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Hewlett Packard Goes After Printer Ink Competition

2010-09-29

Inkjet printer manufacturers have patterned their business model after the old Gillette Razor idea of handing out the gadget for free but charging extremely high for the renewable (blades for the razor, ink cartridges for the printers). While the printers themselves are certainly not free, they are very cheap for what they can do. It's the printer ink that's incredibly expensive. And the manufacturers make a whopping amount of money on ink sales. It's a $30 billion a year market.

Aftermarket manufacturers have been taking bites out of OEM printer cartridge sales by offering cartridge refill kits, and replacement ink that costs a fraction of the original. Of course, the OEM's fought back, at first by installing what came to be known as "killer chips," individual microchips, in each cartridge, that told the printer when the cartridge was empty and turned the printer off. Sometimes (often) these chips would register the cartridge as "empty" when there was still as much as 20% capacity left. The ink-replacement firms fought back by finding ways to reset these chips, thereby allowing the printer to use the same cartridge, but this time with cheaper ink.

In another attempt to shut down the competition from "white label" cartridges, Hewlett Packard allegedly colluded with Staples (essentially bribing them) to keep Staple's store brand and other off-brand ink cartridges off the shelves in Staples stores. The suit alleged that HP paid $100 million in "development funds" to Staples, as well as cutting the office supply firm in on ink cartridge revenues. The case is still pending at this time.

The next attempt by the OEM's was to use the Digital Millennium Copyright Act (DMCA) to shut down the chip-resetting activity, claiming that the ink-replacement firms were overriding software controls designed to safeguard copyrighted software, something specifically prohibited by the DMCA. These efforts came to naught when the courts decided against the OEM's.

Now Hewlett Packard is trying again. This time the angle of attack is through patent law. HP has sued a number of manufacturers, claiming that they used print heads and components of print heads that infringe on HP's patents. It brought suit before the International Trade Commission, which agreed to take the suit and open an investigation into the practices of these companies. Since then, HP has settled with two firms, who agreed to pay damages and stop selling printer ink, and expects more victories against the rest.

For now, the OEM's have the upper hand. But creativity is everywhere, and with a market that size to tap, it's only a matter of time before others try it again.

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