Chinese companies to strike back against foreign IPR disputes

In response to multinationals' accusations of intellectual property right infringement, increasing numbers of Chinese companies are choosing to fight back.

As reported by China Business News recently, a key patent of Microchip Technology Inc, an American chip maker, has been declared invalid by the Patent Reexamination Board of the State Intellectual Property Office (SIPO). The invalidation requester was Shanghai Haier Integrated Circuit Co, Ltd. However, it was the company's countermeasure to Microchip's initial attack.

The case can be traced back to more than one year ago, when Microchip filed the first lawsuit last July, accusing Haier of infringing the copyright of its patented microcode and the data sheet of its microcontroller unit (MCU).

"Microchip has devoted huge resources to developing the data manual and the microcode, and we have solid evidence to prove Shanghai Haier has violated our copyrights," Xinhua News Agency quoted Yang Jinzhu, vice-president of Microchip Asia Pacific, as saying.

Haier depicted the accusation as a "distortion which Haier cannot accept". "Haier's MCU is not completely compatible with Microchip's. Our products have more functions and better resistance to interference," Haier declared on its website.

The case evolved as Microchip filed a second lawsuit shortly thereafter seeking to invalidate a series of Haier's patents.

"The invalidation requests were totally indiscriminate," Chen Shu, marketing manager of Shanghai Haier, tells China Business Weekly.

"Obviously, Microchip's lawsuit is a whole package," says Zhu Haiyan, a lawyer with Jones Day, "first, copyright, then, patent".

Haier struck back with effort to invalidate two Microchip's patents. "In contrast to Microchip's, our requests are based on facts," says Chen.

As it turned out, no administrative or legal decision was returned regarding Microchip requests. On the contrary, the Reexamination Board invalidated one of Microchip's patents, an instruction set for MCU. As the patent is used in Microchip's medium and high-end products, the administrative decision would produce a considerable impact on the company if it comes into effect, a semiconductor professional was quoted by China Business News as saying.

Information on the Patent Reexamination Board's website shows the decision was made on April 30, 2008, long before media reports.

Long before over

However, Zhu told China Business Weekly the decision is not necessarily the final one. Microchip has the right to appeal to a higher court as late as three months after it is notified.

Both Haier and the Patent Reexamination Board said during interview that they "have no idea" whether Microchip has or will appeal. Microchip declined to comment.

Though Chen called the approval of the invalidation request "turning the opponent's weapon around to strike him", it doesn't mean the end of the dispute. SIPO refused to comment on the case, except to say, "it is not yet over".

A decision on Microchip's other accusation of copyright infringement is still pending. "Both sides are gathering and handing in evidences now," Chen says.

Competitive strategy?

In response to the accusation of IPR infringement, striking back in order to invalidate the patent has become a common practice for enterprises, according to Zhu.

As soon as Microchip filed the first lawsuit, Haier attempted to refute the charge as "a distortion aimed to restrain Haier and intimidate its clients". Though the assertion "restrain" cannot be confirmed, the two companies are indeed competing fiercely. Microchip is the world leader in 8-bit microcontrollers, and claims it has the biggest MCU market share in China, while Haier alleges it is expanding rapidly in China's MCU market.

MCU are used in a wide range of industries and applications, such as consumer electronics, automobiles, telecommunications and industrial automation.

According to Zhu, an accusation of IPR infringement can be regarded as a competitive strategy. But she added that it is an enterprise's legal right through which intellectual achievements can be protected.