Companies

Toner cartridge conflict heats up

By Wang Xin (China Daily)
Updated: 2010-07-21 10:40

Generic printer cartridges are at the center of an overseas patent dispute. [Duo Duo / China Daily]

Canon asks for much-feared USITC Section 337 action against China firm

Canon, one of the world's largest maker of office equipment, initiated a US International Trade Commission (USITC) Section 337 complaint against Ninestar Image International Ltd in late June, claiming infringement on two patents for toner cartridges.

Along with Ninestar, the leading Chinese maker of print consumables, nine affiliated businesses on the mainland and in Hong Kong, and 10 US companies that sell the products, are listed as defendants.

Through its US operations, Japanese electronics giant Canon is seeking a limited exclusion order to prevent Ninestar's printer cartridges from entering the US market and a cease and desist order to stop sales of imports already there.

Canon said it opened a manufacturing plant last year near Newport News, Virginia, where it plans to produce millions of cartridges, Bloomberg reports.

It is the 10th complaint asking the US trade organization to mount a feared Section 337 investigation into Chinese exports this year, according to statistics from the Ministry of Commerce.

"We are now awaiting the USITC's decision to determine our next move," Zang Xiaogang, Ninestar's marketing director told China Daily over a telephone interview.

The USITC is expected to announce a decision next week on whether it will accept the complaint and start a formal investigation.

Canon says the patents in question relate to photosensitive drums inside the cartridges and how they connect to the printer, allowing for users, rather than technicians, to remove and replace the drum.

The key components are not made by Ninestar itself, but provided by some "renowned Japanese and South Korean brands", according to Zang.

Yet Canon "elected to sue us, rather than the actual suppliers, which is worth attention", Zang said.

Behind the intellectual property dispute is fierce market competition, National Business Daily cited industrial insiders as saying.

Printers are now sold at a tiny markup, with consumables like cartridges the true major profit stream - an appealing market that attracts newcomers as consumers often voice complaints about the high cost of printer cartridges.

Printer brands usually have their own tailored cartridges, which enables them to control price through production by a limited number of affiliated companies.

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In contrast, Ninestar makes general-use print consumables that can be used in a wide rang of printers including Canon, Epson and Hewlett-Packard brands.

Now with only 10 percent of the global market, generic print consumables have enormous potential that poses a threat to the industry's giants, Zang said.

China'safter-market,replacement toner cartridge business experienced a 50 percent year-on-year sales increase in the first half of this year, according to Zang.

About 90 percent of China-made general-purpose print consumables are exported, which has had wide-reaching impact on conventional producers, Tech.qq reports.

"A patent strategy has lost its real sense if it is just used to ensure a monopoly and forestall competition - such unfair competition is denounced," the website portal cited Yu Xuan, secretary-general of the China Computer Industry Association as saying.

"This is a tech-intensive industry. You can't survive without intellectual property," Zang said, adding that Ninestar has built an intellectual property pool comprised of "hundreds" of proprietary patents and more innovations it licenses from others.

"We respect the intellectual property rights of others so we try to avert touching on existing patents and come out with our own technological solutions in developing new products," he said. "If impossible to steer around, we seek clinch an deal and pay for others' patents."

Ninestar is not short of experience in dealing with overseas legal complaints. It is the only one of 24 makers of consumables to respond to a patent infringement claim in the US filed by Japanese printer company Epson in 2006. The proceedings are still underway four years later.