No. 1] Recent Developments 307 Control of the Aftermarket Through Copyright Lexmark v. Static Control Components In an anticircumvention rulemaking hearing before the Copyright Office,1 the current Register of Copyrights asked a question of the former Register of Copyrights, who was representing Lexmark Inter- national, Inc. (“Lexmark”): MS. PETERS: Could you respond to Mr. Green- stein’s parade of horribles of, you know, the ball point pen, . the car; all of the items in commerce that could in fact be controlled by a computer pro- gram so that the original manufacturer is the only one who can do replacement parts? MR. OMAN: This is, in my view, speculation.2 Mr. Oman, understandably, was arguing that the only question at hand was the particular dispute between his client and Static Control Components, Inc. (“SCC”) regarding SCC’s sale of microchips that enabled the reuse of Lexmark’s toner cartridges. However, broad questions of policy regarding control of interoperability and the avail- ability of replacement parts for almost any item of commerce were in fact on the line. The same type of copyright enforcement scheme at issue in the controversy between Lexmark and SCC could be used to require consumers to buy gas from the same company that sold their cars, compact discs from the same company that sold their stereos, and milk from the same company that sold their refrigerators. Lexmark, a manufacturer and supplier of printers and the toner cartridges that function with those printers,3 and SCC, a manufacturer and supplier of parts to the toner cartridge remanufacturing industry,4 1. See Copyright Office Hearing, Docket No. RM 2002-4 (May 9, 2003), available at http://www.copyright.gov/1201/2003/hearings/transcript-may9.pdf. Under the Digital Mil- lennium Copyright Act (“DMCA”), 17 U.S.C. § 1201(a)(1)(C)–(D) (2003), the Librarian of Congress, at the recommendation of the Register of Copyrights, issues three-year exemp- tions to the basic anticircumvention provision of the DMCA for classes of works where there would otherwise be adverse effects to the users of copyrighted works from application of the provision. This hearing was to consider such an exemption for the types of works at issue in Lexmark Int’l Inc. v. Static Control Components, Inc., 253 F. Supp. 2d 943 (E.D. Ky. 2003). 2. Copyright Office Hearing, Docket No. RM 2002-4 (May 9, 2003), available at http://www.copyright.gov/1201/2003/hearings/transcript-may9.pdf. 3. See Complaint at 2–3, Lexmark (No. 02-571-KSF), available at http://www.eff.org/ Cases/Lexmark_v_Static_Controls/20030108_lexmark_v_static_control_components.pdf. 4. See Memorandum in Opposition to Motion for Preliminary Injunction at 1, Lexmark (No. 02-571-KSF), available at http://www.eff.org/Cases/Lexmark_v_Static_Controls/ 20030213-OppositionBrief.pdf. 308 Harvard Journal of Law & Technology [Vol. 17 are fighting a fierce battle in courts and other government fora. At stake for the litigants are profits. Also at stake are consumer choice in the toner cartridge market, the potential for reuse and recycling in this and other markets, and the very structure of the market for interoper- able goods. The dispute has attracted wide attention, as evidenced by the seven amicus briefs filed at the preliminary injunction stage,5 and is being conducted in multiple fora. SCC has appealed a preliminary injunction issued by the Eastern District of Kentucky, which prohibits SCC from selling its reuse-enabling microchips, to the Sixth Circuit.6 It has also appeared before the Copyright Office to seek an exemption to the Digital Millennium Copyright Act (“DMCA”) from the Librar- ian of Congress,7 filed an antirust complaint against Lexmark,8 and obtained legislation in its home state of North Carolina outlawing contracts that prohibit the remanufacture of toner cartridges.9 Generally, once a toner cartridge is empty, it can be refilled by a third-party remanufacturer. Consumers have their cartridges remanu- factured because it is less expensive than purchasing a new car- 5. Briefs were filed by the Automotive Aftermarkets Industry Association, the Automo- tive Parts Rebuilders Associations Basel Action Network, the Computer and Communica- tions Industry Association, the Grass Roots Recycling Network, International Imaging Technical (a remanufacturer), Silicon Valley Toxics Coalition, and a group of law profes- sors, all available at http://www.eff.org/Cases/Lexmark_v_Static_Controls/ (last visited Nov. 1, 2003). 6. See Notice of Appeal as to Preliminary Injunction, Lexmark (No. 02-571-KSF). 