Is American Superconductor Fighting Chinese Windmills?

Don Quixote:      "Do you see over yonder, friend Sancho, 

              thirty or forty hulking giants?"

Sancho Panza:  "What giants?"

In Don Quixote, Miguel de Cervantes' masterpiece (1605 part I, 1615 part II) Cervantes wrote that Quixote was tilting at windmills, because he thought they were ferocious giants. This lead to the English expression: "tilting at windmills", which means: "attacking imaginary enemies" or "fighting unwinnable or futile battles". 

American Superconductor is suing its former largest customer Sinovel Wind Group Co. of Beijing in several law suits in China for alleged trade secret theft and "copyright" (I think it might be patent and copyright) infringements.American Superconductor is seeking 1.2 billion dollar in damages. 

Is American Superconductor the 21st century version of Don Quixote? 

In June 2011, American Superconductor discovered an imperfect replica of its software in a Sinovel wind turbine. Then they found the possible leak, an engineer at a subsidiary in Austria, who was sentenced to a year in prison.

American Superconductor chief exectuvie Daniel McGahn was quotes saying that they had strong evindence against Sinovel and that hundreds of emails between senior Sinovel staff members and our now incarcerated former employee were found. That these messages give a detailed account of the timetable of the crime and  show that certain senior level Sinovel employees knew that these intellectual property rights were illegally obtained.

To find trade secret thiefs can be elusive. Unless your company have the right safety procedures in place so that trade secret theft can be avoided or at least traced, courts will think you are fighting an imaginary enemy, just like Don Quixote was doing. So protect your company so that your battles will be neither unwinnable nor futile. 

Read Erin Ailworth's article for the Boston Globe here.

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Baby Tricycle Wars: Chinese Babygood Group Victorious Against US Mattel

In a China Daily article by Zhang Zhao, Babygood Group is complaining about the difficulties Chinese companies face when they try to enforce their intellectual property rights in the United States. 

Wei Yaochang, manager of Goodbaby's legal office was quoted saying: 

"Infringement in the US may be enough to cause a company to go bankrupt." 

Therefore the Babygood Group sued Mattel in China. It nearly always is preferable to sue in your own jurisdiction:  you have more expertise there than your counterpart, and courts do not discriminate upon an indigenous company. 

Timeline

• 1997: Babygood Group is a Jiangsu province that got a patent for a baby stroller with three wheels. 
• 2006: Babygood Group saw that Mattel had something similar in the United States. 
• 2007: Babygood Group found that Mattel also sold the tricycle in Chinese cities, including Beijing, Shanghai, Guangzhou and Nanjing.
• 2008: Babygood Group sued Mattel in Nanjing and won in nine trial.
• 2011: Beijing High People's Court made a final verdict in May 2011, ruling that Mattel infringed on Goodbaby's patent and must pay 1.5 million yuan ($232,950) in compensation to the patent owner.

Read the China Daily article here.

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Induced Patent Infringement Standard: How To Avoid Proving Intent And Fast Forward To Actual Knowledge

Q:"How do you want your induced patent infringement?"
A:"Willful blind, not deepfried"

Spicy vegetarian deep-fried noodle nest
Source: Veggy Monkey Eats

The U.S. Supreme Court decided Global-Tech versus SEB May 31, 2011. It gives a standard for induced patent infringement: namely willful blindness, that goes beyond recklessness and negligence.

The facts are interesting too for IP Dragon:
"Pentalpha is a Hong Kong maker of home appliances and a wholly owned subsidiary of petitioner Global-Tech Ap­pliances, Inc. In order to develop a deep fryer for Sunbeam, Pentalpha purchased an SEB fryer in Hong Kong and copied all but its cosmetic features. Because the SEB fryer bought in Hong Kong was made for sale in a foreign market, it bore no U.S. patent markings. After copying SEB’s design, Pentalpha retained an attorney to conduct a right-to-use study, but Pentalpha refrained from telling the attorney that its design was copied directly from SEB’s."

