Lexmark v. Static Control

Citation: Lexmark Int'l v. Static Control Components, Inc., 253 F.Supp.2d 943 (E.D.Ky. 2003), rev’d, 387 F.3d 522 (6th Cir. 2004).

Factual Background
A U.S. district court granted Lexmark, a manufacturer of laser printers and printer toner cartridges, a preliminary injunction against a remanufacturer of replacement cartridges, Static Control Components (SCC), for copyright infringement and violation of §1201 of the DMCA.

Plaintiff Lexmark manufacturers two types of toner cartridges: a regular one that can be refilled by the printer owner or by a third party remanufacturer and a discounted one for its T-series printers which, pursuant to a licensing agreement, consumers agree to use only once and return to Lexmark for recycling. SCC and other remanufacturers refill and sell Lexmark’s regular toner cartridges.

Lexmark employs copyrighted computer programs embedded within microchips to control and monitor various operations on the T-series toner cartridges. It utilizes an authentication sequence to prevent unauthorized access to its Printer Engine and Toner Loading Program (TLP). In the absence of the authentication sequence, a printer will not recognize a toner cartridge as being authorized and disables access to the Printer Engine Program.

Defendant SCC manufactures and sells components for use in the remanufacturing of toner cartridges. By reverse engineering the Lexmark microchip, SCC developed a microchip that copies, and thereby circumvents, the authentication sequence that Lexmark uses in the T-Series printers. This enables SCC to sell its “SMARTEK” microchip for use by third-parties to market replacement toner cartridges that are compatible with the T-series despite Lexmark’s intention to limit replacement cartridges to those it manufactures.

District Court Decision
Lexmark sued SCC in U.S. district court and received a preliminary injunction against the continuing sale by SCC of the “SMARTEK” microchip for T-series replacement cartridges. The court found that Lexmark was likely to prevail on claims of copyright infringement and violation of the DMCA. There were two distinct components of SCC’s microchip. One circumvented an authentication sequence embedded in the T-series printer. The sequence determines whether the printer will accept the cartridge as authorized and subsequently grant it access to the Printer Engine Program which is resident in the printer’s controller board. The other both circumvented access to and copied Lexmark’s TLP in its entirety. The Toner Loading Program enables the printers to approximate the amount of toner remaining in the cartridge. This information is used to display a “toner low” message on the printer screen.

The question before the court was twofold: First, did the SMARTEK microchip violate the DMCA by illegally circumventing the access control systems to both the Printer Engine Program and the Toner Loading Program? Second, by replicating the TLP in its entirety, did the microchip infringe Lexmark’s copyright in it? The court considered in depth whether the Lexmark’s Toner Program was copyrightable and concluded that it was, relying in part upon the fact that the U.S. Copyright Office granted Lexmark of a Certificate of Registration for it. It considered and rejected a fair use defense. It also rejected a copyright misuse defense, finding that attempting to enforce rights under the DMCA to protect access to a copyrighted computer program cannot have the legal effect of “using copyright to secure an exclusive right or limited monopoly not expressly granted by copyright law.”15

Nor could Lexmark’s efforts to enforce its rights under the DMCA be considered an unlawful act undertaken to stifle competition. The court emphasized that under the DMCA, “the right to protect against unauthorized access is a right separate and distinct from the right to protect against violations of exclusive copyright rights such as reproduction and distribution.”16 Indeed, the authentication sequence which triggered the interface between Lexmark’s toner cartridge microchip and printer was exactly the type of “technological measure that effectively controls access to a work” designed to be protected under the DMCA.17

Finally, the court rejected the argument that the DMCA’s exemption for reverse engineering was applicable to SCC’s SMARTEK microchip.18 In addition to violating the DMCA by circumventing the authentication sequence to the Printer Engine Program, SCC’s microchip infringed the Copyright Act because it contained an exact copy of Lexmark’s copyrighted Toner Loading Program. Therefore, SCC was unable to meet the reverse engineering exemption requirement that the circumvention enables interoperability of an independently created computer program.

