Patent disputes in the US and European Union
Though Shenzhen-based building materials company Yekalon Industry Inc has prevailed in a patent dispute after spending more than 10 million yuan on costs, it still faces litigation from its foreign rivals.
The latest suit was filed in Germany last year by Unilin, a subsidiary of the US-listed Mohawk located in Belgium, charging Yekelon with patent infringement at a world fair.
The case centers around a glueless locking technology for laminate and wood flooring. Unilin has owned patents since 1996 for the method and shared the market with another European company Valinge.
Yekalon invented a new locking method in 2006 that connects flooring by vertically tapping in planks instead of the established technique of angling and snapping horizontally, according to He Yixin, chairman of Yekalon.
He is determined to defend the company's product, insisting "our locking technology is completely self-developed".
"It works differently than those of Unilin," he said. "Yekalon has applied for international patents for the invention under the Patent Cooperation Treaty and will soon complete the process."
It is the second big clash between Yekalon and Unilin.
In July 2005, 18 Chinese flooring exporters including Yekalon were part of a Section 337 investigation by the US International Trade Commission after a patent infringement claim was filed by Unilin and its subsidiaries.
Yekalon was the only company in the group cleared by the US commission, which found its locking technology did not infringe the patent claims asserted.
Other Chinese companies found to be using Unilin's technology were ordered to pay $100,000 to $120,000 and 65 cents per cubic meter to the patent owner or their flooring panels would be banned from the US market.
"Even though we have applied for the international patents, it does not mean we will always be safe because there are various risks from competitors," He said.
Unilin and Valinge are reportedly joining forces to initiate proceedings against Yekalon worldwide.
"Our competitors are engaging in a war of attrition," He said, adding that it is becoming more difficult for Chinese companies to afford the cost of litigation.
"Actually, Chinese companies should have intellectual property strategies before entering international markets," said Wang Qian, a senior agent responsible for overseas trademark registrations at Gangxing Corporate Advisory Ltd.
"Most foreign companies apply for the patents first and then began to sell their products while many Chinese companies do the opposite," Wang said. "They will possibly be hindered by some large international competitors."
Jose Julian Izquierdo Peris, head of special cooperation programs at a European Union agency responsible for registering trademarks and designs, agreed that Chinese companies should strengthen intellectual property protection in international markets.
Peris said that only a few Chinese companies have applied for patent protection in Europe.
Of the 694,977 trademarks that were registered at the EU agency from 1996 to 2008, Chinese applicants accounted for less than 2 percent, according to Peris.
"This is an unreasonable situation. Compared with the size of China's economy, the number of the patent applications and trademark registrations is too small," he said.
Ma Weiye, director of the Patent Management Division at China's State Intellectual Property Office, said international patent application and maintenance fees could be one of the reasons.
Ma said the cost of applications is so high in foreign countries that even some large companies cannot afford it.
China's central government has established a special fund to aid Chinese applicants in their international applications.