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Best Buy, Wal-Mart named in patent dispute

(China Daily/Agencies)
Updated: 2009-07-27 14:09

Best Buy Co, Wal-Mart Stores Inc and other companies were sued over dashboard mounts for navigation devices in a rare case of a Chinese company seeking to enforce patent rights in a US court.

Changzhou Asian Endergonic Electronic Technology Co, based in Changzhou, claims the retailers are infringing its patent on a design for the dashboard mounts by selling products made by a competitor. The patent was issued in March.

The Chinese company wants cash and a court order to prevent further use of the design.

The closely held company intends to build a market in the United States and filed the complaint to deal with "the knockoff", said Chad Nydegger, a lawyer for Changzhou Asian.

A shopping cart sits outside a Wal-Mart Supercenter store in Rogers, Arkansas. A Chinese company is suing US retail giants including Wal-Mart and Best Buy, accusing them of infringing its patent on a design for dashboard mounts.[Agencies]

The company also is suing the manufacturer in China, accusing it of infringing two Chinese patents, he said.

The complaint, filed July 2 in US District Court in Texarkana, Texas, reflects the rising use of the US patent system by Chinese companies.

US patent applications by residents of China surged 12-fold between fiscal years 2000 and 2008, according to the US Patent and Trademark Office.

"The Chinese are becoming sophisticated enough to take advantage of the patent system in the United States," said Brian Nester, a lawyer with Fish & Richardson in Washington, DC, who often represents South Korean companies in US patent fights.

"You will see more Chinese companies filing suit in the United States," Nester said.

Michelle Bradford, a spokesperson for Wal-Mart, said the company had not been served with the complaint, and that the company had no comment.

Kelly Groeler, a spokesperson for Best Buy, did not return messages seeking comment on the suit.

First case

Nester, the US lawyer, said the case might be the first time a Chinese company has sued in the United States over a patent obtained by a Chinese resident.

Lenovo Group Ltd, China's biggest maker of personal computers, has sued companies over patents it acquired when it bought International Business Machine Corp's PC division in 2005.

Nydegger, of Workman Nydegger in Salt Lake City, said Changzhou Asian, which makes Sianbag GPS mounts, lost a bidding war to a company, which he didn't name, that makes the Nav-Mat mounts sold by the retailers.

He said his client is willing to negotiate with the US stores.

"They were bidding against this other company that has copied their design," he said. "Their goal is to capture US market share."

Nydegger said his client also predicts there will be more patent-infringement lawsuits by Chinese companies in the US.

First-world country

"The Chinese government is taking steps to assist companies in enforcing their patent rights both inside China and elsewhere," Nydegger said.

Related readings: More detail in patent law aids in enforcement  Patent protection helps companies going global New China patent law is unveiled  China moves up in int'l patent application rating

"My client's view is China is starting to emerge as a first-world country. There's been a significant influx of technology, and they are starting to make improvements. They are becoming innovators, not just copiers," Nydegger said.

China's applications for industrial patents rose 22.5 percent to more than 110,000 last year, according to Lou Qinjian, China's vice-minister of Industry and Information Technology.

Chinese mainland residents filed 5,129 US patent applications in fiscal 2008, according to preliminary patent office figures.

That makes it eighth in the number of filings by residents of foreign countries, behind Japan, Germany, South Korea, China's Taiwan province, Canada, the United Kingdom and France.

The lawsuit over dashboard mounts might be the case of a Chinese company "dipping a toe in the water" to learn how the US legal system deals with intellectual property issues, said lawyer Robert Krupka of Kirkland & Ellis in Los Angeles, who has represented Japanese companies in US courts.

A 'licensing play'

"They're very carefully picking and choosing their battles," Krupka said.

"This is a licensing play, not a real desire to go to court," he said.

Krupka pointed to both the location of the court where the suit was filed and the types of companies that were sued.

Retailers are frequent targets of patent-infringement complaints over products sold in their stores, he said.

Other companies named in the complaint include Target Corp, Office Depot Inc, Radio Shack Corp, Staples Inc and TomTom NV.

Staples spokesman Owen Davis and Office Depot spokesman Brian Levine said their companies do not comment on pending litigation.

An e-mailed response from Radio Shack's media relations department said the company doesn't comment on pending litigation, either.

Taco Titulaer, a spokesperson for Amsterdam-based TomTom, did not return messages seeking a comment.

Multiple lawsuits

Target spokesperson Joshua Thomas said in an e-mail that the company has "yet to be served with a lawsuit, so it would be inappropriate for us to provide any comment".

Minnesota-based Best Buy, the world's biggest electronics retailer, has been named in nine patent-infringement suits this year.

Minnesota-based Target, the second-biggest US discount retailer, has been sued eight times over patents in 2009.

Arkansas-based Wal-Mart, the world's biggest retailer, has been sued five times.

Changzhou Asian filed the complaint in Texarkana, Texas, part of the Eastern District of Texas, the most popular jurisdiction for patent-infringement litigation.

There were 322 suits filed there in the year ended Sept 30, or 11 percent of all new patent suits in the United States, according to the US Administrative Office of the Courts.

Patent owners have won 77 percent of trials in the district's court in Marshall, Texas, compared with a 59 percent win rate nationwide, said Greg Upchurch, director of research for St. Louis-based LegalMetric Inc, which compiles litigation data for law firms and companies.

The Changzhou Asian patent, with two Chinese residents listed as inventors, is for a unique, non-functional design and thus has a shorter term of protection than a patent on an invention.