Canon, the Dongle Gear, & Another Round of Litigation!

On Friday March 2, 2018 Canon Inc. issued an announcement stating it had filed complaints with the United States International Trade Commission (ITC) against 49 manufacturers, distributors, and resellers of toner cartridges and photosensitive drum units, asserting infringement of nine recently issued U.S. Patents. Canon also announced the filing of complaints against these companies in numerous U.S. District Courts according to the various locations of the defendants.

This is a complicated topic that can't be adequately covered in a single article so we're planning a series that will attempt to provide background and context, as well as stay with major developments as they take place.

Litigation is a serious matter. It's expensive for all the parties involved, it's distracting in terms of day-to-day, ongoing management of a business, and it's likely to have a longer-term impact on the development of the market. The OEMs have a right to defend their intellectual property and the legal system is designed to permit them to file complaints if they believe their intellectual property rights are being infringed.

However, while the OEMs have a right to file complaints, the aftermarket manufacturers and distributors also have a right to defend themselves and should not be automatically assumed guilty of infringement until it's determined so by admissions of guilt, jury verdicts, or rulings from the ITC.

The Background

Just in case there's any lack of clarity, the nine patents Canon has asserted in the 2018 dispute are recently issued patents. They are all related and claim the priority benefit as continuing applications/patents of US Patent No. 8,280,278 B2 which has a much earlier U.S. filing date of 12/26/2007 than the U.S. filing dates of the patents involved in this recently announced litigation. The '278 patent was at the heart of the earlier round of litigation in 2014.

• The "parent" patent ('278) filing date was almost 10 years before the various filing dates of the nine other patents now in the 2018 litigation.
• The '278 patent was issued 10/02/2012 after a nearly five-year journey through the U.S. Patent & Trademark Office (USPTO).
• As a point of reference, the current start to finish time for a successful patent application is an average of 40 months or just over 3 years. The USPTO has a current backlog of over half-million unexamined patent applications.
• There are some exceptions but, generally speaking, the term of a patent runs for 20 years from the earliest claimed U.S. filing date.
• The continuations and divisional applications that can spin out of a "parent" patent are not an unusual strategy for a sophisticated and powerful company like Canon to follow.

The Timeline & The Dongle Gear Patents

1. On 12/22/2006 the initial file disclosures took place in Japan which established the priority date for what has subsequently turned into the '278 patent and its family of related patents.

2. In establishing the priority date, this action also started the clock ticking on the one-year countdown before the application had to be lodged in countries outside Japan, i.e. the United States. This led to the "first-active" date in the U.S. becoming 12/26/2007.

3. 12/26/2007 became the filing date, from which the 20-year duration of the '278 patent (finally granted on 10/02/2012) is calculated and from which we can determine the '278 patents' expiry date of 12/26/2027.

4. Six months after the filing date, on 06/26/2008, the application was published under US2008-0152388A1 and it became possible for the public to see the application for the first time.

5. To take advantage of the previously established priority date and to preserve the chain required to execute the continuation strategy, Canon had to:

• File one or more divisionals and/or continuations, or continuations-in-part, on any one of the additional applications it had planned.
• Complete this requirement before the first patent in the family (the '278) was granted on 10/02/2012.

The necessary filings actually took place well in advance of the deadline.

6. It is therefore out of a series of divisionals (less likely) or continuations (more likely) that the nine patents now entering litigation were established.

7. To execute this strategy successfully, Canon had to claim the benefit of the U.S. filing date of the "parent" patent ('278) as the filing date for the continuations and/or divisionals. This means the 20-year patent term on the nine new patents recently issued (and now being litigated) will also expire on the same date as the '278 parent - 12/26/2027.

8. Canon's strategy also meant the nine new applications were able to adopt the 12/22/2006 priority date.

9. For interested parties (particularly those who may have been concerned about the potential for future litigation) it would have been prudent to be monitoring Canon's patent publications at the USPTO for any applications of interest. One would imagine the '388A1 application would have been of great interest and that it, and its growing fleet of associated continuations, would have been carefully monitored.

10. In pursuing its patent applications using its continuation strategy Canon has been able to accomplish the following:

• Continue to take advantage of the original priority date.
• Keep changing the claim scope of the original patent.

11. Out of the full list of 19 filings that claimed the benefit of the original 11/964,518 filing (which later became the parent patent '278), all but one has now issued as patents. Three of the 19 (listed below) issued between 2012 and 2014 and served the purpose of keeping the continuity chain unbroken and maintaining the potential for Canon to re-work its claims on the remaining sixteen filings.

