party patents.” Mr. Ho estimates that to date Print-Rite has registered nearly 3,000 patents worldwide.
While Print-Rite, like many companies in the aftermarket supplies industry, has faced OEM patent-infringement litigation over the years, Mr. Ho emphasizes that Print-Rite does not see the relationship between OEMs and aftermarket as adversarial. Mr. Ho states, “Our philosophy is we don’t want to fight with OEMs because we know that OEMs are not our enemy.” He points out that this is a message Print-Rite has consistently emphasized over the last 30 years even as many of Print-Rite’s competitors have positioned OEMs and the aftermarket as engaged in a bitter war. He bluntly says, “People who express such thoughts forget what business they are in. We are making compatible products for use in those OEMs’ printers. No printers, no compatible supplies industry. With all of the compatible remanufacturers relying on OEMs to sell printers, how then can OEMs be our enemy?”
Mr. Ho sees patent-infringement litigation as an inevitable cost of doing business as an aftermarket supplies manufacturer. He states, “Of course, OEMs sue the companies that they believe are infringing their patents. Otherwise why register those patents?” While Print-Rite has been named a defendant in some patent-infringement lawsuits over the years, Mr. Ho emphasizes that developing the best, most reliable, noninfringing products on the market is always Print-Rite’s goal.
In some previous litigation, such as Lexmark’s International Trade Commission (ITC) investigation of 2010/2011 or Canon’s original dongle gear ITC investigation of 2014/2015, Print-Rite settled with the OEMs relatively quickly. Mr. Ho explains, “Our position toward OEMs is always ‘soft.’ This is not because we afraid of them but because we know the relation between the aftermarket industry and OEMs.” He adds that OEMs’ dislike of the aftermarket supplies industry is understandable. Mr. Ho says, “Of course they don’t like the aftermarket industry because we are sharing their profits from a business model they designed. Why would they like us?”
Mr. Ho indicates that he has found the best way for Print-Rite to operate is to not stand in opposition to OEMs and to do the utmost to respect their IP. As he puts it, “Our overall company philosophy is to be an honest business citizen and fair to everyone in this business world.”
Print-Rite Can Be More Aggressive
Although Mr. Ho characterizes Print-Rite’s response to some OEM lawsuits as “soft,” that has not been the case with Print-Rite’s response to the Canon toner cartridge investigation before the ITC that Canon launched in 2018. Print-Rite and other respondents worked together to challenge Canon’s claims that the respondents’ products infringed the OEM’s patents.
Breaking a long string of relatively easy OEM victories before the ITC, the administrative law judge in the most recent Canon investigation issued a Markman order that was favorable to respondents and then issued a summary determination of noninfringement in the respondents’ favor (see “Huge Aftermarket Victory: Respondents to Canon Investigation Are Awarded Summary Determination of Noninfringement”). Canon has petitioned the full Commission to review this decision (see “Canon and Respondents Petition ITC to Review ALJ Determination” ). Print-Rite and the other respondents also want the Commission to review the decision—they insist that still other disputed terms in the Canon patents should be interpreted as they had argued. As of the time of writing, the ultimate outcome of the investigation is unknown.
Mr. Ho would not comment on the Canon toner cartridge investigation before the ITC because it is an ongoing matter. However, the case is an interesting example of Print-Rite using its IP expertise to defend itself against OEM accusations of infringement. There are other examples as well, including Epson failing to invalidate certain Print-Rite patents in China and a patent-infringement lawsuit that Print-Rite brought against Epson in China (see “Epson Fails to Invalidate Certain Print-Rite Patents in China” and “Print-Rite Sues Epson for Patent Infringement in China”).
Canon Suing Distributors
While Mr. Ho would not discuss Canon’s current toner cartridge investigation before the ITC, he was willing to discuss some trends he has noted in Canon’s litigation over the years. He says he has seen Canon shift its focus from suing manufacturers to distributors. While OEMs have long named key distributors in lawsuits, these distributors were named alongside the manufacturers whose products they sold. Mr. Ho notes that for the most part, in the past, Canon would “let them [distributor defendants]go easily without any damages or difficulties.”
As a result, he says, distributors became lackadaisical about OEM patent-infringement lawsuits. Mr. Ho says, “Distributors assumed that as long as they have some kind of indemnity from their vendors then it will be safe for them. They didn’t need to prepare tons of papers and information related to the case. They wouldn’t even have to be deposed. So they were spoiled and believed as long as they have the vendors indemnify them they can sell without verifying whether the products are infringing patents or not.”
