387 F.3d 522 (6th Cir. 2004), 03-5400, Lexmark Intern., Inc. v. Static Control Components, Inc.

Docket Nº:03-5400.
Citation:387 F.3d 522
Party Name:LEXMARK INTERNATIONAL, INC., Plaintiff-Appellee, v. STATIC CONTROL COMPONENTS, INC., Defendant-Appellant.
Case Date:October 26, 2004
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

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387 F.3d 522 (6th Cir. 2004)




No. 03-5400.

United States Court of Appeals, Sixth Circuit

October 26, 2004

Argued: Jan. 30, 2004

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Seth D. Greenstein, McDermott, Will & Emery, Washington, DC, for Appellant.

Christopher J. Renk, Banner & Witcoff, Chicago, IL, for Appellee.


Seth D. Greenstein, M. Miller Baker, Melise R. Blakeslee, McDermott, Will & Emery, Washington, DC, W. Craig Robertson III, E. Christine Lewis, Wyatt, Tarrant & Combs, Lexington, KY, William L. London, Static Control Components, Inc., Sanford, North Carolina, for Appellant.

Christopher J. Renk, Binal J. Patel, Jason S. Shull, Timothy C. Meece, Banner & Witcoff, Chicago, Illinois, Joseph M. Potenza, Bradley C. Wright, Banner & Witcoff, Washington, DC, Charles E. Shivel, Jr., Steven B. Loy, Hanly A. Ingram, Stoll, Keenon & Park, Lexington, KY, for Appellee.

Before: MERRITT and SUTTON, Circuit Judges; FEIKENS, District Judge.[*]

SUTTON, J., delivered the opinion of the court. MERRITT, J. (pp. 551-53), delivered a separate concurring opinion. FEIKENS, D.J. (pp. 553-65), delivered a separate opinion concurring in part and dissenting in part.


SUTTON, Circuit Judge.

This copyright dispute involves two computer programs, two federal statutes and three theories of liability. The first computer program, known as the "Toner Loading Program," calculates toner level in printers manufactured by Lexmark International. The second computer program, known as the "Printer Engine Program," controls various printer functions on Lexmark printers.

The first statute, the general copyright statute, 17 U.S.C. § 101 et seq., has been with us in one form or another since 1790 and grants copyright protection to "original works of authorship fixed in any tangible medium of expression," id. § 102(a), but does not "extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery," id. § 102(b). The second federal statute, the Digital Millenium Copyright Act (DMCA), 17 U.S.C. § 1201 et seq., was enacted in 1998 and proscribes the sale of products that may be used to "circumvent a technological measure that effectively controls access to a work" protected by the copyright statute.

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These statutes became relevant to these computer programs when Lexmark began selling discount toner cartridges for its printers that only Lexmark could re-fill and that contained a microchip designed to prevent Lexmark printers from functioning with toner cartridges that Lexmark had not re-filled. In an effort to support the market for competing toner cartridges, Static Control Components (SCC) mimicked Lexmark's computer chip and sold it to companies interested in selling remanufactured toner cartridges.

Lexmark brought this action to enjoin the sale of SCC's computer chips and raised three theories of liability in doing so. Lexmark claimed that SCC's chip copied the Toner Loading Program in violation of the federal copyright statute. It claimed that SCC's chip violated the DMCA by circumventing a technological measure designed to control access to the Toner Loading Program. And it claimed that SCC's chip violated the DMCA by circumventing a technological measure designed to control access to the Printer Engine Program.

After an evidentiary hearing, the district court decided that Lexmark had shown a likelihood of success on each claim and entered a preliminary injunction against SCC. As we view Lexmark's prospects for success on each of these claims differently, we vacate the preliminary injunction and remand the case for further proceedings.



The Parties. Headquartered in Lexington, Kentucky, Lexmark is a leading manufacturer of laser and inkjet printers and has sold printers and toner cartridges for its printers since 1991. Lexmark is a publicly traded corporation and reported $4.8 billion in revenue for 2003.

Static Control Components is a privately held company headquartered in Sanford, North Carolina. Started in 1987, it currently employs approximately 1,000 workers and makes a wide range of technology products, including microchips that it sells to third-party companies for use in remanufactured toner cartridges.

