Generic Ink & Toner Cartridges and the Legal Challenges

On Friday, March 2, 2018, Canon Inc. issued an announcement stating it had filed complaints with the United States International Trade Commission (ITC) against 49 manufacturers, distributors, and resellers of toner cartridges and photosensitive drum units, asserting infringement of nine recently issued U.S. Patents. Canon also announced the filing of complaints against these companies in numerous U.S. District Courts according to the various locations of the defendants.

This is a complicated topic that can't be adequately covered in a single article so we're planning a series that will attempt to provide background and context, as well as stay with major developments as they take place.

Litigation is a serious matter. It's expensive for all the parties involved, it's distracting in terms of day-to-day, ongoing management of a business, and it's likely to have a longer-term impact on the development of the market. The OEMs have a right to defend their intellectual property and the legal system is designed to permit them to file complaints if they believe their intellectual property rights are being infringed.

However, while the OEMs have a right to file complaints, the aftermarket manufacturers and distributors also have a right to defend themselves and should not be automatically assumed guilty of infringement until it's determined so by admissions of guilt, jury verdicts, or rulings from the ITC.

The Background

Just in case there's any lack of clarity, the nine patents Canon has asserted in the 2018 dispute are recently issued patents. They are all related and claim the priority benefit as continuing applications/patents of US Patent No. 8,280,278 B2 which has a much earlier U.S. filing date of 12/26/2007 than the U.S. filing dates of the patents involved in this recently announced litigation. The '278 patent was at the heart of the earlier round of litigation in 2014.

• The "parent" patent ('278) filing date was almost 10 years before the various filing dates of the nine other patents now in the 2018 litigation.
• The '278 patent was issued 10/02/2012 after a nearly five-year journey through the U.S. Patent & Trademark Office (USPTO).
• As a point of reference, the current start to finish time for a successful patent application is an average of 40 months or just over 3 years. The USPTO has a current backlog of over half-million unexamined patent applications.
• There are some exceptions but, generally speaking, the term of a patent runs for 20 years from the earliest claimed U.S. filing date.
• The continuations and divisional applications that can spin out of a "parent" patent are not an unusual strategy for a sophisticated and powerful company like Canon to follow.

The Timeline & The Dongle Gear Patents

1. On 12/22/2006 the initial file disclosures took place in Japan which established the priority date for what has subsequently turned into the '278 patent and its family of related patents.

2. In establishing the priority date, this action also started the clock ticking on the one-year countdown before the application had to be lodged in countries outside Japan, i.e. the United States. This led to the "first-active" date in the U.S. becoming 12/26/2007.

3. 12/26/2007 became the filing date, from which the 20-year duration of the '278 patent (finally granted on 10/02/2012) is calculated and from which we can determine the '278 patents' expiry date of 12/26/2027.

4. Six months after the filing date, on 06/26/2008, the application was published under US2008-0152388A1 and it became possible for the public to see the application for the first time.

5. To take advantage of the previously established priority date and to preserve the chain required to execute the continuation strategy, Canon had to:

• File one or more divisionals and/or continuations, or continuations-in-part, on any one of the additional applications it had planned.
• Complete this requirement before the first patent in the family (the '278) was granted on 10/02/2012.

The necessary filings actually took place well in advance of the deadline.

6. It is therefore out of a series of divisionals (less likely) or continuations (more likely) that the nine patents now entering litigation were established.

7. To execute this strategy successfully, Canon had to claim the benefit of the U.S. filing date of the "parent" patent ('278) as the filing date for the continuations and/or divisionals. This means the 20-year patent term on the nine new patents recently issued (and now being litigated) will also expire on the same date as the '278 parent - 12/26/2027.

8. Canon's strategy also meant the nine new applications were able to adopt the 12/22/2006 priority date.

9. For interested parties (particularly those who may have been concerned about the potential for future litigation) it would have been prudent to be monitoring Canon's patent publications at the USPTO for any applications of interest. One would imagine the '388A1 application would have been of great interest and that it, and its growing fleet of associated continuations, would have been carefully monitored.

10. In pursuing its patent applications using its continuation strategy Canon has been able to accomplish the following:

• Continue to take advantage of the original priority date.
• Keep changing the claim scope of the original patent.