Moreover, he says that Canon found that focusing mainly on the “supply side”—the manufacturers—was not as effective as it had hoped. Manufacturers have been quick to bring new workarounds to market. For example, Print-Rite brought its PR3 gear design to market and obtained Canon’s admission that cartridges using this solution did not infringe just a few months into the ITC investigation (see “Print-Rite Unveils PR3 Gear Design It Says Is Patent-Safe” and “Print-Rite Says Canon Has Confirmed PR3 Workaround Does Not Infringe”).
Now the industry is seeing Canon step up litigation against the channel for aftermarket supplies. While Canon’s ITC investigation names both manufacturers and distributors, it has filed individual lawsuits in federal court against each of the named distributors. Moreover, Canon is now often filing lawsuits that go after distributors solely. In the United States, for example, Canon has filed individual patent-infringement lawsuits against Kostland, Ink Technologies Printer Supplies, and Do It Wiser alleging infringement of a different patent than those asserted in the ITC matter (see “Canon Sues Kostland over Infringement of JetIntelligence Patent”, “Canon Files New Lawsuit against Ink Technologies Printer Supplies” and “Canon Files New Patent-Infringement Suit against Do It Wiser”).
More recently, in March, Canon filed a patent-infringement lawsuit against LD Products—Canon’s first, we believe, to assert U.S. patent number 8,588,646(‘646), which is part of a broader patent family Canon has been asserting in Europe (see “Canon Files Patent-Infringement Suit against LD Products”). And speaking of Europe, Canon has been on a spree filing patent-infringement lawsuits against distributors in Germany. So far in 2019, the OEM has filed nine toner cartridge patent-infringement lawsuits against distributors doing business in Germany—it has obtained preliminary injunctions against them all (see “Canon Files Suit, Gets Injunction against Hamle GmbH in Germany”).
Canon is also targeting distributors via its Amazon takedown campaign in the United States and Europe. For Amazon sellers, getting key listings pulled can be a real blow and they often have little recourse. To date, Canon has issued 59 announcements about Amazon takedowns—all focused on Amazon sellers, not manufacturers (see “Canon Takes Down Toner from Amazon in Germany and Italy”).
So Mr. Ho does indeed have a valid point—Canon has been looking to dial up the pressure on distributors via the courts and Amazon takedowns. Mr. Ho says this is a “smart move,” from Canon’s perspective, although a worrisome one from distributors’ point of view. This shift can and should change distributors’ thinking, says Mr. Ho. He explains that even though many distributors are indemnified, they now are faced with having to defend themselves in court, rather than relying on manufacturers to take care of the matter as in cases that name numerous distributors and manufacturers. While Mr. Ho says that ultimately the distributor’s manufacturer might have to pay damages and other financial costs associated with the litigation, but being named in individual cases costs distributors in other ways—lost time, anxiety, and uncertainty.
Why is this strategy so smart on Canon’s part? Mr. Ho says it is because it hurts distributors, yes, but ultimately targeting distributors hurts manufacturers as well. “If OEMs can stop the distributors selling infringing products, then the manufacturers can’t survive. Just like the new way to kill cancer is to stop supplying nutrition to those bad cells which would become cancer.”
Mr. Ho’s advice to the channel is to be knowledgeable, careful, and respectful. Those in the channel have legal responsibility for what they sell, so they need to verify IP and ensure that their products do not infringe. Obtaining an indemnity agreement from a supplier won’t prevent all pain if an OEM files suit. Moreover, he warns that distributors need to be aware that an indemnity agreement is only as good as the vendor standing behind it. “Indemnity,” he says, “is kind of a blank check. Whether that check can be cashed would depend on how much the legal costs will be and whether the company providing the indemnity has the money in the bank.” He also warns that if OEMs continue to obtain big awards like that General Plastic Industrial Co., Ltd. (GPI) had to pay Canon (see “Canon Awarded Nearly $4.5 Million in Toner Bottle Lawsuit against Color Imaging and General Plastic”), some vendors may become less willing to agree to provide their customers with indemnity.
Mr. Ho says that in today’s litigious environment it is simply not smart for distributors to sell whatever product they can obtain at the least cost that provides them with the best profit margin. Such products are often infringing. Resellers and distributors need to do their due diligence about IP and choose noninfringing new-build and remanufactured solutions.