The Two Computer Programs. The first program at issue is Lexmark's "Toner Loading Program," which measures the amount of toner remaining in the cartridge based on the amount of torque (rotational force) sensed on the toner cartridge wheel. Maggs Aff. ¶ 24, JA 709. The Toner Loading Program relies upon eight program commands--"add," "sub" (an abbreviation for subtract), "mul" (multiply), "pct" (take a percent), "jump," "if," "load," and "exit"--to execute one of several mathematical equations that convert the torque reading into an approximation of toner level. Goldberg Aff. ¶ 21, JA 578; Maggs Aff.¶ 24, JA 709. If the torque is less than a certain threshold value, the program executes one equation to calculate the toner level, and if the torque equals or exceeds that threshold, the program executes a different equation to calculate the toner level. Goldberg Aff. ¶ 19, JA 576-77. The exact code of the Toner Loading Program varies slightly for each printer model, and this case involves two versions of the program--one for Lexmark's T520 and T522 printer models and another for Lexmark's T620 and T622 printer models. The Toner Loading Program for the T520/522 printers comprises 33 program instructions and occupies 37 bytes of memory, while the Toner Loading Program for the T620/622 printers comprises 45 program commands and uses 55 bytes of memory. To illustrate the modest size of this computer program, the phrase "Lexmark International, Inc. vs. Static Control Components, Inc." in ASCII format

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would occupy more memory than either version of the Toner Loading Program. Burchette Aff. ¶ 13, JA 106. The Toner Loading Program is located on a microchip contained in Lexmark's toner cartridges.

The second program is Lexmark's "Printer Engine Program." The Printer Engine Program occupies far more memory than the Toner Loading Program and translates into over 20 printed pages of program commands. The program controls a variety of functions on each printer--e.g., paper feed and movement, and printer motor control. D. Ct. Op. ¶ 24, at 5. Unlike the Toner Loading Program, the Printer Engine Program is located within Lexmark's printers.

Lexmark obtained Certificates of Registration from the Copyright Office for both programs. Neither program is encrypted and each can be read (and copied) directly from its respective memory chip. Id. ¶ 44, at 8.

Lexmark's Prebate and Non-Prebate Cartridges. Lexmark markets two types of toner cartridges for its laser printers: "Prebate" and "Non-Prebate." Prebate cartridges are sold to business consumers at an up-front discount. In exchange, consumers agree to use the cartridge just once, then return the empty unit to Lexmark; a "shrink-wrap" agreement on the top of each cartridge box spells out these restrictions and confirms that using the cartridge constitutes acceptance of these terms. Id. pp 13-14, at 3. Non-Prebate cartridges are sold without any discount, are not subject to any restrictive agreements and may be re-filled with toner and reused by the consumer or a third-party remanufacturer. Id. pp 15-18, at 3-4.

To ensure that consumers adhere to the Prebate agreement, Lexmark uses an "authentication sequence" that performs a "secret handshake" between each Lexmark printer and a microchip on each Lexmark toner cartridge. Both the printer and the chip employ a publicly available encryption algorithm known as "Secure Hash Algorigthm-1" or "SHA-1," which calculates a "Message Authentication Code" based on data in the microchip's memory. If the code calculated by the microchip matches the code calculated by the printer, the printer functions normally. If the two values do not match, the printer returns an error message and will not operate, blocking consumers from using toner cartridges that Lexmark has not authorized. Yaro Decl. ¶ 7, JA 82 ("To prevent unauthorized toner cartridges from being used with Lexmark's T520/522 and T620/622 laser printers, Lexmark utilizes an authentication sequence.").

SCC's Competing Microchip. SCC sells its own microchip--the "SMARTEK" chip--that permits consumers to satisfy Lexmark's authentication sequence each time it would otherwise be performed, i.e., when the printer is turned on or the printer door is opened and shut. SCC's advertising boasts that its chip breaks Lexmark's "secret code" (the authentication sequence), which "even on the fastest computer available today ... would take Years to run through all of the possible 8-byte combinations to break." D. Ct. Op. ¶ 103, at 19. SCC sells these chips to third-party cartridge remanufacturers, permitting them to replace Lexmark's chip with the SMARTEK chip on refurbished Prebate cartridges. These recycled cartridges are in turn sold to consumers as a low-cost alternative to new Lexmark toner cartridges.

Each of SCC's SMARTEK chips also contains a copy of Lexmark's Toner Loading Program, which SCC claims is necessary to make its product compatible with Lexmark's printers. The SMARTEK chips thus contain an identical copy of the Toner Loading Program that is appropriate

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for each Lexmark printer, and SCC acknowledges that it "slavishly copied" the Toner Loading Program "in the exact format and...

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