So what can be learned from these bare facts? A way for patent holders to avoid this problem of proving intent and fast forward proving actual knowledge is to use the patent numbers of the patents you own in different jurisdictions on your products. Maybe a sticker is suboptimal, because removable. Engraved in or stamped on the metal or plastic could do the trick.

Now back to the case. It was about which intent test to use in case of 35 U.S.C. §271(b): "Whoever actively induces infringement of a patent shall be liable as an infringer."

The Federal Circuit had used the deliberate indifference test.
The Supreme Court opines that the deliberate indifference test makes it possible that knowledge is found where there is just a known risk that the induced acts are infringing. Instead the Supreme Court (8 minus 1) think that some active effort by the inducer is needed to avoid knowing about the infringing nature of the activities.

In this humble author's opinion the wording "actively induces" does not correspond to "deliberate indifference", which seems a mental state. So in this respect he agrees with the outcome of the Supreme Court's decision.

What is the willful blindness test exactly:
(1) the defendant must subjectively believe that there is a high probability that a fact exists;
(2) the defendant must take deliberate actions to avoid learning of that fact.

There seems to be a continuum from no knowledge to recklessness/negligence to deliberate indifference to willful blindness to actual knowledge.

Read the Supreme Court decision here.

Eileen McDermott, whose coverage of the court deliberations is excellent, is quoting Global-Tech's counsel William Dunnegan who was proposing to use a "purposeful, culpability test". This was followed by John Roberts C.J. question of how to apply such a standard across different industries. McDermott points out that in some amici briefs it became clear that for example the semiconductor industry has 420,000 patents. McDermott quoted the reaction of John Roberts C.J. after Dunnegan said that there might be different standards per industry: "Well we're not going to adopt a special rule for the deep-fryer industry." Read McDermott's court report for Managing IP here.

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Fast Technology Transfer/IPR Infringements Slows Down China's High Speed Train

Photo: Danny Friedmann
High-speed train just got slower.
Getting a ticket even more so.

Infringed intellectual property rights can have negative influences on society. During the manufacturing process of these goods labour and environmental minimum standards, already challenged in China, can be ignored without ever being checked. Then the products of the manufacturing process can cause real safety challenges to the public.

China's high profile high-speed trains were so rapidly developed without much consideration to foreign IPR rights, see here. Now it becomes clear that not only IPR infringements were condoned, but that some safety standards seem to have been skipped altogether too, see here.

The Railways Ministry announced that the trains now need to slow down from 218 miles per hour (350 kilometers per hour) to 186 miles per hour (almost 300 kilometers per hour).

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Shake or Crush Your Hand: Huawei versus ZTE versus Huawei

Photo: Danny Friedmann
Shake Or Crush Your Hand, you choose. 

What if you are developing a product but your competitor has patented some technology needed to achieve the technical result? And at the same time you have some patents that you know you competitor likes to use? You might consider to cross-license. However, from a patent strategy point of view, excluding your competitor from some crucial technology might be the best thing to do.

Bien Perez reports in the South China Morning Post (April 30, 2011): "Huawei had also invited ZTE on many occassions to enter into cross-patent licensing negotiations, but was unsuccessful."

Then April 28, Huawei sues ZTE in Germany, France and Hungary for alleged patent infringement related to its data card and Long Term Evolution standard (candidate for 4G mobile communication standard) technologies, and trademark infringement.

April 29, ZTE counter sues Huawei for alleged patent infringement on Long Term Evolution.

"Proxy PRC Courts" in Europe and now also China

China Hearsay's Stan Abrams is not surprised that the legal fight "in a most non-harmonious fashion" between two Chinese giants took place overseas, see here.

It is interesting that Chinese competitors fight some patent and trademark issues abroad. But I think it becomes really interesting now that ZTE has sued Huawei in China. ZTE also threaten to take a series of legal actions globally to protect its IPR rights.

UPDATE:  The Hungarian site Portfolio.hu has a picture provided by Huawei that it uses to proof that ZTE is infringing its trademark. See Porfolio.hu's article Huawei files patent, trademark lawsuits against ZTE, rival rejects charges.

