Chinese group sues Vale Inco

A large Chinese battery manufacturer is suing two units of Vale, one of the world's largest mining companies, in a patent infringement case that highlights the growing number of Chinese companies using local courts to protect their interests.

Corun, a Shanghai-listed nickel processor and battery maker with close ties to the Chinese government, lodged a case with an intermediary court in its local jurisdiction in Hunan Province last month claiming nearly Rmb90m ($13m) in damages from two Chinese subsidiaries of Vale Inco, the wholly owned Canadian subsidiary of Brazil-based Vale.

Industry insiders said it was widely known that Vale Inco was planning to sell the two joint-venture subsidiaries, in which it holds majority stakes of more than 70 per cent, and that Corun had expressed interest in purchasing one or both of them.

The patent infringement case against Inco Advanced Technology Materials (Dalian) and Inco Advanced Technology Materials (Shenyang) is almost certain to complicate Vale Inco's efforts to sell them and may lower their value to potential bidders.

Corun alleges the subsidiaries infringed a Chinese patent it holds for a nickel foam process. Nickel foam is used in making batteries.

Intellectual property lawyers say the likelihood of Vale Inco receiving a fair trial in a remote province like Hunan is slim, especially when the case involves such a large local company with excellent political connections.

Zhong Faping, Corun's chairman, is a delegate to the National People's Congress, the country's parliament, and the company's website contains pictures of senior political leaders at Corun facilities.

"The Chinese legal system has improved greatly in recent years, but problems remain with local protectionism and political influence," said Douglas Clark, a partner with Lovells law firm in Shanghai. "The most independent courts are generally found in the large economically developed cities, and generally this is where foreign companies prefer to litigate." The Chinese government is in the middle of a very visible crackdown on intellectual property rights piracy, which has resultd in high-profile awards to foreign companies.

A court in the north-eastern city of Shenyang said on Wednesday it had ruled that a local company must pay Apple Rmb400,000 in compensation for infringing on the US company's trademark.

Corun and Vale Inco both refused to comment on Wednesday.