Felony Contempt of Business Model: Lexmark's anti-competitive legacy

In 2002, Lexmark was one of the leading printer companies in the world. A division of IBMthe original tech giantLexmark was also a pioneer in the now-familiar practice of locking customers in to expensive "consumables," like the carbon powder that laser-printers fuse to paper to produce printouts.

Lexmark gave its customers the choice of paying extra for their cartridges (by buying refillable cartridges at a $50 premium), or paying extra for their toner (saving $50 on a cartridge whose "lock-out" chip prevented refilling, so that they would have to buy a whole cartridge when the non-refillable one ran dry). Customers, however, had a counteroffer for Lexmark: they wanted to save $50 on a "non-refillable" cartridge and then go ahead and refill it. After all, carbon is relatively abundant throughout the universe, and more locally, Earth has more carbon that it knows what to do with.

Various competitors of Lexmark stepped up to help its customers with their counteroffer. One such company was Static Control Components, which reverse-engineered Lexmark's lock-out chip and found that its 55-byte program performed a relatively straightforward function that would be easy to duplicate: when a cartridge was newly filled, this chip signaled to the printer that the cartridge had available toner. Once the cartridge ran out, the chip would tell the printer that it had an empty cartridge. Refilling the cartridge did no good because the chip would still tell the printer that there was no toner available.

After Static Control performed this bit of reverse engineering, it was able to manufacture its own chips, which it sold to remanufacturers, who would pour in fresh carbon, swap out the chip, and sell the cartridges. Read the rest