Canadian pipe extrusion machinery manufacturer Corma Inc. announced recently that the company won a significant lawsuit in China against a Chinese company in Shanghai that copied Corma's Mold-Block Quick Return Technology.
Corma Executive Vice President Stefan Lupke said the suit is the first of 20 infringement cases the company is pursuing in China.
But a representative of the defendant in the case, Shanghai Jwell Machinery Co. Ltd., called Toronto-based Corma's hard-line tactic with infringers ``crazy.''
``They are crazy, suing companies all over the place, not just us,'' said Li Deming, a vice general manager at Jwell. ``They just apply for some patents in China because patents are easy to get. They applied for patents for some very basic technology and then accuse us of infringement.''
Steve Dickinson, a lawyer with Seattle-based international law firm Harris & Moure PLLC, said an aggressive approach against infringement is the only technique that works.
``Litigation is required because the Chinese infringer will almost always take an untenable position and move on. They do not believe they will be sued, so they don't see the foreign party as a threat. Legal action in the courts is the only practical approach that can be taken with these infringers,'' Dickinson said.
But Li said part of the problem with patent infringement cases lies with China's Patent Bureau.
``Go look - 80 percent of China's patents are trash,'' he said.
He said he suspects patents are filed just to keep Chinese companies from manufacturing.
Dickinson said Li's indictment of the Patent Bureau is unwarranted: ``They may not always make the best decisions, but they certainly don't lean toward the foreign side.''
Anatomy of a case
Lupke said his company is relatively lucky in China because it did file patents. Many companies complain about problems with intellectual property rights in China, but a lot of them have no recourse because they did not file patent or trademark licenses.
But protecting intellectual property looks like a long road. Corma filed the case against Jwell in 2004 and the final judgment was made in mid-2006.
``It is a long process to protect one's [intellectual property] in China, but not terribly different or more challenging than in other countries,'' said Lupke.
Corma discovered the infringement during a visit to its largest Chinese customer, Shanghai ERA Building Materials Development Co. Ltd. ERA owned five lines of Corma machinery and, to a Corma salesperson's surprise, five other lines that looked exactly the same.
Lupke said his firm tried to negotiate a supplier arrangement or licensing agreement with Jwell, but negotiations dragged out, and Corma thought Jwell was stalling. Corma filed suit in Shanghai against Jwell, and against ERA and another company suspected of leaking drawings for the mold-separation technology, which then was copied by Jwell and others.
Alleged infringers usually challenge the validity of the patent, which Jwell did, but eventually the patent was upheld by the Shanghai court.
``The Chinese side seldom makes a real defense,'' Dickinson said. ``They just talk slander and nonsense, as the defendant appears to have done in this case.''
The court determined Jwell should compensate Corma 300,000 yuan (almost $37,000), and ERA had to shut down the infringing lines.
The defendant appealed the ruling, and the case went to a higher court, which issued an enforcement award in May. At press time, Corma was waiting to see how the enforcement order would be implemented.
Traditionally, monetary awards in court cases are more difficult to enforce in China than orders to shut down infringing operations, Dickinson said.
Moving on
The case has another silver lining for Corma. Based on the success in the Jwell case, Corma issued a letter to 10 infringers; nine have responded with their interest in licensing agreements.
Xu Yijiong, ERA manufacturing manager, said ERA did not know the machines they bought infringed on Corma's patent. ERA just bought the machines because of the lower price, and stopped using them after the court made its ruling.
Lupke said Corma still considers ERA a good customer.
Zwang said Jwell remains confident that the suit will not affect the company's sales.
``Our company's gross production value is 600 [million] to 700 million yuan [about $73 million to $85 million] a year,'' Zhang said. ``We are not weak. We still have our advantages in pipe manufacturing. Besides, we can offer a lower price and our quality is no worse than [Corma's].''
Corma, meantime, has opened a small plant outside Shanghai.