11. Out of the full list of 19 filings that claimed the benefit of the original 11/964,518 filing (which later became the parent patent '278), all but one has now issued as patents. Three of the 19 (listed below) issued between 2012 and 2014 and served the purpose of keeping the continuity chain unbroken and maintaining the potential for Canon to re-work its claims on the remaining sixteen filings.

• 8,275,286 on 09/25/2012
• 8,630,564 on 01/14/2014
• 8,682,215 on 03/25/2014

12. Of the remaining sixteen applications, fifteen have been granted and nine of those now form the basis of the 2018 litigation. We have not participated in an evaluation of the claims on the six other patents not included in the new 2018 complaint but, if they're relevant;

• They could be added later.
• They could stay outside the litigation, or;
• They could become the basis of another complaint in the future.

13. With one patent filing in the family still pending, the possibility for the scope of claims to be re-shaped still further remains open. In other words, as the aftermarket reacts to the 2018 litigation with new design-around efforts, Canon remains in a position to potentially alter the scope of its coverage in preparation for a further round of future litigation.

14. For the group of nine patents now in the 2018 litigation, the average time between the filing date and grant date was 10 months. The average time between the grant date and filing the 2018 complaints was 2.6 months - less than 90 days.

15. We don't know at this time how much (if any) patent claims on the continuations were modified between the settlement of the 2014 litigation and Canon's patent filing dates during late 2016 and early 2017.

Conclusions:

There's nothing out of the ordinary with regards to Canon's patent prosecution strategy. It is typical of a powerful company with significant financial resources available to allocate to its intellectual property and patent strategy.

It is curious why the defendants in the 2014 litigation did not obtain protection in their settlements from future complaints, not just on the patents asserted in that 2014 complaint, but also on any descendants that may subsequently issue; however, we assume it is unlikely that Canon offered this as part of the resolution to the 2014 litigation. Regardless, in light of the latest complaints, it seems clear there were no such provisions in the settlements so, we have to assume the 2014 defendants were not in a strong enough position to successfully negotiate for them.

This, in turn, means all the defendants in the 2014 litigation must have known they were vulnerable to future complaints. Knowing they were vulnerable should mean they've been continuing to develop their own technology on the dongle gears and attempting to re-work their design-arounds to stay clear of the issued Canon patents, as well as the pending applications that matured into the patents now the subject of the 2018 complaint.

Litigation between the OEMs and the aftermarket competitors in the imaging supplies business is nothing new; going back to the 1980s with Okidata suing aftermarket companies for infringement on Microline dot matrix printer ribbons, the early 1990s with Smith Corona suing Pelikan for infringement on typewriter ribbons, and the mid-1990s with Hewlett Packard, Seiko Epson, and Canon suing Nukote for infringement on inkjet patents.

Almost every aftermarket imaging supplies manufacturer that's been in business at any point during the last 40 years or so, has been directly impacted by OEM litigation at some point.

It's nothing new to witness the OEM's adopting aggressive media and legal profiles as part of their litigation strategies to combat the aftermarket manufacturers but, it is new to witness the emergence of three sides, rather than two, in the latest battle getting underway.

• The OEMs
• The Legacy Remanufacturers
• The Offshore New-Build Manufacturers

The OEMs and the legacy remanufacturers are united in their front to maximize the media impact of Canon's new round of litigation on the new-build manufacturers, as both their business models are threatened to varying degrees by them. However, as we've already pointed out, the OEMs have fought the litigation battle for decades and, over all that time, have probably given up less than 20% of the market to aftermarket competitors.

In other words, the aftermarket as a whole, regardless of the litigation, is probably not a major incremental threat to OEM market share. Instead, the bulk of the noise in these early days following the filing of the complaints may have more to with the threat well-capitalized, new-build cartridge manufacturers represent to the less well-capitalized legacy remanufacturing model.

For a calm, rational, and intelligent assessment of the recent developments, we encourage you to spend ten minutes watching this interview between David Gibbons of RT Media and Merritt Blakeslee, a Patent Attorney of the Blakeslee Law Firm, that took place on March 9, 2018.

In the next section, we'll be going into more detail on the importance of the priority date and the role it plays in patents and patent families with continuation strategies.

