Dec (12-06) - Proprietary strategies

I have thought long and hard about how or if to present this one. Seems that there is a significant change on the horizion. And that may a severe understatement. Lexmark has been aggressive in its business practices, making it both a market innovator and a competitive nemesis to Hewlett Packard's printer business. Years ago they tested the legal waters with the DMCA (Digital Millenium Copyright Act) challenge to a competitor's foray into the toner cartridge market. You may recall that in 2002, North Carolina-based Static Control Components (SCC) was sued by Lexmark under the DCMA for reverse engineering a chip to allow others' entry into the toner cartridge business. Lexmark had cleverly engineered electronics that would not allow competitors' toners from working. Lexmark tried to stop it, and the Supreme Court has ruled against Lexmark.

Lexmark's attorneys probably were bruised by this defeat, but apparently have used their acquired legal savvy to concoct an even more frightening restriction in their current product lines. Typically we dont discern problems or issues with products until they have been installed long enough to emerge. This is a doozy. It appears to apply to any of their OEM versions also (IBM, Unisys, SourceTech, Dell, et. al.). The three main electronic components; control panel, interconnect board and motherboard, all register themselves with oneanother upon initial installation. When one of those parts needs to be replaced, one is forced to buy an "un-registered" one from the OEM - We can't sell aftermarket parts without corrupting the whole machine. This is a killer in the offing. And we cannot claim damages until after we have sustained them, putting this loss into the future sometime.

This is the citation from the Service Guide:

"Warning: When replacing any one of the following components:
? Operator panel assembly (or upper front cover)
? System board assembly
? Interconnect card assembly

Only replace one component at a time. Replace the required component and perform a POR before replacing a
second component listed above. If this procedure is not followed, the printer will be rendered inoperable. Never
replace two or more of the components listed above without a POR after installing each one or the printer will be
rendered inoperable.

Warning: Never install and remove components listed above as a method of troubleshooting components.
Once a component has been installed in a printer, it can not be used in another printer. It must be
returned to the manufacturer."

I would assume that Lexmark understands patent law, DCMA, and other ramifications of this move, but it will certainly put a hurt on the myriad of parts resellers that currently trade in used Lexmark and their OEM printers. Lexmark gains a very strong position in its unique ability to offer maintenance agreements, shutting out potential third party maintainers as well as competition from other suppliers. It will have an enormous effect.

We, therefore, strongly suggest that users not upgrade to the the current IBM and Lexmark printer products, but instead focus on perpetuating their network uniformity with second generation offerings.

I'm sure this is an issue which will be debated and discussed further as it becomes more cogent.

I have mentioned this several times with varying degrees of acceptance, but the days of cheap and abundant equipment are waning. There are several machine types, models , parts, and features which are tightening. Capital investment to replace infrastructure, aka durable goods, has been down for some time and we expect this to be reflected in net supply of gear in the marketplace. I dont expect this to be severe, but it does suggest a squeeze on prices in a normally deflationary market.

We have accumulated a "bad-guy" list of people and companies who have displayed less than honest behavior, but we don't really have an effective way to publish this without potential for my own exposure to lawsuits. Anyone have any ideas how e can protect each other from these rascals?

I am pleased to announce that Rachel Dworkin has been promoted to outside sales representative. She'll be focusing on after-sale support of supplies and machines.

David T. Mendelson
Argecy Computer Corporation
27280 Haggerty Road C21
Farmington Hills, MI 48331
248-324-1800 x122
248-324-1900 fax