Inkjet Printers, Patents and Business Plan Protection

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September 8, 2006
OnTheCommons.org

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It seems almost a law of human nature that we become replicas of that which we rebel against.   Children turn into revised versions of the parent they hate.  The karmic chains hold nations too.  Look at America’s deepening class system, its hereditary entitlements enhanced by the rollback of the estate tax, and the spread of government-sanctioned commercial monopolies through the abuse of the patent system.  It does sound a bit like the colonial power we once declared our independence from.

The patent system was supposed to help avert this cycle. It was supposed to spur innovation, and thus help the nation escape the swamps of commercial entitlement that Mother England had fallen into  The system was not supposed to help corporations protect a business model and ensure a constant stream of monopoly gains.  Yet that is what it often has become.  Inkjet printers are a case in point.

I have written here before about inkjet printers, and the patent-based business model that traps customers into buying expensive and proprietary refill cartridges.  More evidence comes in an article in the August 29th Wall Street Journal on Hewlitt Packard and its printer business, which provides the bulk of the company’s profits.

HP has launched a patent jihad against competitors in the replacement cartridge business.  It has a team of chemists who spend full time analyzing the ink of other companies.  Its lawyers have been filing lawsuits right and left: Walgreen, OfficeMax, and a host of lesser-known makers of refilled and replacement cartridges.  In 2004, apparently the last year for which figures are available, such efforts yielded some $200 million in “cash and product discounts,” thus constituting a profit center in and of themselves.

If all this were to protect genuine innovation that would be one thing.  But I am skeptical.  I have bought three or four printers over the last ten years: Cannon, Lexmark, Epson, HP.  I have not noticed an iota of difference in the quality of ink.  When I manage to refill a cartridge with generic ink (the printer manufacturers make it as difficult as possible) the generic looks just fine. The only problem is the technical barriers the manufacturers build in to discourage refilling, such as the “empty cartridge” warning that continues to show on the computer screen.

For that matter, I am not aware of a single “advance” in printer technology in recent years that makes much difference to me. The Cannon that I bought in the late ‘90s served just as well as the HP I bought last year.  So as I said I am skeptical that HP’s patent jihad is in the service of the kind of technical advance that the patent clause of the Constitution was written to promote.

My skepticism is increased by the following paragraph in the Journal story:

H-Ps ink-cartridge business acts as a powerful annuity for the company.  The technology giant, which has a market share of 50% in the U.S. and more than 4000 patents on its ink formulations and cartridge design, often sells its printers at a loss, then essentially locks customers in when they have to repeatedly come back to buy replacement ink cartridges. In fiscal 2004, H-P made more than 80% of its $5.6 billion in operating profits from ink and toner supplies, according to Sanford C. Bernstein & Co.

Sell the printer at a loss, and then lock your customers into buying replacement cartridges at exhorbitant prices.  Use the patent laws to make sure that no competitors cut in on this lucrative business.  This sounds an awful lot like business plan protection, not authentic innovation that serves the customer rather than the company.

What would happen if cartridges were standard, the way flashlight batteries are?  Or more to the technological point, cd’s. Then manufacturers would have to compete on the basis of the quality of printers.  Staples et al wouldn’t have to devote oceans of display space to a staggering array of cartridge types.  Corporate purchasing departments wouldn’t have to keep track of these.  Us ordinary customers wouldn’t be stuck with a hundred dollars worth of unused cartridges every time a printer wore out – which they do often.

Now that would be real innovation: generic, public domain printer cartridges.  Americans once rebelled at being forced to buy tea from a government-sanctioned trade monopoly.  I wonder.

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