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 user 2005-02-26 at 10:41:00 am Views: 86
  • #10548

    China patent suits head to U.S.

    Tech giants seek new way to crack down on

    KONG-China’s new electronics companies, lured by riches in foreign markets,
    are feeling the bite of well-honed patent protection systems that have become
    effective weapons of business war for their competitors.

    Such lawsuits filed in the
    U.S.would have been considered little more than a nuisance by Chinese firms
    just two years ago, carrying little or no clout in China. 

    Multinationals are
    reluctant to file patent lawsuits in China, where intellectual property (IP)
    laws are new and the courts lack experience handling such cases.

    But with China’s exports
    of machinery and high tech goods reaching $490 billion last year, up 45 percent
    from 2003, the threat of being shut out of lucrative western markets has become
    a potent deterrent against IP theft by Chinese companies, experts

    “The Chinese companies
    have to care because if they don’t they face several bad scenarios,” said Tony
    Chen, an IP attorney at the law firm of Paul Hastings, Janofsky & Walker. 
    “If you lose a lawsuit, the court … could issue an injunction to stop your
    product from entering the U.S.  You also face the prospect of very big damages. 
    Also, your customers don’t want to be exposed to liabilities.”

    In January, U.S. chip designer SigmaTel Inc. sued Zhuhai,
    China-based Actions Semiconductor in Texas.  Weeks later, SigmaTel announced a
    settlement with Actions co-defendant U.S.-based Sonic Impact, which was using
    the Chinese firm’s chips in its MP3 players.

    But the main complaint
    with Actions has yet to be resolved, said Mike Wodopian, a senior vice president
    at SigmaTel.  “At the end of the day, from an overall market perspective the
    U.S. is still a huge consumer of these products,” he said, explaining SigmaTel’s
    decision to sue in the United States.

    Attorneys said the number
    of IP lawsuits in the U.S. was relatively small, in the dozens each year.  But
    they added the number was growing quickly as companies try to nip new
    competition from China in the bud and avoid losing market share the way they did
    to aggressive competitors from Japan and later South Korea starting in the

    While it is difficult for
    an outsider to judge the merits of individual cases, and few lawsuits have made
    it to trial, foreign companies say Chinese firms routinely copy their
    technology, down to highly complicated circuitries and production

    See them in
    Such cases are not always easily resolved and can drag on for
    years.  Most are eventually settled out of court.  One of the earliest, a suit
    by Japan’s Sanyo Electric Co. Ltd. against Chinese battery maker BYD Co. Ltd.
    filed in California in 2002, was resolved earlier this month when the two
    companies reached a settlement.

    In one of the most high
    profile cases to date, and one at the head of the recent wave, Cisco Systems
    Inc. in 2003 sued Chinese rising tech star Huawei Technologies in Texas for
    alleged IP theft.  The two companies settled the case later that

    More recent cases against
    Chinese firms, both filed in California, include a suit by a hard drive joint
    venture between Hitachi Ltd. and IBM and one by Taiwan’s TSMC, the world’s
    biggest maker of made-to-order chips, against fast-growing Chinese rival SMIC. 
    TSMC and SMIC announced a settlement to their case late last month.

    “Cases in the past often
    involved Japanese or Taiwanese defendants,” said Sebastian Hughes, an attorney
    at the law firm of Preston Gates.  “These days it’s more mainland Chinese
    defendants. In some cases, such as SMIC, you have a Taiwanese or Japanese
    plaintiff suing in the U.S. It’s come full circle.”

    Foreign companies may have
    more experience using the U.S. courts, but a growing number of Chinese firms are
    also finding they can use the system to their advantage in a range of disputes
    with their overseas business partners.

    Two Chinese companies sued
    a consortium of DVD patent holders, including Philips, Sony, Pioneer and LG
    Electronics, alleging cartel-like behavior.

    China’s top TV maker,
    Sichuan Changhong Electric Appliances Co. Ltd., sued U.S. distributor Apex
    Digital Inc. in California in December to recover an alleged $484 million in
    unpaid bills.

    “The Chinese firms are
    drinking from a hydrant, they’re learning,” said Chen of Paul Hastings.”From
    the U.S. law firms, the education of Chinese companies about the possibility of
    filing lawsuits themselves is getting some effect.”