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Trends Counterfeit Trademarks/Infringed Patents From China: Smaller Scale, Bigger Risks

Two trends can be abstracted from the 2010 report of the Austrian Federal Finance Ministry to the National Council about the application of Council Regulation (EC) 1383/2003 of July, 22 2003, concerning customs action against goods suspected of infringing certain intellectual property rights and measures against goods found to have infringed such rights. According to the report these trends are in line with the other countries of the European Union.

Unlike in the movie
Matrix, there is no choice
between a blue or red pill.

Only blue pills.
But which one is real?

• Trend 1. From containers and trucks to postal packages via internet

The Austrian customs administration in 2010 seized 2,803 cases after it implemented the EC Counterfeiting Regulation 2004, these consisted out of 292,606 articles. This resulted in (because sometimes a consignment involves more than one person) 4,038 prosecutions. The products represent a value, if they were genuine goods, of € 6,765,057. This is much less than in 2009, when the amount was 16 million euro. So smaller amounts representing lesser value per consignment. These were ordered via the internet and send via the postal service.

• Trend 2. From counterfeit luxury goods to counterfeit daily products with lower original prices
and higher risks

Mass consumer products such as food, cosmetics and hygiene products, auto spare parts, toys and equipment, with all inherent health and safety related risks. Fake drugs were mainly lifestyle drugs such as sexual enhancers, diet pills and hair growth preparations. These trends together are quite a challenge for customs the world over. To check each and every postal package is hardly feasible. If customs in cooperation with industry can find an automised way to authenticate goods, it could decrease risks.

The report says that the EU-China customs action plan, which intensifies the contact between the respective customs, will be extended to 2012. The action plan was a pilot project and will now probably become institutionalised.
For those who can read German, read the Piracy report 2010 of the Federal finance ministry of Austria (in German): Produktpirateriebericht 2010 des Bundesministers für Finanzen (III-226 d.B.) , April 1, 2011.

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Sweet US ITC Victory Over Sucralose Patents For Chinese Manufacturers

Complainants:
Tate & Lyle Technology Limited of London, United Kingdom;
Tate & Lyle Sucralose, Inc. of Decatur, IL.

Versus

Respondents:

AIDP, Inc. of City of Industry, CA;

Beijing Forbest Chemical Co., Ltd. of China;

Beijing Forbest Trade Co., Ltd. of China;

Forbest International USA, LLC of Edison, NJ;

Changzhou Niutang Chemical Plant Co., Ltd. of China;

U.S. Niutang Chemical, Inc. of Brea, CA;

CJ America, Inc. of Los Angeles, CA;

Fortune Bridge Co. Inc. of Elmont, NY;

Garuda International, Inc. of Exeter, CA;

Gremount International Co., Ltd. of China;

Guangdong Food Industry Institute of China;

Hebei Province Chemical Industry Academe of China;

Hebei Research Institute of Chemical Industry of China;

Hebei Sukerui Science and Technology Co., Ltd. of China;

Heartland Packaging Corporation of Carmel, IN;

L&P Food Ingredient Co., Ltd. of China;

Lianyungang Natiprol (Intl’l) Co., Ltd. of China;

MTC Industries, Inc. of Edgewood, NY;

Nantong Molecular Technology Co., Ltd. of China;

Nu-Scaan Nutraceuticals, Ltd. of United Kingdom;

ProFood International, Inc. of Naperville, IL;

Ruland Chemistry Co., Ltd. of China;

Shanghai Aurisco International Trading Co. Ltd. of China;

Vivion, Inc. of San Carlos, CA;

Zhongjin Pharmaceutical (Hong Kong) Co. Ltd. of Hong Kong.

The complainants (Tate & Lyle) asked the US International Trade Commission (US ITC) to conduct a Section 337 investigation and give an exclusion order that directs Customs to stop imports that allegedly infringe their patents for sucralose, a sweetener. However, the US ITC confirmed its decision that imported sucralose from China does not infringe Tate & Lyle's patents (U.S. Patent Nos. 5,470,969; 5,034,551; 4,980,463; 5,498,709; and 7,049,435). Read more on the site of US ITC here.