Market exclusivity obtained through patent protection can lead to significant economic benefits because the inventor is provided with a monopoly over the invention for the 20-year period of the patent protection. Maximizing the scope of patent coverage by adopting patent continuation strategies can be an effective means for fending off aftermarket competitors and continuing to maximize market share during the term of patent coverage.

Recap

We have now provided a background on the history of the nine patents asserted in the 2018 litigation and constructed a timeline of the key patent events that took place between Canon establishing the December 2006 priority date and the filing of the 2018 complaints.

Introduction

It's a misrepresentation to apply a "clone" label to describe the accused products because clones, by definition, the bulk of them cannot be.

Until the issuance of the patents now asserted in the 2018 litigation, Canon, the owner of the intellectual property, may have believed a case for infringement with regards to the competitor's products with the redesigned dongle gears (which emerged subsequent to the 2014 litigation) was not a sufficiently clear-cut literal reading of the patent claims in the 2014 litigation.

By definition, a clone must be a direct copy and, by definition, the aftermarket products with the redesigned gears (and possibly many other unique features) are not direct copies.

However, while the cartridges may not be clones, there is now the possibility they may infringe Canon's new patents. This is what will be determined by the future rulings of the ITC and the Federal courts.

Affected parties facing the greatest potential threats from the manufacturers of the disputed cartridges may elect to spread fear, uncertainty, and doubt as far and wide as they possibly can following the complaints filed against their competitors. However, while such campaigns may be part of a strategy designed to help protect their legacy positions, the other side of the argument, exposing the potential for pernicious behavior during the prosecution of patents, is entitled to an equal platform on which to be heard.

Observations:

1. The priority date is an important date in the processing of a patent. This becomes the "anchor" date for defining what materials may be considered prior art. In other words, any technology in the public domain that existed before the priority date was established is considered prior art and may render a patent application or issued patents worthless.

2. Third-party dongle gear technology, developed after Canon's December 2006 priority date was established, is irrelevant to Canon's continuation filings that benefit from the 2006 priority date, and has no bearing on whether or not the continuation filings may be granted.

3. So, not only can obtaining the earliest possible priority date be an important factor in the patentability of an invention it can also play a vital role in re-working and re-shaping the scope of coverage as a patentee executes a continuation strategy.

4. The A1 date of 06/28/2008, on what later became the '278 patent, was the "pre-grant" publication date. This is the point at which the public may have a view of the "parent" patent application for the first time and, from which point on, can then be utilized as a means to obtain visibility of the downstream "child" filings as and when they are added, as well as to monitor the progress of the "prosecution" of the publicly available Canon applications.

5. The '278 patent, granted in October 2012, was at the heart of the 2014 U.S. litigation Canon undertook against nearly 30 companies - many of which are the same companies sued again in 2018.

6. The defendants involved in the 2014 round of litigation either defaulted or settled the lawsuits with admissions of patent validity and infringement. As a consequence, the '278 patent, along with the eight others involved in the 2014 litigation is rock-solid and, in the absence of pertinent prior art coming to light, it's very unlikely the validity or enforceability of any of these patents could be successfully contested.

7. The primary manufacturers of aftermarket versions of dongle gears, compatible with the Canon laser cartridges in question, redesigned them to avoid conflict with the '278 patent and the eight other dongle gear patents asserted in the 2014 litigation.

8. Aftermarket manufacturers such as Ninestar, Static Control (now owned by Ninestar), Print-Rite, and Aster Graphics all obtained U.S. patents on their versions of redesigned dongle gears in the period after the 2014 litigation commenced. Unfortunately for them, obtaining patents on their own design-around dongle gears developed after the Canon established priority date will not adversely impact the Canon patents.

9. We don't know if the aftermarket dongle gear manufacturers went deep enough into the Canon patent applications to continually monitor for filings of continuations or divisionals after the 2008 "A1" date. However, in order for their 2014 redesign efforts to be effective for the longer term, it would have been prudent for them to do so.

10. None of the nine patents at issue in the 2014 litigation are identified in the 2018 litigation. There is no assertion from Canon that any of the aftermarket competitors have failed to honor the settlement agreements they entered into at that time, or that their products have infringed any of those patents since that time.

