Green light

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A recent Tokyo court case has lit the ‘go’ sign for remanufactured cartridge resellers in Japan. But the battle against the OEMs has only just begun

For the last few decades, Japan has clung to all that is advanced and modern – embracing commerce, technology and ‘state of the art’ with gusto. But it seems one international trend has passed the nation by. While anti-monopoly battles have been fought out in the West – with courts largely bowing to the rights of the consumer – manufacturing giants in Japan have been left to enjoy relative intellectual property domination.

The market for remanufactured cartridges provides a clear example. The Japanese market is a small one over which OEM giants such as Canon and Epson reside. It is also one in which legal uncertainty – and fear of going against these giants – has left many dealers and distributors unwilling to import recycled inkjet cartridges into the country.

But recent events suggest revolutionary rocks have started rumbling. In December 2003, Asian cartridge supplier Union Technology International (UTec) shipped some recycled inkjet cartridges (compatible for Canon printers) to a Japanese customer, Recycle Assist. This provoked Canon to lodge a patent infringement claim against the Japanese distributor. On 8 December 2004, the charge was rejected by Tokyo District Court, which clarified that recycling cartridges belongs in the category of ‘repair’, and in no way invades the OEM’s intellectual property rights.

Although Canon is currently appealing against the decision, industry insiders claim the impact of the case -should it not be reversed – will be immense. "The decision is a milestone for cartridge recyclers in Japan and is expected to bring about revolutionary changes," says UTec’s director Iris Ngo.

"It opens the door for overseas recyclers (notably those in low cost countries) to export recycled inkjet cartridges to Japan. We also expect to see more inkjet cartridges recycled in other countries going into Japan. OEMs such as Canon and Epson are right to be concerned by the expected increase in competition."

Colin O’Brien, CEO of imaging products manufacturer GCC International, airs a similar view. "Now that it is seen to be legal, the market is open to refillers of all quality and price levels. Japan is a high priced market and will attract many entrants eager to get a part of it."

Indeed, Japan is one of the few markets worldwide in which OEM inkjet cartridges still take up to 80-90 per cent of the supplies market. The potential is huge.

The benefits to consumers, too, are evident: greater choice; lower prices (recycled printing supplies usually sell at 20-30 per cent discount to original products); environmental satisfaction; and, as many believe, higher quality suppliers in the market.

But just because distributors can sell remanufactured cartridges in Japan, does not automatically mean they will gain market share. Japanese customers are known to demand high quality products and services, so they may continue to look to brands they are familiar with.

"It remains to be seen if remanufacturers of inkjets can meet the high quality levels that Japanese consumers demand, and whether they can develop a brand, find distribution and make a profitable business case," says O’Brien. "After all, patents are there to encourage innovation and forbid others trying to get a ‘free ride’ off the OEMs’ products.

"Furthermore, Asia has a high respect for brands and a lesser regard for environmental issues which pushes them to the OEM," he adds. "And the Japanese market differs from the rest of the Asian markets in that brand and quality tend to remain paramount over price, compared to, say, China where price is everything and quality a very poor second."

There are additional hurdles for distributors. OEMs can restrain competition from recycled products by using ‘killer chips’. According to Vincent van Dijk, secretary general of the European Toner and Inkjet Remanufacturers Association (ETIRA), these chips have useful functions such as measuring ink levels, but increasingly their sole purpose is to prevent re-use of the cartridge after the first use, therefore reducing the availability of empties in the market.

In addition, many tech giants – including Canon – have introduced their own collection and recycling schemes in Japan.

But, according to O’Brien, perhaps a larger threat to the future of the Japanese imaging products industry is not so much patents but counterfeiting, which is becoming increasingly rampant.

On the plus side, the market scope for remanufactured cartridges worldwide looks extremely rosy at the moment. The paperless office still seems a far cry from becoming a reality, the digitalisation of imaging has increased printing globally, and the colour laser is fast on the inroad. With any luck, there will be plenty of room in the Japanese market for OEMs and remanufacturers alike.