Printer giant Lexmark has filed a patent infringement suit claiming 24 cartridge manufacturers stole its intellectual property.

The companies in the suit haven’t been announced, but the complaint is assumed to be connected to Chinese companies that sell Lexmark-compatible ink and toner, Network World reports. The company is seeking damages, as well as limitations placed on the unnamed importers.

Observers say filing the lawsuit is a risky move for Lexmark, because it brings to attention the pricing strategy used by printer manufacturers — sell printers for cheap, but turn huge profits on consumables sales.

Lexmark had already lost a similar case in 2003, when it sued a company for cloning the control chip embedded in toner cartridges that allows the machine to authenticate the cartridge.

From 2005 to 2007, TJX fell victim to a breach in which more than 45 million customer credit card numbers were pilfered from its databases.

The good news: The thief was caught by the Feds and sentenced to a 20-year prison sentence.

The bad news: The company got hit by lawsuits from every direction. First were the banks and credit card issuers, who had been hit by false claims and the need to help untangle the mess caused by TJX’s IT vulnerability.

Then came the class-action suits by groups of customers who were stung or at least inconvenienced by the breach.

And recently, TJX settled a lawsuit from investors, including pension funds, who sued the board of directors, alleging that those individuals, failed in their duty to protect customers’ personal data (and thus lowered stock prices).

That suit was settled at a reported cost of $595,000, with the board admitting to no wrongdoing. All in all, TJX had to set aside $178 million cash reserves to settle the lawsuits.

The lesson: Courts and plaintiffs are getting serious about data breaches. And the number of parties willing to sue is growing. It may in the end be impossible to outwit the most determined and crafty data thieves, but being able to demonstrate in court that your company was not negligent, that it had a rational, constantly updated data protection initiative certain won’t hurt, whether with judges or with insurers.

The suit says that HP, in negotiating with Turbon to subcontract the refilling of its own returns cartridges, had demanded full disclosures of Turbon’s business and technology processes. It then dropped Turbon and, according to the suit, made use of the trade secrets to improve and expand its own recycling and refilling program. HP then ramped up its own cartridge return program, making fewer empty available for Turbon to convert.

According to a Reuters article: “The lawsuit seeks damages for fraudulent inducement, misappropriation of trade secrets and unfair competition, a ban on the use of improperly obtained secrets, and other remedies.”

As with any lawsuit, the filing is just the beginning. The lawsuit is, however, part of an ongoing struggle between the original manufacturers and the remanufacturers/refillers that strikes at the center of all profitability in the printer business. The original manufacturers leave themselves vulnerable thanks to very high prices on most toner cartridges, especially for the lower-speed machines.

For Turbon, as for other reputable remanufacturers, they are hurt by a wide-open market with lots of poor-quality fly-by-night competitors that give bad experiences and a bad name to all remanufacturers. In the end, even the better firms have trouble piercing through the general distrust in the market.

Texas-based PlainsCapital Bank recently sued Hillary Machinery, Inc., a business customer, after criminals hacked into Hillary’s account and stole more than $800,000.

The bank recovered about $600,000 of that money. Hillary sent a letter demanding PlainsCapital pay the difference, claiming the bank’s lack of proper security measures was to blame for the theft.

PlainsCapital promptly filed a suit against Hillary. The accusation: Well, there was no accusation, really. The bank was trying to get the court to confirm that its security was adequate.

Hillary filed a countersuit to recover the funds, arguing the bank should never have allowed the suspicious transfer to happen. Given the facts of the case, it’s hard to disagree:

• The accounts receiving the cash were located in Eastern Europe, which should have been red flag,
• Hillary had previously only transferred money to a few other accounts, but the theft involved moving huge sums to multiple accounts within 48 hours, and
• E-mails authorizing the transfer came from Romania, even though Hillary is based in Texas.

Who won the case? We may never know the real outcome. The two sides recently settled, but, as ComputerWorld reports, would not disclose any details.

If you need one more reason for instituting an improved data security system, the chance of serious liability (we’re talking over $100 million) has just gotten more real.

Federal courts are getting far more aggressive in penalizing companies that fail to protect confidential client data. That’s the case with a recent court settlement of a class action suit brought for data breaches at a company called Heartland Payment Systems.

Heartland is one of the biggest processors of credit and debit card transactions in the country. In 2009, it revealed that hackers had managed to break into its systems and stole critical information on as many as 130 million customer credit and debt card accounts. The breach, orchestrated by an organized gang of US-based cyberthieves, was the largest of its kind and resulted in a flurry of false charges made on consumer card accounts.

Many of the members of the gang were caught, tried and sentenced, but the affected customers and their banks joined in a large class action suit for the costs and inconvenience of sorting out the false charges. The settlement of the suit required Heartland to pay:

• $60 million to reimburse banks issuing Visa cards for costs related to the breach
• $41 million for settling with MasterCard-issuing banks
• $3.6 million just to settle claims from American Express, and
• $4 million to settle consumer claims.