Court of Appeals Decision
The Sixth Circuit Court of Appeals overturned the lower court’s issuance of a preliminary injunction, taking issue with virtually all of the district court’s findings.19 Specifically, the Court of Appeals found that, for purposes of upholding a preliminary injunction, Lexmark was not likely to successfully establish that SCC infringed its copyright for the TLP or that the SMARTEK microchip violated the DMCA by illegally circumventing access controls.

The court first considered the TLP’s eligibility for copyright protection. It weighed the basic element for copyrightability, original and/or creative expression, against that which cannot be copyrighted &mdash; an idea, procedure, process, system, method of operation, concept, principle or discovery, regardless of form.20 Applying this process to computer programs with its concomitant task of separating idea from expression is “vexing.”21 In order to ascertain the “elusive boundary line” between idea/expression and between process/non-functional expression, the court utilized the doctrines of “merger” and “scenes a faire.”

The merger doctrine precludes copyright protection where there is only one way or very few ways of expressing an idea. Idea and expression are deemed to be merged because granting copyright to the expressive component of the work would extend protection to the work’s uncopyrightable ideas as well. The scenes a faire doctrine is related. In the computer-software context it means


 * that the elements of a program dictated by practical realities &mdash; e.g., by hardware standards and mechanical specifications, software standards and compatibility requirements, computer manufacturer design standards, target industry practices, and standard computer programming practices--may not obtain [copyright] protection.22

The court noted that lock-out codes generally fall on the functional-idea rather than the original-expression side of the copyright line. Manufacturers of interoperable devices such as toner cartridges or garage door opener transmitters often employ a security system to bar the use of unauthorized components. To unlock the system to permit operation of the primary device, the printer or the garage door opener, the component must contain certain code or be engineered to respond correctly to an authentication sequence. When a code sequence must be included in a component device to permit its use, the merger and scenes a faire doctrines often preclude the sequence from obtaining copyright protection.

Applying the foregoing, the court concluded that the district court erred in finding that the TLP code had sufficient originality to be copyrightable. It found the TLP to be a very brief, uncomplicated code sequence that functioned as a lock out code. Brevity in a computer program does not make it ineligible for copyright protection, but creativity and effort are reciprocally related: the smaller the effort, the greater the creativity required to invoke copyright protection.23

In view of its finding that the TLP was not copyrightable, the court declined to rule on SCC’s fair use defense. It did, however, indicate that although the purpose of SCC’s use of the SMARTEK chip was for commercial gain, a factor in a fair use analysis, its use of the copyrighted TLP on the chip was not. Rather, the use of the TLP was to satisfy authentication requirements and to permit printer functionality. Likewise, with respect to the allegedly infringing use on the value of the copyrighted work, the lower court had concluded that the SMARTEK chip would diminish the market for sales of Lexmark’s toner cartridges. The proper and more narrow question, however, was whether replication of the TLP on the microchip would diminish demand for the TLP. More significantly, the Court of Appeals observed that copyright law is not properly invoked to protect a secondary market in consumer goods:


 * [T]he district court focused on the wrong market: it focused not on the value or marketability of the Toner Loading Program, but on Lexmark's market for its toner cartridges. Lexmark's market for its toner cartridges and the profitability of its Prebate program may well be diminished by the SMARTEK chip, but that is not the sort of market or value that copyright law protects. . . . Lexmark has not introduced any evidence showing that an independent market exists for a program as elementary as its Toner Loading Program, and we doubt at any rate

that the SMARTEK chip could have displaced any value in this market.24

The Court of Appeals then addressed the district court’s findings with respect to Lexmark’s likelihood of success in establishing that SCC violated  the DMCA’s ban on distributing devices that circumvent access-control measures placed on copyrighted works. According to Lexmark, SCC's SMARTEK chip is a “device” that “circumvents” Lexmark’s “technological measure,” i.e., the authentication sequence, which “effectively controls access” to its copyrighted works (the Toner Loading Program and Printer Engine Program). Lexmark claimed that the SMARTEK chip met all three tests for liability under § 1201(a)(2): (1) the chip was “primarily designed or produced for the purpose of circumventing” Lexmark’s authentication sequence, (2) it had “only limited commercially significant purpose or use other than to circumvent” the authentication sequence; and (3) SCC marketed the chip “for use in circumventing” the authentication sequence. The district court agreed and concluded that Lexmark had shown a likelihood of success under all three provisions.