11. While we don't know the terms of the 2014 litigation settlements, it's possible they contained language that protected the defendants from being sued again on the specific patents asserted in the 2014 dispute. However, based on the commencement of the 2018 litigation, it seems clear the settlements cannot have contained language that protected them from being sued on any continuation, continuation-in-part or divisional patents that subsequently issued (or continue to issue) as "children", "grand-children", or "great-grandchildren", etc., of the patents involved in the 2014 dispute.

12. Running a patent suit from start to finish through the U.S. Federal Courts takes a long time and costs a lot of money. However, there's a high legal threshold to cross before a Court will issue an order such as a Temporary Restraining Order (to prevent the ongoing sale of products alleged to infringe patents) while the dispute continues to work its way through the legal process. In other words, relying on the Federal Court system to provide quick relief and prevent disputed products from entering the market while the complaint is litigated, is unlikely.

13. The strategic decision to simultaneously file complaints with the International Trade Commission is likely to have been taken as part of an attempt by Canon to obtain faster relief by winning a General Exclusion Order. A GEO prevents the importation of products into the United States that are determined by the ITC to infringe intellectual property.

14. By filing complaints in both jurisdictions, not only do the defendants face higher legal costs, but Canon may obtain a quicker, more effective outcome through the granting of a General Exclusion Order (GEO), long before the Federal Court complaints would be expected to be resolved.

Summary Points

Canon's tactic to fight the battle on multiple fronts may motivate defendants to settle the Federal complaints with admissions of infringement and patent validity. However, in the event of continuing to elect not to fight the Federal cases for patent infringement, the net may be tightening around the aftermarket manufacturers, a net which may then serve to restrict their design opportunities for non-infringing versions of their dongle gears.

Continuing to monitor the Canon patent file at the US PTO after the A1 date in June 2008, is necessary for the purposes of ensuring aftermarket design-around technology avoids the claims of any potential future patents waiting in the wings as continuation filings. Of course, this becomes an increasingly difficult task to accomplish as the need to remain compatible with the OEM product is a requirement.

There can only be so many ways for developing unique, patentable inventions on a single component such as the dongle gear. In fact, you'd think Canon would have already exhausted all possibilities for additional patents because of the sheer number they've already obtained. 

We must hand it to the aftermarket technology resources that have been able to come up with novel inventions and multiple patents of their own despite all the Canon obstacles.

Canon is a prolific innovator and a master for utilizing the patent system to its fullest advantage. In 2017 Canon obtained 3,285 U.S. patents, the third largest number issued to a single entity, although still a long way behind IBM (9,043) and Samsung Electronics (5,837).

Until the mid-1990s a patent was valid for 17 years after it's issue date. Many sophisticated companies, including Canon, leveraged the system to prolong issue dates as long as they could, a tactic which effectively served to extend the period of patent coverage.

It's likely to have been these types of practices that contributed to a change in the rules during the mid-1990s when the patent term changed from 17 years from the date of issue to 20 years from the date of application or earliest claimed priority date. However, although this change may have successfully eliminated incentives for prolonging the application process, it was not designed to (and nor did it) eliminate the practice for leveraging continuation filings for the purpose of broadening or altering the scope of claim coverage.

An Empirical Study:

In a comprehensive 2003 report prepared by Mark A. Lemley and Kimberly A. Moore (citation below), it was suggested that:

"Continuation applications may be more likely than average to result in bad patents" and "empirical evidence suggests that patents based on continuation applications are far more likely to be litigated than other sorts of patents".

Furthermore, the report also pointed out that:

"Inventors can keep an application pending in the PTO for years, all the while monitoring developments in the marketplace and then draft claims that cover those developments. In the most extreme cases, patent applicants add claims during the continuation process to cover ideas they never thought of themselves, but instead learned from a competitor".

They went on to qualify this by stating:

"Applicants do not have carte blanche to rewrite their claims as the new claims must find adequate support in the original application. If not, the patent will be invalid for lack of written description, or alternatively, the new claims will be considered "new matter" invented only as of the date the claims were added. However, if the patentee can find sufficient support in the original patent application for the new claims, the legal rights can be obtained over ideas that never occurred to the inventor until after it was seen what others were already doing".