The agreement may be indicating a new era of liability for data breaches. According to a BusinessWeek story about the settlement:

“Typically, courts have tended to dismiss consumer class action lawsuits in data breach cases involving payment card data. By that measure, Heartland’s settlement offer is unusual even though it might appear small considering the number of cards that were compromised.”

Read the lease carefully.

That’s the lesson learned from this recent court case:

A lawyer leased a copy machine for his firm’s office. Partway through the lease, the copier broke down.

When the supplier didn’t fix it, the lawyer sued, asking for a total of $250,000 in damages.

The problem: The lease didn’t require the supplier to maintain the copier. In fact, the contract explicitly said maintenance for the equipment “is not part of this Rental Agreement.”

Unsurprisingly, the judge dismissed the case.

Cite: Ghods v. Citicorp Vendor Finance, Inc.

Yes, there are junk fax filters, but even the best of them can be gotten around.

A Michigan company, according to the Detroit News, has decided to do more than filter. Imhoff Investment LLC has filed a federal lawsuit against Texas-based Stephen Bean & Associated and Aftermlifequote.com for sending unsolicited junk faxes. The fax in question was entitled “Affordable life insurance.”

The suit references two federal laws: the Telephone Consumer Protection Act of 2001 and the Junk Fax Prevention Act of 2005. It is illegal, by these acts, to send faxes to a party unless you already have underlying business relationship with them.

The lawsuit brief states that “Unsolicited faxes prevent fax machines from receiving authorized faxes, prevent their use for authorized outgoing faxes, cause undue wear and tear on the recipient fax machines, and require additional labor to attempt to discern the source and purpose of the unsolicited message.” It couldn’t be stated better.

The cost per violation: $400 per page received, and the judge can award triple damages if the sender is seen to be willfully violating the law. This is a case worth watching.

Dean Klein worked for J.P. Morgan Chase from 1980 until 2005, when he was fired after being caught allegedly talking empty toner cartridges home, selling them to a recycling service and pocketing the money.

But Klein, who was a manager at the time he was fired, claims the company was acting on a false tip from another employee who was trying to clear the way for her own advancement.

He says Morgan Chase fired him without conducting a thorough investigation, never gave him chance to defend himself and refused to give him a copy of the employee handbook that might spell out what he rule he broke.

He’s suing his ex-employer for wrongful termination and breach of contract.

How significant is the financial sum involved in this dispute? Staples, for example, offers $3 in store credit per cartridge, so over a long enough period of time, it can add up.

New York’s Attorney General Andrew M. Cuomo recently announced that Dell and its subsidiary, Dell Financial Services (DFS), are going to pay the Attorney General’s Office $4 million in restitution, penalties and court costs to resolve charges of fraudulent and deceptive business practices that scammed consumers across New York State.

The company will also compensate victims its business practices. To get the money, folks will have to prove they’ve bought a Dell in New York in the past several years and fill out a form with the AG’s office. Forms are due by December 15, 2009.

The settlement follows a decision of the New York Supreme Court, Albany County, which went along with Attorney General Cuomo’s claims that Dell engaged in fraud, false advertising, deceptive business practices, and abusive debt collection practices.

The court ruled that Dell engaged in bait and switch advertising with respect to:

• its “no interest” financing promotion and misleading consumers to believe they’d qualified for it
• failing to adequately disclose the terms of its “next day” service contracts, and
• failing to provide consumers with warranty service and promised rebates.

Along with the $4 million in restitution, penalties and fees, the settlement requires Dell to make sweeping changes to its advertising, sales and financing practices.

Among other things, Dell will be required to advise customers before they purchase an “at-home” or “on-site” service contract that they may be required to engage in diagnostic activity over the telephone that includes the customers themselves opening computers to access internal components.

The settlement also requires Dell to disclose in its advertisements the estimated percentage of consumers who will actually qualify for promotional financing.

According to the Court’s decision upholding the Attorney General’s lawsuit, Dell deprived customersof the technical support to which they were entitled under their warranty or service contract by:

• Repeatedly failing to provide timely on-site repair to consumers who purchased service contracts promising “on site” and expedited service;
• Pressuring consumers, including those who purchased service contracts promising “on site” repair, to remove the external cover of their computer and remove, reinstall, and manipulate hardware components; and
• Discouraging consumers from seeking technical support; those who called Dell’s toll free number were subjected to long wait times, repeated transfers, and frequent disconnections.

It seems the consumers will get the last word in this sorry scenario. Any New York resident harmed by Dell’s deceptive conduct can file a claim for restitution using special claim forms that are posted on the Attorney General’s website.

The question remains, however: If Dell’s New York customers are entitled to restitution, are businesses and consumers located in other areas?