Chinese Battery Manufacturers Win Patent Infringement Lawsuit

Joseph Lopez

Thursday, June 05, 2008

A U.S. court's decision to shoot down the patent infringement claims of a U.S. battery maker has ended a lengthy case against Chinese battery manufacturers and marks the first victory of Chinese enterprises in similar trade disputes.

When it comes to companies that are based in China, the last thing they need is a lawsuit in the United States. China has a reputation for producing very similar products derived from companies in other countries, especially the U.S. Because of this, they rarely win legal battles under patent infringement claims.
So when the Chinese Battery Industry Association (BIA) announced on May 10th that its seven major members had won a five-year legal battle against U.S.-based Energizer and its subsidiary Eveready, it made headlines in the Chinese media.

Since Chinese companies have been the most frequent targets of U.S. trade complaints, the verdict here is seen as a victory, not only for battery makers, but for many other businesses. These types of lawsuits can result in a blanket ban on Chinese exports of a particular product to the United States.
Five years ago, the second largest battery maker in the U.S., Energizer, filed a complaint with the International Trade Commission (ITC) citing Section 337 of the U.S. 1930 Tariff Act.

Energizer wanted the ITC to issue a cease-and-desist order and bar 28 foreign companies from exporting and selling household-size mercury-free alkaline batteries in the United States, claiming that batteries from China and several other countries had infringed on its mercury-free alkaline battery patent.

In response, Wang Jianhao, general manager of Zhongyin (Ningbo) Battery Co. Ltd., dismissed Energizer's claim.

"We had the technology to produce mercury-free alkaline batteries back in 1993," he said. "The Hong Kong-based Jinshan Group, which owns my company, was able to produce alkaline batteries three years before Energizer had begun to apply for patents.'

The mercury-free compound for the batteries is like wheels for a car, and everyone knows that a car needs four wheels, said Wang.

"We saw this technology as common knowledge, rather than an invention belonging to a single company," an unidentified BIA official told the English newspaper China Daily.

"In comparison with other trade measures, a Section 337 investigation could have more severe consequences since similar batteries made by all Chinese companies would never be allowed to enter the U.S. market," said Wang of the BIA.

In the end, the Chinese battery companies had no choice but to go to court. However, since China is short of legal professionals who are familiar with both the Chinese and American legal systems, Zhongyin and the rest of the companies had to hire U.S. lawyers at a staggering rate.

In June 2004, one year after Energizer filed, the ITC issued a preliminary ruling that nine Chinese battery makers had infringed the legitimate patent of Energizer. The agency issued a ban on imports of mercury-free alkaline batteries.

The result ended up in a compromise proposed by Energizer involving a 1 million dollar settlement along with a 3 cent royalty fee for every battery the Chinese companies would sell in the U.S. market.

"It was unacceptable and unfair. Our profit on exports was just about one cent per battery. The terms were tantamount to asking us to leave the U.S. market," Wang said.

Four months later, China began to get the upper hand surprisingly. The ITC had ended its investigation and ruled that Energizer's patent was invalid because it was "indefinite as a matter of law."

In response, Energizer appealed to the ITC’s ruling six days later. The ITC ended up holding its original judgment that declared Energizers patent to be invalid. Energizer then appealed to the court one more time before being voted out 2-1, dismissing Energizer’s second appeal. Since the court only allows a plaintiff to appeal twice, Energizer had lost its lawsuit.

The U.S. court's decision to deny the patent infringement claims of Energizer ended a lengthy case against Chinese battery manufacturers and marks the first victory of Chinese enterprises in trade disputes. This was considered to be a huge turning point for the Chinese battery industry.

[Chinaview.cn]

Chinese Battery Manufacturers Win Patent Infringement Lawsuit

Chinese Battery Manufacturers Win Patent Infringement Lawsuit

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