CIG Remanufactured HP 201A Color Toner Series Launch Video promo by Fit to Print series sponsor Clover Imaging Group, featuring commentary by EVP, Global Sales and Marketing and thought leader Luke Goldberg.
As new build toner cartridges coming into the U.S. multiply exponentially, does history offer any clues as to what this means to the imaging industry?
Fit to Print is a monthly summer editorial series that explores key topics and trends pertaining to the aftermarket segment’s accelerated transition from a commodities to services orientation. “New Build History Lessons” is the third installment of four in this series, each of which launches on the second Thursday morning of every month through September. (Click on the following links to check out previous installments in the series, “Can Seat-based Billing Save MPS?,” and “Raising Your Dealership’s Social Media Profile.”
Researched, sourced and written by The Cannata Report, Fit to Print is presented by Clover Imaging Group.
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New-build cartridges are shaking up the supply chain. Most are coming into the U.S. from China while others are being built right here in the U.S. There are divergent views as to the legitimacy of these products (See the article Just Like New, But Not Quite in our July/August issue). We’re not going to get into that debate here, but instead will provide some historical background as a means of placing these new build products into perspective.
Charlie Brewer, founder of the market research company Actionable Intelligence, closely follows what’s happening in China on the supplies front. He vividly remembers when new-build hit the U.S. shores like a tidal wave.
“It exploded during the recession for various reasons,” noted Brewer. “It was a fraction of the cost of reman, and because not a lot of empties [were available] to reman, companies had to fill orders with new build.”
While empties are no longer scarce, the same cannot be said about new build, nor are competing views as to their viability.
“People tried it, and in some cases once they crossed over they never went back,” observed Brewer. “Others tried it and were dissatisfied about the quality, the supply chain, or fear of being sued.”
It used to be if it was new build and sold inexpensively, the impression was that it was infringing, but some new build vendors are claiming otherwise and backing their product in terms of IP, quality, performance, etc. However, if it is infringing, the industry will eventually find out.
History has proven it is difficult to build a non-infringing product. You start with a cartridge, and inside that cartridge is an imaging drum, and then the various electrostatic properties become a factor as do how those pieces and parts work together. All those things are patented. It’s not unusual to have scores of patents on the way the drum turns and the way one piece fits into a groove, and so on and so on. With so many patents, one wonders how a manufacturer of new build can work around all of them.
Brewer recalls GCC (Green Cartridge Corporation), a new build company based in China. One of its biggest customers for its new-build cartridges was Staples. GCC even had a bureau in Australia run by the past head of the patent office in Australia. Brewer recalled that it would take GCC a couple of years to completely reengineer old HP cartridges. They eventually had some 10 SKUs branded by Staples.
Brewer recalls GCC (Green Cartridge Corporation), a new build company based in China. GCC had a number of large U.S. customers, including TallyGenicom and was rumored to be the supplier of new builds to one of the office superstores. GCC even had an office in Australia run by the past head of the patent office in Australia. Brewer recalled that it would take GCC a couple of years to completely reengineer old HP cartridges. They eventually had nearly a dozen SKUs branded by the office superstore.
Then the walls came down. In 2006 Canon sued them on the gear used in the cartridge. Even though GCC had all these workarounds for the various parts within the cartridge, the company hadn’t been able to work around the gear patent. That was a wakeup call to the new-build industry even though many were already aware of the issue prior to the Canon lawsuit. Some new-build manufacturers were prepared for this scenario and had already developed workarounds for the gear. They just weren’t going to do anything because of the costs until Canon did something.
“You can work around lots and lots of patents, but infringe on one and you’ve infringed,” said Brewer.
The other thing to keep in mind is that over time patents expire even though Canon has applied for another patent on the aforementioned gear.
“They’ve likely made minor changes, but they’re not going to redo their entire portfolio,” opined Brewer. “There’s probably some patents that are so specific they can’t do it anyway.”
Brewer offers an additional observation about the current state of the new build market.
“I am hearing from a lot of vendors that they have totally non-infringing product now and they are standing by it. It sounds like its indemnified and it’s legitimate. We haven’t seen any OEM lawsuits yet, but normally it takes a while for these things to hit a critical mass before there’s lawsuits.”
Brewer uses Epson’s story regarding patent infringement as a final history lesson.
At one point, Epson lost, what some estimates put at 70% of its inkjet market share in the U.S. where patents are fully protected before they ever initiated a lawsuit. When they did, they got all their share back and had a 95% share for years and years.
Will history repeat itself in the brave new new-build world?
That’s a tough question with way too many variables, and one that even an astute observer like Brewer can’t answer.
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The Seat Based Billing (SBB) advocates have taken their show on the road to educate the imaging industry on the perceived benefits of SBB. Clover Imaging Group (CIG), Print Audit, GreatAmerica Financial Services, Supplies Network, and Office Document Consulting are all partnering with the Business Technology Association (BTA) to offer a three-city SBB Road Show, which kicked off on June 6 in Kansas City, Missouri.
Next up is a stop on August 15 in Las Vegas, Nevada, before the road show comes to a close on September 12 in Philadelphia, Pennsylvania. Each session is held the day before a BTA event for ease of attendance. Learn more about and register for the SBB Road Show at sbbroadshow.com.