HP cracks down on cartridge refill industry

Charges that Cartridge World uses formula for HP-patented ink is part of attempt to draw attention to HP's intellectual-property rights.

Hewlett-Packard on Thursday accused a national cartridge reseller of refilling used printer cartridges with ink that relies on a formula for an HP-patented ink brand.

In its letter to Cartridge World, HP asked the company to stop using inks with the same chemical composition that's found in its patented brand of Vivera inks. HP holds 9,000 patents related to imaging and printing, 4,000 of them for consumable supplies such as ink and cartridges.

Although not an official legal action, the letter to Cartridge World is part of a broader attempt to crack down on the ink cartridge refill industry, HP said.

"HP spends millions of dollars annually in R&D to create innovations that benefit our customers, and we are rigorous in our protection of this investment," Pradeep Jotwani, senior vice president of supplies in HP's Imaging and Printing Group, said in a statement. "HP hopes that Cartridge World North America will assist its franchisees in quickly complying with the law."

Palo Alto, Calif.-based HP said it found multiple instances of cartridges filled with the infringing ink at Cartridge World's U.S. franchises. The cartridges replace a handful of HP printer cartridges, including those numbered 56, 57 and 78, and would be used in HP's DeskJet consumer printers.

Representatives with Cartridge World North America in Emeryville, Calif., and its home office in Adelaide, South Australia, were not immediately available to comment on the accusations.

Cartridge World, commonly found in strip malls and in business parks, refills empty inkjet cartridges from printer makers such as HP, Epson, Canon and Lexmark International and sells them at heavily discounted rates. For example, Cartridge World sells an HP 56-compatible cartridge for $17.72 instead of its usual retail price of $35.35. A discounted HP 78-compatible cartridge that retails for $53.07 sells for $26.57 under Cartridge World pricing.

Separately, HP said it settled its false-advertising lawsuit against Rhinotek Computer Products of Carson, Calif.

Rhinotek acquires used HP ink cartridges and refills them with generic ink prior to resale. HP's suit alleged that Rhinotek's packaging failed to tell consumers that the "compatible" products are used.

Rhinotek has denied any wrongdoing, but has agreed, among other things, to modify its packaging. Financial terms of the deal were not disclosed.

HP said it is using the Cartridge World and Rhinotek cases to draw attention to its intellectual-property rights.

"HP has lost more than most of the other vendors in the aftermarket because they sell more than any other vendor," said John Shane, a director at InfoTrends/CAP Ventures and an industry expert on the ink and toner market.

The estimated retail value for cartridges used in HP inkjet machines in the United States in 2004 was about $6.3 billion, according to Shane. That's just more than half the $12 billion Shane estimates as the amount for all cartridges for all machines used for desktops last year.

And even though HP printer cartridges make up the majority, the company itself controls only 88 percent of the retail value. The remaining portion of that cartridge demand goes to refilling companies such as Cartridge World, InkCycle and Rhinotek.

"HP products tend to be a little more difficult to recreate in the generic market because the refilling companies can't make print heads, but a good portion of HP's cartridge business is getting eaten up," Shane said.

The case draws many similarities to one that after it discovered that refilled inkjet cartridges sold under the Staples brand contained patent-infringing ink. HP filed the lawsuit, but reached the settlement before going to court. InkCycle eventually changed its ink formula.

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