The US courts heard legal arguments Friday in a case involving Lexmark that observers said could stifle the market for low-cost, refurbished printer cartridges.

Lexmark is trying to win a temporary injunction to prevent SCC - a third-party company - shipping computer chips that are used to make clones of toner cartridges for two of Lexmark's laser printers.

SCC makes chips and other components that are used to make refurbished, or "remanufactured" printer cartridges, which are sold to customers at prices typically 30 per cent lower than those offered by the major printer vendors. The industry accounts for roughly a quarter of all printer cartridges sold, according to analyst estimates.

Printer makers make much of their profits from cartridges and other printing supplies, so they view the market with some trepidation. They argue that their printers work best with their own cartridges, and in some cases offer incentives to customers to use their own supplies.

Last year Lexmark began using a computer chip with some toner cartridges that uses software programs to communicate with its printers. Without the software, for which Lexmark filed copyrights, its printers won't function. In the remanufacturing industry the chip is known as a "killer chip", because it prevents remanufacturers from making compatible cartridges.

SCC figured out a way to mimic the software program and began selling chips that allow cartridges to be made for Lexmark's printers. In so doing, according to Lexmark's lawsuit, SCC violated terms of the 1998 Digital Millennium Copyright Act. The act made it illegal to circumvent a protection technology in order to gain access to a "protected work" inside.

The significance of the case goes beyond Lexmark, and has the potential to affect the whole market for remanufactured cartridges, said Jim Forrest, managing editor of The Hard Copy Supplies Journal, a monthly newsletter that tracks the printing industry

"The final outcome when it goes to trial could impact the whole industry," he said.

If Lexmark is successful in using the DMCA to protect its cartridge business, other printer makers are likely to follow suit, Forrest said. That could deal a severe blow to the market for remanufactured cartridges, depriving businesses of the option of buying cheap cartridges from third-party vendors.

The International Imaging Technology Council, which represents the remanufacturing industry, considers the lawsuit "a potential industry killer", Judge said.