From Deseret News archives:

Ink-refill companies aim to take a chunk out of printer giant

Published: Sunday, Oct. 8, 2006 6:45 p.m. MDT
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Privately held Cartridge World, which was founded in Australia in 1997, has nearly 1,300 stores, including 440 in the United States, and says it will have 600 U.S. stores by year end.

They are run by franchisees like Sheri de Wet, who was casting about for a new career after she and her husband left middle-management jobs at a software company. They considered and rejected haircutting, sandwich and window-cleaning opportunities before opening two Cartridge Worlds in the Dallas suburbs.

"We wanted to get in on the ground floor for a product that is growing, and this made perfect sense," de Wet said. "Everybody has a printer."

De Wet said her two shops have gross sales of about $110,000 a month, much of it to business customers, and she wants to open more stores. The company said franchise fees and other startup costs run $75,000 to $130,000.

Refill shops like Cartridge World, Island Ink-Jet Systems Inc. and Caboodle Cartridge LP also compete with office-supply chains such as Staples Inc. and OfficeMax Inc., which sell private-label cartridges or offer in-store refilling kiosks.

HP watches these competitors closely and has sued or threatened to sue several of them for allegedly infringing on HP ink and cartridge patents.

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HP told Cartridge World last year that four of its inks violate HP patents, and the companies settled their dispute recently with Cartridge World agreeing to pay an undisclosed settlement, said Tuan Tran, an HP vice president. HP recently lodged similar complaints about ink sold by OfficeMax and Walgreen Co., and sued a Chinese company that makes cartridges that work in HP printers.

Last year, HP sued Staples' supplier, InkCycle, for allegedly using an HP-patented recipe for metallic salts that prevent yellow and black ink from running together. InkCycle settled by paying HP an undisclosed amount.

HP employs hundreds of chemists and other scientists to develop new inks and ferret out possible patent infringement by rivals, Jotwani said.

The HP executive is unapologetic about the company's legal tactics.

"When you invest $1 billion a year in R&D, and you have 9,000 patents, I have a reasonably steady practice of looking at stuff that's in the marketplace for intellectual-property violations," he said.

Another big printer company, Lexmark International Inc., uses technology to thwart customers from buying knockoff toner cartridges. Some Lexmark cartridges contain a chip that shuts down the printer if the unit is refilled. Company spokeswoman Barbara Leary said this is to ensure that used cartridges are returned to Lexmark and not dumped in a landfill.

Perhaps the biggest obstacle for refillers is to overcome the perception that their ink isn't as good as HP, Lexmark, Epson or Canon products. The refillers say their ink is just as good. Barnes and other customers at the Cartridge World in Grapevine said they don't notice a difference in quality.

But research company QualityLogic Inc. found that up to 70 percent of refilled cartridges leaked or printed poorly, compared to 2 percent of HP cartridges. HP is a QualityLogic client.

Consumer Reports said it tested hundreds of cartridges and found that many were inferior in print quality and fade-resistant photos but a few matched their brand-name counterparts.

"For something you want to keep, like a wedding photo, I would use a (brand-name) cartridge," said Joy James, a consultant and former InkCycle executive. "But for printing office documents, refills are good."

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