So probably these patents have something that is added to the sucralose.

A certain Dr Mercola says: "Splenda (sweetener by Tate & Lyle) is a combination product. It is not synonymous with sucralose. Sucralose is the actual organic chemical coordination-compound. It is 60o times sweeter than sugar. But when you buy Splenda at the store it consists of sucralose and a bulking agent, because it is 600 times sweeter than sugar you cannot use it by itself. You would have such a small amount that you would not even be able to see it when you use it, so they have to combine it with the bulking agent. And the bulking agent they use are dextrose and maltodextrin, those are sugars, and they are taken from high fructose corn syrope." See Mercola's YouTube presentation here. Sean Croxton has a YouTube presentation called "The Truth about Splenda/Sucralose" in which he tells about the invention/discovery by two scientists who were looking for a new insecticide, see here.

Joff Wild of IAM Magazine blogged that the expected results could be devastating for Tate & Lyle, read here.

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Netac versus PNY settled out of court

Remember the Netac versus PNY case, read here? After two years of litigation, the patent infringement conflict between Shenzhen-based Netac Technology Co Ltd and Texas PNY Technologies was settled out of court. The Netac versus PNY case is seen as a milestone, because it could highlight a trend of Chinese companies suing overseas companies for the infringements of their intellectual property rights overseas.

Read the article by Jiang Jingjing of the China Daily here and .

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WorkTools: "We Won the Judgement But it Did No Good" Part II

Yesterday, Mr Mike Marks, inventor and co-founder of WorkTools explained in Part I how is it possible that although they won at court in Taiwan it really did no good. In Part II below you will find a more detailed explanation by Mr Brad I Golstein, partner of WorkTools who manages their IP.

Mr Brad I Golstein wrote:
"In this particular instance in Taiwan, the case dragged on so long that the applicable law changed before it was decided, so the court threw out the case as being moot (irrelevant) in light of the changed law. It is the strong suspicion of many that Taiwan laws are designed more to protect home industry than to protect intellectual property rights. In general, the "proof" requirements are much greater and the penalties for infringement are much less than in the United States. What is often recommended to achieve success is that the foreign company have a Taiwanese partner who is the actual party to the lawsuit (such as the company that has the official rights to manufacture the product in Taiwan)--that makes it a case of Taiwan company vs Taiwan company rather than Taiwan company vs Foreign company. Larger Taiwan companies are probably more likely to respect IP rights, and less likely to simply close up the offending shop and just open anew down the street (although this is still possible)."

"Success" in stopping Asian knock-offs is a relative term--many times that means driving the infringer underground rather than being able to> eliminate them entirely. Many times it means getting major retailers to agree to not stock the offending product rather than actually stopping the manufacture of it. And while some degree of success> might be achieved in North America and Western Europe, it is much harder in less regulated parts of the globe, such as Africa, the Middle East, Eastern Europe, etc. Heck, even mega-corporations such as Disney, Levi's, Microsoft, etc. have their hands full and cannot stop all the infringers. "

"As a bit of an elaboration, the penalties for infringement in Taiwan in the matter we were pursuing before it was dismissed were quiteminor--something like putting a notice in the local paper and a fine of$4,000 (which the government would keep, it would not go to us tocompensate for our losses!)."
Brad I Golstein WorkTools, Inc.

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WorkTools: "We Won the Judgement But it Did No Good" Part I

Yesterday I blogged about an interview on WorkTools' patent challenges in Taiwan and China, read here.

I was like Mr Stan Abrams of China Hearsay, who came up with some interesting suggestions here, very interested to know the real answer. So I asked Mr Mike Marks by email who came up with some very interesting and elaborate answers and is also referring the answer to his partner Brad Golstein, who manages WorkTools' IP for more detail:

1. How is it possible that although you won at court in Taiwan it really did no good whatsoever? Was it the enforcement of the judgement that did not work? Or did Taiwanese infringers continue under a different name?
2. Why don't you publish your Chinese and Taiwanese patents online?