Conclusions

Whether or not Canon may have pushed the boundary in terms of its patent continuation prosecutions is, at this time, unknown to us. However, we imagine, as the defendants prepare themselves for the battle ahead, the file histories associated with the patents in suit will be under the microscope as they're examined for claim language, any modifications to claim language, and potential similarities to aftermarket redesigns along with the timing of those redesigns appearing in the public domain.

Regardless, the sophisticated patent continuation strategy adopted by Canon appears to stack the odds against the defendants in this latest round of litigation. While not without a risk of failure, it seems their best shot to get through this and to strengthen their future position, may be to stand up and fight the Canon complaints in the Federal Courts. To be successful, they must either prove there is no infringement or that the asserted patents are invalid. As noted by Lemly and Moore, one non-prior art avenue for challenging the validity of the continuation patents is to prove there is insufficient support in the original patent application for the new claims now being asserted against them.

In the next section, we plan to ask some open-ended questions relating to the dispute and the tactics and to further examine the challenges facing the aftermarket manufacturers in terms of continuing to develop their own non-infringing technologies.

Citations: 

There are similarities between the 2014 ('918) ITC investigation and the new 2018 ('1106) ITC investigation as both involve the dongle gear assembly used in certain Canon original and aftermarket alternative laser cartridges. The new complaint from Canon is built around nine recently obtained patents that were spawned from the 8,280,278 B2 "parent" patent which was at the core of the 2014 investigation.

Our purpose here is to provide a brief recap of the '918 investigation, its named respondents, and to identify how each of them was ultimately dispositioned in the months leading up to the completion of that investigation on August 31, 2015. We've then provided a summary table of the '1106 respondents and identified which of those were also previously named respondents in the 2014 investigation.

The main point here, whether this experience was desirable or not, is that the previously named respondents now have knowledge of the ITC investigation process, the format it takes, and the necessity for complying with (and dealing with the pressure of) the frequent deadlines for required responses. This experience will be valuable in terms of shaping how the respondents finalize their strategies for defending their technology and their future position in the marketplace.

The 2014 Investigation (377-TA-918)

In the Canon initiated 2014 Dongle Gear ITC Investigation (337-TA-918) there were 33 named respondents. These were ultimately dispositioned as follows:

1. Between the dates of November 4, 2014, and April 3, 2015, the Administrative Law Judge (ALJ) issued initial determinations (ID's) terminating the investigation as to 15 of the respondents based on consent orders.

2. On August 1, 2014, the ALJ issued an ID terminating the investigation on two respondents based on Canon's withdrawal of its complaint, and;

3. On April 1, 2015, one further ID was issued terminating the investigation as a consequence of a corporate dissolution of a named respondent.

4. Ten ID's were issued between August 25, 2014, and November 17, 2014, that dealt with respondents who defaulted.

5. The remaining five respondents, each of which acknowledged and stipulated they had failed to act within the meaning of a Commission Rule, (as a result of not filing a pre-hearing statement and brief as required), meaning they had no standing to contest Canon's evidence and arguments.

The Named Respondents 2014 ('918) ITC Dongle Gear Complaint

On May 12, 2015, the ALJ issued an ID (Order #34) granting Canon's motion for summary determination of violation and recommending the issuance of a GEO and several cease and desist orders. No party petitioned for review of the ID and the final determination and issuance of remedial orders was completed on August 31, 2015 and sent for the 60-day Presidential Review two weeks ahead of the scheduled date set that had been set 13 months earlier.

The 2018 Investigation (377-TA-1106)

There are 49 named respondents in the new investigation 377-TA-1106 facing allegations of patent infringement on multiple claims associated with nine recently issued Canon patents. Although this is 50% greater than the number of respondents named in the 2014 investigation, with the substance of the investigation being similar and the structure of the ITC investigation so well defined, it's likely there will be many similarities to the 2014 proceedings. Please click the following embedded link for a projected timeline of the 337-TA-1106 investigation.

Given that there are only a small number of manufacturers involved in the investigation and that the manufacturers usually provide indemnifications to the importers, who in turn provide indemnifications to the distributors and resellers, then the bulk of the litigation cost is going to tree-up to the manufacturers.

Given also that the payer of the legal fees is likely to be the dictator of the respective defense strategies, it provides another reason to closely observe who responds to the ITC investigation and who does not. Defaulters will ultimately be considered guilty of any infringement findings entered by the commission and subject to remedial actions, such as general or limited exclusion orders as well as any cease and desist orders.

