After the latest in a series of battles with its Chinese competitor, Schneider Electric has spoken out against a recent lower-court ruling - "it's undeserved", the company's president says.

It's the first time anyone from the company has spoken publicly since Schneider was dragged into an intellectual property rights (IPR) dispute with Chinese competitor Chint Group.

Wenzhou-based Chint filed a lawsuit against Schneider Electric Low Voltage Tianjin (SELV) in Wenzhou Intermediate Court in July, 2006, claiming Schneider's C65 series infringed on its utility patent.

After more than a year of testimony and deliberations, the court in September ruled that Schneider's C65 series infringes on Chint's patent and ordered the company to pay 330 million yuan in compensation.

The news immediately made headlines for Chint as a Chinese company hailed for using IPR lawsuits to protect its innovative technology.

It was seen as a landmark because in past IPR lawsuits involving foreign companies, domestic firms were usually the defendants.

Schneider Electric, which kept a low profile before the ruling, last month talked to the media to publicly defend itself.

"It's totally an unfair ruling," says Guy Dufraisse, president of Schneider Electric China. He also contends the amount of compensation awarded by the court is "baseless".

"The truth is Schneider Electric invented the C60 circuit beaker 20 years ago. In 1996, we registered an improvement invention patent for the C60 series in France, clearly showing the fast-closing contact mechanism (FCCM) technology in the technical drawings and then filed it in China with patent priority date of December 23, 1996," says Dufraisse.

The FCCM, a tiny plastic flake in the circuit breaker that Schneider says is "not the core technology in the breaker", is nonetheless at the epicenter of the conflict.

"Among thousands of the parts in the C65 circuit breaker, we did not add a written description for the FCCM on the technical drawings when we applied for the patent, because it's really a small - not key - part in the breaker," an insider of Schneider Electric tells China Business Weekly.

"But how did China's IPR authority approve such a junk patent (from Chint) that lacks its own innovation?" he asks.

"We came to know that Chint applied for a patent for the familiar technology of our C65 in November 1997. However, we never expected Chint would some day bring us to court," says Dufraisse.

"Especially at this time, Chint's patent registered 10 years ago just lost its legal force, yet it filed a lawsuit and asked for such huge compensation," he says.

"The lawsuit shocks me. During 20 years of cooperation with Schneider, the technology transfer from the C45 series to the C60 series was really a hard negotiation," says Li Shan, vice-chairman of the board in SELV.

In 1987, Schneider brought the C45 technology to Tianjin Merlin Gerin Co Ltd, its first joint venture in China, replacing the common fuse and improving safety and quality standards across the nation. It has been recognized as a milestone.

Knowing that the upgraded C60 series came off the production line in Europe in 1993, SELV in 1995 requested that Schneider import the new technology to replace the successful C45 series.

"However, it wasn't until 1999 that we and Schneider finally reached an agreement to transfer the C60 technology to SELV for what we call the C65 series circuit breaker in China," says Li.

Even before 1997, more than 30 projects in China used Schneider's C60 breakers sold by dealerships.

"This shows us that Schneider, a truly innovative company, is the inventor of the original C60 circuit breaker series with its FCCM, before Chint used Schneider's design to file their utility model and produce their own circuit breaker series," says Li.

"So, I can say Chint's utility patent is actually a preemptive move to register Schneider's C60."

The case in Wenzhou was not the first between Chint and Schneider.

"We have won lawsuits against Chint in Italy in 2006 and in Germany in 2007. Now we are also suing Chint in France over infringement on our C60," says Dufraisse.

Also "the amount of compensation is too big, almost 10 to 20 times the size of a similar infringement lawsuit in Europe and the US", he adds.

Some observers also wonder whether the Wenzhou Intermediate Court should have ruled on the case all.

According to China's legal framework, any lawsuit over 50 million yuan should be heard by a high court, in this case the Zhejiang People's High Court, not an intermediate court.

After Chint asked for compensation of 330 million yuan, the Wenzhou Intermediate Court should have handed the lawsuit to the high court, legal observers say.

Some experts worry if plaintiffs follow Chint's lead, both the law and judiciary will be brought into question.

"Should the ruling from the Wenzhou Intermediate Court be upheld, the whole IPR environment in China will be compromised because it would encourage more owners of junk patents to claim huge amounts of money from the true inventors of leading technologies," says Dufraisse.

"This will slow the transfer of technology to China, limit innovation and development of new technologies by Chinese companies and impact overall foreign and local investment in China, hurting all innovation-based companies throughout the world."

(China Daily 12/15/2007 page9)

2013-07-17