Mr Mike Marks' answer:
"My recollection is that we won our case in Taiwan but the penalty was so minor that it was meaningless. We should publish ALL of our patents online, both US and International, including Taiwan and China. Thanks for the push. I have some updating to do on the website!"

"On another note, one thing we've seen from Taiwan and China are companies that pursue and receive patents on top of our patents. Example: Company-1 has a patent on a pneumatic tire. Company-2 gets a patent on a pneumatic tire that's filled with a mixture of 1/3 helium and 2/3 nitrogen. Company-2 can't use its patent without violating the patent of Company-1, but Company-2 can claim "patented". Company-2 presents its claim to retailers to make them feel comfortable buying Company-2's tire. Now Company 1 must educate retailers that Company-2 is selling a patent-infringing pneumatic tire, that the patented "improvement" does not give Company-2 any meaningful rights. In short: Company-1 can prevent Company-2 from making and selling ANY pneumatic tire. Company-2 can prevent Company-1 from making a version of pmeumatic tire."

Mike Marks
http://worktools.com/
http://inventioncity.com/

See Part II where Mr Brad Golstein, who manages WorkTools' IP, gives a more detailed explanation here.

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WorkTools Inventor's Experience With Taiwanese and Chinese Patents

Mr John Eastman of Black and White interviewed Mr Mike Marks, inventor and co-founder of WorkTools about patent infringements. WorkTools specializes in the development and licensing of patented mechanical products for consumers. The company invents products and enhances products brought to it by others.

According to Mr Marks American companies in general try to work around patent claims,
"[w]hereas companies in Asia, whether by request from a foreign company or on their own, have on occasion knocked us off very explicitly, imitating our tool to a tee."

"I don’t think that a lot of companies even bothered looking at the patent at all, they just saw the product and said oh, this is an item that is being sold and we’re going to just copy it explicitly. Maybe they were unaware of intellectual property laws. I don’t think companies are quite that bad about it today, but 10 or 12 years ago that was definitely the case.
Even though we have enforceable Taiwanese and Chinese patents issued, we have had no success in stopping any Asian companies. We even won at court in Taiwan, and it really did no good whatsoever. Perhaps it would be a little different for us if we were a Taiwanese company."

Read Mr Eastman's interview here

WorkTools is showing their US issued patents on their website, and inform that they can be
contracted to evaluate international and pending patents, see here. That is probably a good decision, transparent and can function as a deterrent. It is also good that you can see that Mr Paul Y. Feng is their outside patent council, partner of Fulwider Patton, which can have an deterrent effect.
The question is, however, why WorkTools doesn't put its Chinese and Taiwanese patents online? Mr Marks said that a lot of companies don't even bother to read patents, but I don't understand why he at least put WorkTools' Chinese and Taiwanese patents online. One can argue whether it works as a deterrent, but at least it would not harm them.

UPDATE:
Mr Mike Marks gives the answer to the question why it does not help to have won a judgement in Taiwan here.

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China's General Protecht Group Wins IPR Case in US

Li Yang of CCTV.com reports about several patent infringement disputes between US-based Leviton against Zhejiang Province-based General Protecht Group's US subsidiary General Protecht Group Inc. The lawsuits were filed April 2004 and only June 10, 2007 a US court came up with a 28 page-ruling (according to IPR.Gov.Cn) in favour of the Chinese company, "accepting the claim that its products (No. 6246558 patent right on ground fault circuit interrupters IP Dragon) are beyond the scope of Leviton's patents."

After being a defendant in the case in the US, General Protecht Group sued Leviton in 2006 before the Guangzhou Intermediate People's Court, which made a "decision of Property Preservation and Evidence Preservation in a patent infringement case between two electric companies. As a result, defendant Leviton Electric (Dongguan) Co Ltd has been prohibited from selling 50,000 products." Read more on the site of IPR.Gov.Cn here.

Li wrote that Tim Tingkang Xia, partner of Morris, Manning & Martin, LLP intellectual property group and a registered patent attorney said:“The win is certainly a triumph for Chinese businesses. In international IPR disputes, Chinese companies should learn to use the law to protect themselves.” Read more here.

