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Economy & Business

Supreme Court's Decision About Printer Cartridges Could Have Big Consequences

RACHEL MARTIN, HOST:

There's a case before the U.S. Supreme Court right now that centers around a lowly office supply product - the printer cartridge. It could have wide-reaching implications though for a whole host of consumer goods from electronics to cars to medicines. Noel King from our Planet Money podcast has the story.

NOEL KING, BYLINE: A Lexmark laser printer costs somewhere in the neighborhood of $400. A Lexmark refill toner cartridge costs about $130. It's not cheap. So there are businesses that have sprung up that take empty Lexmark printer cartridges, refill them and then resell them for a lot cheaper. Eric Smith owns one of those businesses - Impression Products. It's a small company in West Virginia. Every year, he says, they refill and sell tens of thousands of Lexmark printer cartridges.

ERIC SMITH: I buy the empty toner cartridges by the truckload every day.

KING: A couple years back, Eric started getting cease and desist notices from Lexmark - stop reselling our cartridges.

SMITH: I just kind of ignored the letters. I kind of thought they were bluffing.

KING: They were not bluffing. Lexmark printer cartridges come with a license. It's written right on the side of the box. It says basically this cartridge is patented by Lexmark, you can't reuse or resell it. So Lexmark took Eric Smith to court. Eric's lawyer is arguing once a consumer has bought a product, the company that sold it - in this case Lexmark - can't tell the buyer what to do with it. There's a legal term for this - patent exhaustion. Here's Eric's lawyer, Andrew Pincus.

ANDREW PINCUS: Patent exhaustion is - it's the principle that once the good is sold, the patent rights are exhausted, and the patentee - patent owner - can no longer control that good under the patent law.

KING: Can't tell you what to do with it?

PINCUS: Can't tell you what to do with it.

KING: Can't tell you what not to do with it?

PINCUS: Can't tell you what not to do with it.

KING: But Lexmark argues legally there are some exceptions to patent exhaustion, like if a company writes clearly on the side of the box this product is patented, once you open it, you agree not to resell it. This little case about printer cartridges ended up in front of the Supreme Court because it has much larger implications. All kinds of things we buy every day from computers to cars have parts that are patented.

If the Supreme Court rules for Lexmark, it could upend what it means to own something that you've bought. A bunch of big companies including Costco and LG Electronics have filed amicus briefs on behalf of the company down in West Virginia. It might seem like a tale of a little company versus a big corporation, but some economists and law professors say not quite because Lexmark actually offers two options for those toner cartridges.

There's the version with the license on the box that says you cannot reuse this. And there's another version. It's more expensive, but there's no fine print. You can do whatever you want with that cartridge. The worry is if Lexmark loses the case, it'll just stop making the less expensive version with the license. Michael Risch is a law professor at Villanova Law School who signed an amicus brief in support of Lexmark.

MICHAEL RISCH: People think that Impression wins this and Lexmark is going to continue to sell cartridges at the cheaper rate with the agreement, they're fooling themselves.

KING: Risch says if Lexmark loses, it might not make financial sense for the company to keep offering two versions of the toner cartridge - the more expensive and the less expensive. Either way, if Lexmark makes less on cartridges, there is one likely outcome - more expensive printers. A decision on the case is expected in June. Noel King, NPR News.

(SOUNDBITE OF SHIGETO'S "ANN ARBOR PART 3 AND 4") Transcript provided by NPR, Copyright NPR.