7. The Register of Copyrights has recommended against an exemption for SCC, reason- ing that the existing statutory reverse engineering exception discussed in note 19, infra, is a more robust scheme than a limited copyright office exemption and that it better balances Congress’ competing concerns. See Recommendation of the Register of Copyrights in RM 2002-4; Rulemaking on Exemptions from Prohibition on Circumvention of Copyright Pro- tection Systems for Access Control Technologies, Memorandum from Marybeth Peters, Register of Copyrights, to James H. Billington, Librarian of Congress at 172–88 (Oct. 27, 2003), available at http://www.copyright.gov/1201/docs/registers-recommendation.pdf. 8. SCC filed the antitrust complaint in the Middle District of North Carolina. The magis- trate found that the antitrust claims were compulsory counterclaims, under Rule 13 of the Federal Rules of Civil Procedure, to the Lexmark-initiated suit in Kentucky, and recom- mended dismissal without prejudice so that the allegations could be heard in the Eastern District of Kentucky. See Static Control Components, Inc. v. Dallas Semiconductor Corp., No. 1:02CV1057, 2003 WL 21666582 (M.D.N.C. July 16, 2003). In a related suit brought against Lexmark under California’s unfair competition statute by the Arizona Cartridge Remanufacturers Association, summary judgment was granted for Lexmark. See Ariz. Car- tridge Remfrs. Ass’n v. Lexmark Int’l, Inc., No. C 01-4626, slip op. (N.D. Cal., Sept. 30, 2003), available at http://www.supportacra.org/ACRA-Order-Judgment.pdf. 9. The law provides that “[a]ny provision in any agreement or contract that prohibits the reusing, remanufacturing, or refilling of a toner or inkjet cartridge is void and unenforceable as a matter of public policy. Nothing in this section shall prevent any maintenance contract that warrants the performance of equipment under the contract from requiring the use of new or specified toner or inkjet cartridges in the equipment under contract.” 2003 N.C. Sess. Laws 386. No. 1] Recent Developments 309 tridge.10 Remanufacturing means fewer sales of Lexmark’s new car- tridges, so Lexmark is interested in discouraging third-party remanu- facture and in selling new cartridges in place of remanufactured ones, or in capturing the remanufacturing market for itself. In order to im- prove its position in the toner cartridge market, Lexmark developed and sold toner cartridges with a two-pronged system that consisted of (1) a shrink-wrap customer agreement, and (2) a technological meas- ure. Lexmark offered customers a choice of two pricing/control schemes: they could purchase a new toner cartridge for a reduced price on the condition that they returned the empty cartridge to Lex- mark, or they could pay an increased price to buy a cartridge that could be refilled without returning it Lexmark.11 The technological measure consisted of a microchip on each type of cartridge that re- flected the pricing scheme.12 Once the low cost cartridge was empty, the microchip prevented the cartridge from operating with the printer if the cartridge had been refilled.13 For the high-priced cartridge, the microchip contained no such disabling feature.14 Customers who purchased the low price cartridges often did not return them to Lexmark, and instead sent them for remanufacturing. Customers were able to do so despite the technological measure be- cause SCC developed a replacement microchip that allowed the re- manufactured cartridges to function.15 Lexmark sued SCC, alleging infringement of its copyrighted program that resides in the cartridge microchip (the “toner loading program”), and that SCC circumvented a technological measure that prevents access to a copyrighted com- puter program which resides in the printer (the “printer engine pro- gram”),16 in violation of the DMCA.17 Lexmark successfully sought a 10. See Letter from Ralph Oman, Dechert LLP, to David O. Carson, General Counsel, Copyright Office 14–15 (Aug. 11, 2003), available at http://www.copyright.gov/1201/ 2003/post-hearing/lemark.pdf. 11. See Lexmark Int’l, Inc. v. Static Control Components, Inc., 253 F. Supp. 2d 943, 947–48 (E.D. Ky. 2003). 12. See id. 13. See id. 14. See id. The parties made conflicting contentions about the availability of the high- cost cartridges and the firmness of the pricing scheme once a customer indicated that he wished to purchase the refillable cartridge. SCC contends that it is in practice quite difficult to obtain refillable cartridges. See Complaint at 9–15, Static Control Components, Inc. v. Dallas Semiconductor Corp., No. 1:02CV1057, 2003 WL 21666582 (M.D.N.C. July 16, 2003), available at http://www.sccinc.com/special/oemwarfare/pdf_lawsuit/amended_ complaint.pdf. 15. See Lexmark, 253 F. Supp. 2d at 955. 16. The cartridge-based program approximates the amount of toner left in the cartridge. The printer-based program controls various operations of the printer such as paper feed, paper movement, motor control, fuser operation and