Why Are Hard Copy Companies So Litigious?

By Mike Huster //

Several industries have spawned an aftermarket, most notably the automotive, computer, medical, aviation, and printing and imaging markets. Within the printing and imaging industry, there is an aftermarket for printing devices as well as consumables, which can be further divided into parts and supplies.

In 2011, 411 million toner cartridges shipped for color laser printers, color laser MFPs, monochrome laser printers, and monochrome laser MFPs. The total revenue for these shipments was almost $50 billion. Inevitably with an industry of this size, a powerful aftermarket materializes.

With the trend of reduction in printing, original equipment manufacturers (OEMs) for the first time have been developing alternative paths to demonstrate growth. Some OEMs have decided not to diversify but are instead concentrating on manufacturing hardware and supplies with the expectation that they will be one of the last companies standing.

With screen-based technology affecting printing, OEMs are finding themselves with what seems like more problems than solutions. Some of the solutions the OEMs have pursued to combat the aftermarket involve intellectual property (IP) litigation, marketing their collection of cores, fighting counterfeiters, and increasing the prices of toner cartridges. Some have had a positive effect (from an OEM standpoint), and others have not been as strong.

The aftermarket is also stuck between a rock and a hard place, with concerns about IP litigation, the downward spiral of pricing by their peers, “dumping” by foreign firms, lack of empties, and the effect of clones. In addition, smartphones and tablets, which are reducing print volume, are casting a shadow over their livelihood.

Although the aftermarket accounts for approximately 21 percent of worldwide toner cartridge shipments, aftermarket vendors sell more monochrome toner cartridges than color toner cartridges. Aftermarket vendors have much stronger penetration in the monochrome market, particularly in emerging markets where the cost of printing is extremely important. OEM vendors dominate the color toner market because most of their color laser devices use chemically prepared toners (CPT), which are difficult for aftermarket vendors to duplicate. Color matching is also a concern for aftermarket vendors because most businesses require consistent color output.

Although the laser printer and toner market received a boost from strong sales in 2011 and early 2012, there are signs that the laser toner market is facing tough times. Business practices are moving away from printing and using electronic information when possible. However, there remains a large requirement for output due to legal issues and because many business and personal users do not have broad access to electronic information—yet.

The aftermarket is changing, and OEMs are increasingly being drawn to it due to MPS and the improved margins that can be received through remanufactured toner cartridges. Dealers have realized this, and their positive experiences with the aftermarket have encouraged them to seek new partnerships with aftermarket distributors.

Remanufacturers are becoming more sophisticated and innovative about their R&D by building their patent portfolios. It appears they are developing new technologies to avoid patent-infringing products. Their goal is to manufacture products that are alternatives to OEM products.

Finally, in regards to IP litigation, if the aftermarket fails to join forces to solve some of the IP issues that are prevalent today, OEMs will use the results of favorable court actions to drive out the aftermarket industry. This would mean consolidation, reduced job prospects, and reduced profits within the aftermarket industry.

So, why are many hardcopy companies litigious? When the profitable supplies of yesteryear seem to be slowly drying up due to the reasons mentioned above, and the CEOs have to respond to those pesky shareholders, one of the first places they turn is their legal team. It all comes down to those companies getting their fair share of the profits of which they feel entitled (talk about entitlements). Despite the slowing of the imaging industry, it is still massive, changing, and profitable. No wonder OEMs and the aftermarket are litigious; it is easy to afford legal departments with the margins they earn.


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