For the Court of Appeals, the anticircumvention allegation with respect to the TLP was problematic. The microchip did not provide “access” to the TLP but actually replaced it. More important, since the DMCA prohibits circumvention of access controls for copyrighted work, the determination that the TLP was not eligible for copyright protection mooted the DMCA charge.

The charge of illegal circumvention of the authentication sequence for the copyrighted Printer Engine Program was more complicated. The district court determined that the authentication sequence “controlled access” to the Printer Engine Program because it controlled the consumer’s “ability to make use of” the program. The Court of Appeals disagreed, asserting that the authentication sequence did not control access, rather “[i]t is the purchase of a Lexmark printer that allows <access’ to the program.”25 The literal code itself can be read directly from the printer memory without the benefit of the authentication sequence. There is no security device protecting the Printer Engine Program. While the authentication sequence controls access to the Printer Engine Program’s functionality, the Program itself is not otherwise effectively protected by access controls; the data and program can be translated into readable source code. Hence, the authentication sequence controlled only one avenue of access &mdash; operational compatibility with a printer cartridge. Analogizing access controls to locks on a house, the court reasoned:

Because the statute refers to “control[ling] access to a work protected under this title,” it does not naturally apply when the “work protected under this title” is otherwise accessible. Just as one would not say that a lock on the back door of a house “controls access” to a house whose front door does not contain a lock and just as one would not say that a lock on any door of a house “controls access” to the house after its purchaser receives the key to the lock, it does not make sense to say that this provision of the DMCA applies to otherwise-readily-accessible copyrighted works.26

The court elaborated by explaining why access to the Printer Engine Program is not covered by the DMCA. In the setting where the DMCA applies, such as encrypted data on music CDs and motion-picture DVDs, the copyright content that it protects operates on “two planes”: the literal code governing the content and its manifestation generated by the code’s execution, namely, the music or movie. In the DMCA’s context, restricting “use” of the work means “restricting consumers from making use of the copyrightable expression in the work.”27 The manufacturer must prevent access to both planes of the copyrighted material and the alleged infringer responds by marketing a device that circumvents both levels of protection. Thus, because Lexmark did not direct any of its security efforts, through the authentication sequence or otherwise, to ensuring that the Printer Engine Program could not be read and copied, “it cannot lay claim to having put in place a <technological measure that effectively controls access to a work protected under [the copyright statute].’”

The extent to which the court leaves open an invitation to manufacturers to come within the DMCA by withholding all levels of access to copyright-protected code is less clear. It refers to the act’s legislative history and discerns congressional intent to protect the market for interoperable consumer goods, but nevertheless emphasizes its “two plane” analysis:

Nowhere in its deliberations over the DMCA did Congress express an interest in creating liability for the circumvention of technological measures designed to prevent consumers from using consumer goods while leaving the copyrightable content of a work unprotected. In fact, Congress added the interoperability provision in part to ensure that the DMCA would not diminish the benefit to consumers of interoperable devices “in the consumer electronics environment.”

Concurring Opinion
Interestingly, in a concurring opinion, Circuit Judge Merritt addresses this very point. He advocates broadening the scope of the holding by making clear “that in the future companies like Lexmark cannot use the DMCA in conjunction with copyright law to create monopolies of manufactured goods for themselves just by tweaking the facts of this case: by, for example, creating a Toner Loading Program that is more complex and <creative’ than the one here, or by cutting off other access to the Printer Engine Program.”29

In his opinion, the critical question is the purpose of the circumvention technology. Because the purpose of the law is to prohibit piracy of copyright protected works such as movies, music, and computer programs, an anticircumvention claim should not be permitted to go forward unless the plaintiff can demonstrate that the circumvention supports piracy. A broad reading of the statute is necessary, he argues, to prevent manufacturers from creating monopolies for durable goods such as replacement parts through the use of more elaborate lock-out codes. And the burden of proof to demonstrate piracy must be on the plaintiff in order to prevent the threat of litigation by powerful manufacturers against smaller rivals and thereby thwart development of devices that facilitate legitimate access to consumer goods. Only then should the burden of proof shift to the defendant to invoke a statutory exception, such as the reverse engineering exception.