• 8,275,286 on 09/25/2012
• 8,630,564 on 01/14/2014
• 8,682,215 on 03/25/2014

12. Of the remaining sixteen applications, fifteen have been granted and nine of those now form the basis of the 2018 litigation. We have not participated in an evaluation of the claims on the six other patents not included in the new 2018 complaint but, if they're relevant;

• They could be added later.
• They could stay outside the litigation, or;
• They could become the basis of another complaint in the future.

13. With one patent filing in the family still pending, the possibility for the scope of claims to be re-shaped still further remains open. In other words, as the aftermarket reacts to the 2018 litigation with new design-around efforts, Canon remains in a position to potentially alter the scope of its coverage in preparation for a further round of future litigation.

14. For the group of nine patents now in the 2018 litigation, the average time between the filing date and grant date was 10 months. The average time between the grant date and filing the 2018 complaints was 2.6 months - less than 90 days.

15. We don't know at this time how much (if any) patent claims on the continuations were modified between the settlement of the 2014 litigation and Canon's patent filing dates during late 2016 and early 2017.

Conclusions:

There's nothing out of the ordinary with regards to Canon's patent prosecution strategy. It is typical of a powerful company with significant financial resources available to allocate to its intellectual property and patent strategy.

It is curious why the defendants in the 2014 litigation did not obtain protection in their settlements from future complaints, not just on the patents asserted in that 2014 complaint, but also on any descendants that may subsequently issue; however, we assume it is unlikely that Canon offered this as part of the resolution to the 2014 litigation. Regardless, in light of the latest complaints, it seems clear there were no such provisions in the settlements so, we have to assume the 2014 defendants were not in a strong enough position to successfully negotiate for them.

This, in turn, means all the defendants in the 2014 litigation must have known they were vulnerable to future complaints. Knowing they were vulnerable should mean they've been continuing to develop their own technology on the dongle gears and attempting to re-work their design-arounds to stay clear of the issued Canon patents, as well as the pending applications that matured into the patents now the subject of the 2018 complaint.

Litigation between the OEMs and the aftermarket competitors in the imaging supplies business is nothing new; going back to the 1980s with Okidata suing aftermarket companies for infringement on Microline dot matrix printer ribbons, the early 1990s with Smith Corona suing Pelikan for infringement on typewriter ribbons, and the mid 1990s with Hewlett Packard, Seiko Epson, and Canon suing Nukote for infringement on inkjet patents.

Almost every aftermarket imaging supplies manufacturer that's been in business at any point during the last 40 years or so, has been directly impacted by OEM litigation at some point.

It's nothing new to witness the OEM's adopting aggressive media and legal profiles as part of their litigation strategies to combat the aftermarket manufacturers but, it is new to witness the emergence of three sides, rather than two, in the latest battle getting underway.

• The OEMs
• The Legacy Remanufacturers
• The Offshore New-Build Manufacturers

The OEMs and the legacy remanufacturers are united in their front to maximize the media impact of Canon's new round of litigation on the new-build manufacturers, as both their business models are threatened to varying degrees by them. However, as we've already pointed out, the OEMs have fought the litigation battle for decades and, over all that time, have probably given up less than 20% of the market to aftermarket competitors.

In other words, the aftermarket as a whole, regardless of the litigation, is probably not a major incremental threat to OEM market share. Instead, the bulk of the noise in these early days following the filing of the complaints may have more to with the threat well-capitalized, new-build cartridge manufacturers represent to the less well-capitalized legacy remanufacturing model.

For a calm, rational, and intelligent assessment of the recent developments, we encourage you to spend ten minutes watching this interview between David Gibbons of RT Media and Merritt Blakeslee, a Patent Attorney of the Blakeslee Law Firm, that took place on March 9, 2018.

In Part 2 of the series, we'll be going into more detail on the importance of the priority date and the role it plays in patents and patent families with continuation strategies.

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About the author:

Ian Elliott has over 35 years experience in the imaging supplies industry and, at prior places of employment, has faced direct involvement in OEM versus aftermarket patent litigation. Mr. Elliott is not a patent attorney, is not qualified to provide legal advice, and this article is not an attempt to provide any kind of legal advice. It represents no more than his views and opinions based on decades of relevant experience.