US Report: Xerox files suit against HP

Xerox yesterday filed a law suit against Hewlett Packard seeking to bar HP from manufacturing and selling thermal inkjet printers that contain Xerox-patented technology.

If granted, such a move could have a significant effect on HP. The company's inkjet printer business accounted for $2.1bn (£1.28bn) in U.S. sales last year, according to ZD Market Intelligence (an affiliate of ZDNN publisher Ziff-Davis). HP dominates the marketreporting overall sales of $42.8bn (£26.25bn) in its fiscal year ended last October.

According to papers filed last week in a U.S. District Court, Xerox alleges that multicolored thermal inkjet printheads contained in HP's DeskJet, Office Jet Pro and PhotoSmart printer lines and its Color Copier 110 and 120, violate U.S. Patent No. 5,030,971 held by Xerox. That is a significant portion of HP's inkjet line, analysts said.

"We have become much more aggressive in protecting our intellectual property," said Xerox spokesman Judd Everhart. "We certainly respect HP as a competitor in the marketplace, but we can't allow them to infringe the technology we developed and marketed."

Though Xerox contends that only the inkjet cartridges infringe on its patents, the printers and copiers are sold with the cartridges inside, necessitating Xerox's motion to keep HP from selling the entire product, said Everhart.

It's unclear how strong a case Xerox may have, analysts said. "It's strange that HP would be copying Xerox technology when the worldwide leaders in inkjet technology are HP and Canon," said Angele Boyd of International Data Corp. in the US. "One thing Xerox will gain is PR. It will make the world know that they have inkjet technology, and anything they launch in the market will get attention.

If they win, it will have a terrible impact on HP, but unless a judge says they have to cease and desist, I don't think it will impact them now." She noted that Xerox is about to introduce an inkjet printer. "The consequences for HP will be minimal if they can settle on a royalty basis, but if they go to trial, who knows how it will resolve," said Ed Pullen, analyst at ZD Market Intelligence. "The immediate impact will come down to whether a judge prohibits HP from selling those models and the cartridges. That would be an exceptionally unusual ruling."

Some analysts speculated that Xerox is signalling a resolve to get tougher about protecting its own inventions. "Xerox realises that they do great research and have great technology, and now they'll be more intense in identifying what are great areas to be in, and be more protective;" said Capital Reflections analyst Jeanne Hanley. "[Xerox] always lets technology go too early. [The suit] is just putting everyone on notice that they want to own that market."

Recently, Xerox has moved to strengthen its position in the small-office and home-office markets by cutting costs and unveiling a line of digital copiers and laser printers. The number of patents granted to Xerox - almost 800 in 1997 - is a key measure of Xerox's place in the market, said company officials.

HP said it was surprised by Xerox's suit. "HP began development of inkjet technology in the late 1970s, and has invested to date many billions of dollars in the development of the technology - $500m (£306m) annually for nearly 20 years," said spokesman Jeremy James. "While Xerox has also done inkjet development work, they have yet to enjoy market success with the technology." James said HP is undertaking a review of the patents cited in Xerox's complaint and expects to have a response within the next week.

The patent suit, which seeks trebled damages on an unspecified amount, comes at a bad time for HP, which Wednesday announced it would not meet Wall Street's expectations for the second fiscal quarter. The warning shook up investors, as HP's stock plummeted nearly 15 percent Thursday, dropping $11.38 to $70.25.

Xerox's actions mark the second time in one month that patent infringement claims have been filed against HP.

On May 6, Micro Solutions filed suit against HP, alleging that HP's CD-Writer Plus 7200e external rewritable CD drive infringed on patented technology used in Micro Solutions' backpack external storage products for PCs. Ironically, in October 1997, Hewlett Packard sued Xerox for alleged patent infringement over its LaserJet-compatible printer cartridges.

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