I haven't taken a position on either side of this issue, but here is further food for thought from Paul Roark, in the form of a letter posted as a link on the Digital B&W Yahoo Group:
To Whom It May Concern:
Re: International Trade Commission matter 337-TA-565
Exclusion of competitive cartridges from the U.S.
The public needs to be made aware of a very anticompetitive, anti-consumer, and anti-environmental action about to be taken by the U.S. government. Our government is about to eliminate competition in the sale of Epson-compatible inks.
It appears the fate of competition in the market for Epson-compatible inks is in the hands of U.S. Trade Representative Susan Schwab, 600 17th Street, N.W., Washington D.C. 20508. If she does not act to stop the implementation of International Trade Commission matter 337-TA-565, the ability of other companies to sell ink to consumers of Epson inkjet printers may be blocked by the U.S. government, in effect, subsidizing Epson’s efforts to monopolize Epson-compatible ink sales by excluding inkjet cartridges from importation into the U.S.
The prices of Epson inks in its cartridges are vastly higher than the competing ink options. In addition to the pre-filled, competitive cartridges, many use easily-refillable, third-party cartridges or continuous flow ink systems and buy ink in bulk, such as 4 oz. bottles. When bought in bulk, the prices for competing inks are about 1/10th that of what consumers pay for Epson inks.
In addition to the huge price differential, the competitive options that allow the use of bulk inks do not cause the environmental problems associated with consumers throwing the small cartridges into our land fills. These options also will likely be eliminated by this ITC action.
While some have claimed that third party inks are inferior, this is simply not true in many cases. In the small black and white, monochromatic ink market that I am personally most interested in, the non-Epson inks are superior to Epson options. Epson makes no product that can equal the image quality, stability and lightfastness of the carbon inks I use for my fine art B&W photographic prints. And the inks I use are far cheaper. Additionally, innovative little U.S. companies have for years made very lightfast pigmented inks available for entry level printers where Epson sells only fast-fading dyes. In short, there are small, innovative U.S. companies that sell superior products for less. These companies are at risk of being put out of business by the combination of Epson’s anticompetitive practices and the U.S. government.
The ITC Epson inkjet cartridge matter, now pending before the U.S. Trade Representative, is part of Epson’s attempt to monopolize aftermarket ink sale into its printer base. It is using its patents over the interface between the inks and printers to accomplish this. Even assuming these inkjet cartridge patents are valid, this is, in effect, an illegal “tying agreement” that ties subsequent sales of inks to the sale of the printer. Tying agreements have been prohibited by the antitrust laws for many years, although the burden of proving an illegal tying agreement has been made much more difficult in recent years. Realistically, small competitors and consumers simply cannot afford the legal fees and years of litigation such matters now involve. Nonetheless, where a government agency is called on to exercise discretion, the fact of the likely illegal conduct and the larger competitive picture should be considered. Sadly, the plight of competitors and consumers who were never parties to this action may never have come to the attention of the decision makers. The U.S. Trade representative needs to consider these factors.
From a legal standpoint, there are cases that deal with these concepts. The Ninth Circuit Federal Court of Appeals in Image Technical Services v. Eastman Kodak (125 F.3d 1195 (1997)) addressed for the first time the relationship of intellectual property rights and the antitrust laws. The court held that a monopolist who has achieved a dominant position through its patents and copyrights can violate the Sherman Act by exploiting that dominant position to attain a monopoly in another market. As a subsequent court noted, “Properly viewed within the framework of a tying case, [Image Technical Services] can be interpreted as restating the undisputed premise that the patent holder cannot use his statutory right to refuse to sell patented parts to gain a monopoly in a market beyond the scope of the patent.” (CSU v. Xerox, 203 F.3d at 1327) See also Atari Games Corp. v. Nintendo of AM., Inc.: “[A] patent owner may not take the property right granted by a patent and use it to extend his power in the marketplace improperly, i.e., beyond the limits of what Congress intended to give in the patent laws.” (897 F.2d 1572, 1576 (Fed. Cir. 1990)) An excellent article on this subject by Nicholas Economides and William Hebert can be found at http://ideas.repec.org/p/net/wpaper/0707.html
Almost all of us use printers that might be affected by the concepts noted above. We need consumers to be aware of the problem and convey their concerns to the policy makers involved. Using dubious patents to monopolize adjacent markets, and having the ITC help in this effort is not what Congress had in mind when these legal regimes were put in place.
Thank you for your assistance in this matter.
Retired FTC antitrust attorney