According to China's Ministry of Commerce the ruling was a so called Markman Order, or a claim construction report, where the judge determines what the claims mean as a matter of law, read more at the end of this article. General Protecht spent 200,000 US dollars on patent litigation, according to Li, so it is interesting to know whether it demanded and/or received damages.

Another Sino-American patent infringement lawsuit in the US is still pending. Read 'Shenzhen Netac Sues Texas PTY Technologies for Patent Infringement' here. I hope to get more information about this case soon.

It is great that these Chinese companies realise the value of protecting and enforcing their patents overseas. This might be a preview of things to come and can only be advantageous for the promotion of a culture of respect for IP within China, in a not too distant future.

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SIPO Deputy Director Does Not Want to Discuss How To Enforce Patent Infringement

SIPO deputy director Zhang Qin was interviewed by Emma Barraclough of Managing Intellectual Property in Geneva.

Zhang said: "[T]he counterfeiting and piracy of copyright and trade marks is illegal and should be punished. We have to be trustable. We want a good market order system – that's the way to develop the economy."

But patents are a bit different, according to Zhang. He gives the argument that developed countries have more money, better education and they start R&D earlier, so they pre-empt this opportunity for developing countries.

In Zhang's words: "So patent infringement can't be viewed in the same way as stealing a car. Technology is an objective thing – there is a better way to do something. Once somebody else has applied for a patent, your effort becomes illegal."

Another argument Zhang makes for the distinction between the infringement of trademark rights and copyrights on the one hand and patent rights on the other is that in China some areas of technology, such as business methods, are rejected as unpatentable. So their alleged infringement not relevant.

Zhang wants to balance the rights of foreign companies, Chinese companies and other people in a fair way. He wants to discuss how to balance interests rather than how to enforce patent infringements.

Read Barraclough's interview about this and Chinese companies preference for utility models and industrial designs instead of invention patents, and the growth in Chinese international patents here.

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LG Electronics Brings Patent Infringement Lawsuit Against Thomson TCL

Korea Newswire reports about LG Electronics who presented a lawsuit against Thomson TCL Electronics (TTE), the French-Chinese TV maker, and its Hong Kong based holding company TCL Multimedia Technology Holdings for the infringement of four of its patents. LG Electronics filed the lawsuit at the US District Court, Eastern District of Texas and demands an injunction and damages. Consultations, since 2005, between LG Electronics and TTE did not resolve the problem.

Read Korea Newswire's story here.

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Exemplary Patent Enforcement Case At National Hardware Show Las Vegas

Lisa Eckelbecker of the Worcester Telegram & Gazette wrote a very informative article about the way Diamond Machining Technology (DMT), Inc. of Marlboro, Massachusetts, USA, is enforcing its intellectual property rights. DMT's approach is a good example of a small to medium sized business giving tit for tat at fairs and exhibitions and showing teeth to potential infringers.

Eckelbecker wrote:

"Events started when Mr. Brandon, who purchased DMT in 2005, arrived at the National Hardware Show in Las Vegas in May. DMT was an exhibitor, and Mr. Brandon said he decided to visit the exhibit hall before the doors opened. During a walk through the China pavillion he came upon Jing Yin Lixin [Diamond Tools Factory]’s booth."

After DMT got the evidence that Jing Yin Lixin, headquartered near Shanghai, "gave price quotations for manufacture and delivery in the United States of 1,000 and 5,000 pieces for Jing Yin Lixin’s copies of both of DMT’s Mini-Sharp and Diafold products lawyers were contacted, who drafted a complaint and delivered it to Jing Yin Lixin on the floor of the trade show."

"Jing Yin Lixin put up no legal defense in the case against DMT, according to court filings. It failed to obtain a lawyer, as required in federal cases, and instead submitted a letter arguing that it knew nothing about a patent and never made or sold the tools, even though it pictured the tools on a brochure."

In November Judge Kent J. Dawson of the U.S. District of Nevada ruled that Jing Yin Lixin, infringed on a DMT patent and ordered an injunction and to pay DMT’s legal fees.

Read Eckelbecker's article here.

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