The Named Respondents 2018 ('1106) ITC Dongle Gear Complaint

The summary table of '1106 respondents will be maintained and accessible from this link as we continue to add currently missing details for each of the named respondents in terms of their known status as a manufacturer, an importer, distributor, reseller, or internet retailer.

To make sure you don't miss upcoming content on this major story please click the link below to signup for our blog.

The ITC investigation '1106 instituted March 29, 2018, started at a fast pace. On April 5, 2018, within a week of the institution, Administrative Law Judge (ALJ) Sandra (Dee) Lord issued order No.3 establishing the timeline for the investigation and setting the date for the final determination at July 29, 2019, just sixteen months after the date of this timeline order.

The compact timeline is not unexpected as this is a common feature of ITC investigations. However, what may be considered mildly unexpected is the determination by ALJ Lord "that a Markman hearing would be beneficial to this investigation, and a Markman hearing shall be held on Thursday, August 30, 2018."

The two previous ITC investigations ('829 & '918) in 2012 and 2014 resulting from complaints filed by Canon and involving the gear assemblies on laser printer cartridges, were both assigned to ALJ Shaw who, in the six-year period between October 25, 2010, and September 20, 2016, did not hold any Markman hearings as part of his assigned investigations, including those of the '829 and '918 matters. ALJ Lord, on the other hand, seems more inclined to conduct Markman hearings as a matter of course in her investigations.

So-called "patent claim construction" must occur with, or without a Markman hearing at some point in any patent-based ITC investigation. Historically, this requirement has been more routinely performed at the evidentiary hearing stage of the investigation, rather than as part of an earlier Markman hearing.

Ultimately, ALJ Lord cannot fulfill her responsibilities to the investigation unless the claims of the patents in the dispute are clearly understood. The Markman hearing is presumably intended to help develop this understanding at an earlier stage of the investigation than would otherwise be accomplished.

Patent claims define the boundaries of an invention and, ideally, should be written so that people "of ordinary skill in the art" are able to understand them. However, the lawyers writing the claims may not be "of ordinary skill" meaning claims, typically, end up written with a blend of technical and ordinary words "mixed with legal jargon". Not surprisingly, this often means the claims are difficult to understand and open to interpretation.

To properly construe (interpret) the patent claims at issue in this investigation, the ALJ will be focusing primarily on the words of each claim and the patent specifications. The investigation will also look closely at the prosecution history of the patents and their claims in order to help construe them. It is the record of correspondence between the patent applicant and the Patent & Trademark Office (PTO) that will help the ALJ decide what each invention is intended to cover and what it's not intended to cover.

The Markman hearing will present an opportunity for the complainant (Canon) to present its case for explaining the claims to the ALJ and for the respondents to present theirs.

So, with this now established in the timeline, the August 30, 2018, Markman hearing could be an important milestone in the course of the '1106 investigation, second only in importance to the trial itself that's scheduled for late January 2019.

It's possible the outcome of the Markman hearing will provide an indication of whether Canon's patents are infringed because the resulting claim construction order will be likely to either lean toward favoring the complainant or toward favoring the respondents.

Given there's plenty of time (5 months) between the Markman hearing (August 30, 2018) and the trial (January 28, 2019), there will be ample opportunity for the parties to talk so, it's possible, the claim construction order may drive an early resolution of the investigation. However, we imagine any initiative to discuss resolution will be motivated by how clearly the claim construction order leans in one direction or the other.

The Markman hearing is limited to dealing with the construction of the claim language and not whether the claims are valid. Instead, validity will be the subject of expert testimony and of legal briefings at the hearing stage (January 2019).

It will be at these later stages of the investigation that Canon will be seeking to convince ALJ Lord that:

The ITC Investigation Timeline and Key Events

To make sure you don't miss upcoming content on the US ITC 337-TA-1106 investigation please click the link below to signup for our blog.

About the author:

Ian Elliott has over 35 years' experience in the imaging supplies industry and, at prior places of employment, has faced direct involvement in OEM versus aftermarket patent litigation. Mr. Elliott is not a patent attorney, is not qualified to provide legal advice, and this article is not an attempt to provide any kind of legal advice. It represents no more than his views and opinions based on decades of relevant experience.