Inkjet Printing - Business Model

Business Model

A common business model for inkjet printers involves selling the actual printer at or below production cost, while dramatically marking up the price of the (proprietary) ink cartridges (a profit model called "Freebie marketing"). Most current inkjet printers attempt to enforce this product tying using microchips in the cartridges to hinder the use of third-party or refilled ink cartridges. The microchips monitor usage and report the ink remaining to the printer. Some manufacturers also impose "expiration dates". When the chip reports that the cartridge is empty (or out of date) the printer stops printing. Even if the cartridge is refilled, the microchip will indicate to the printer that the cartridge is depleted. For many models (especially from Canon), the 'empty' status can be overridden by entering a 'service code' (or sometimes simply by pressing the 'start' button again). For some printers, special circuit "flashers" are available that reset the quantity of remaining ink to the maximum. Some manufacturers, most notably Epson and Hewlett Packard, have been accused of indicating that a cartridge is depleted while a substantial amount of ink remains. A 2007 study found that most printers waste a significant quantity of ink when they declare a cartridge to be empty. Single-ink cartridges were found to have on average 20% of their ink remaining, though actual figures range from 9% to 64% of the cartridge's total ink capacity, depending on the brand and model of printer. This problem is further compounded with the use of one-piece multi-ink cartridges, which are declared empty as soon as one color runs low. Of great annoyance to many users are those printers that will refuse to print documents requiring only black ink, just because one or more of the color ink cartridges is depleted.

In recent years, many consumers have begun to challenge the business practices of printer manufacturers, such as charging up to $8,000 per gallon for printer ink. Alternatives for consumers are cheaper copies of cartridges, produced by third parties, and the refilling of cartridges, using refill kits. Due to the large differences in price caused by OEM markups, there are many companies selling third-party ink cartridges. Most printer manufacturers discourage refilling disposable cartridges or using aftermarket copy cartridges, and say that use of incorrect inks may cause poor image quality due to differences in viscosity, which can affect the amount of ink ejected in a drop, and color consistency, and can damage the printhead. Nonetheless, the use of alternative cartridges and inks has been gaining in popularity, threatening the business model of printer manufacturers. Printer companies such as HP, Lexmark, and Epson have used patents and the DMCA to launch lawsuits against third-party vendors. An anti-trust class-action lawsuit was launched in the US against HP and office supply chain Staples Inc, alleging that HP paid Staples $100 million to keep inexpensive third-party ink cartridges off the shelves.

In Lexmark Int'l v. Static Control Components, Case No. 03-5400 (6th Cir. Oct. 26, 2004) (Sutton, J.) the United States Court of Appeals for the Sixth Circuit ruled that circumvention of this technique does not violate the Digital Millennium Copyright Act. The European Commission also ruled this practice anticompetitive: it will disappear in newer models sold in the European Union. While the DMCA case dealt with copyright protection, companies also rely on patent protection to prevent copying and refilling of cartridges. For example, if a company devises all of the ways in which their microchips can be manipulated and cartridges can be refilled and patents these methods, they can prevent anyone else from refilling their cartridges. Patents protecting the structure of their cartridges prevent the sale of cheaper copies of the cartridges. For some printer models (notably those from Canon) the manufacturer's own microchip can be removed and fitted to a compatible cartridge thereby avoiding the need to replicate the microchip (and risk prosecution). Other manufacturers embed their microchips deep within the cartridge in an effort to prevent this approach.

In 2007 Eastman Kodak entered the inkjet market with its own line of All-In-One printers based on a marketing model that differed from the prevailing practice of selling the printer at a loss while making large profits on replacement ink cartridges. Kodak claimed that consumers could save up to 50 percent on printing by using its lower cost cartridges filled with the company’s proprietary pigmented colorants while avoiding the potential problems associated with off-brand inks.