August 21, 2008

 

Lawsuit against Global Bio-Chem highlights importance of patents
   

 

If there was one thing that the recent lawsuit against Global Bio-Chem has taught the executives at Global Bio-Chem, it was the importance of patents and intellectual property rights.

 

Global Bio-Chem who now accounts for 30 percent of the world's lysine sales and 70 percent in China, was sued by Ajinomoto Heartland LLC and Ajinomoto Co Inc, affiliates of Ajinomoto Animal Nutrition in 2006 for infringing two of Ajinmoto's registered patents in the US when the company exported lysine to the US market. 

 

Both were affiliates of the Ajinomoto group, a Japan-based global leader of feed-grade amino acid manufacturer.

 

The case was filed with US International Trade Commission and pertained to Section 337 of US law which involved infringements of US patents and trademarks as well as other intellectual property issues.

 

USITC can issue cease and desist or exclusion orders. The accused party will lose the right to export the related products to the US if it does not respond to the suit or loses the judgment.

 

Global Bio-Chem responded actively, assembling a team of lawyers to fight the case, thus becoming the exception rather than the rule. As Chinese exports to the US rise, more were being hauled to court for violating Section 337.

 

Most Chinese companies, when faced with such a lawsuit, simply forego the US market as they do not have the financial muscle to last through the drawn out fight. Section 337 cases typically took about a year. In Global Bio-Chem's case, it took two.

 

The US market earned US$9 million for Global Bio-Chem, a small portion compared to what it earns elsewhere. However, the company saw a future in the US market, company executives said.

 

The company won an initial judgment recently, becoming the first Chinese company to win a case regarding section 337.

 

The judge ruled that there were insufficient details in Ajinomoto's patents.

 

According to the US patents law, the patent specification must 'describe' the claimed invention in sufficient detail to 'teach others how to make and use the invention'. If a claim includes devices, compositions, processes that are not described or are not enabled by the specification, the claim is invalid.

 

Ajinomoto has appealed against the decision and a final judgement will be handed out in December 1.

 

Wang Dehui, general engineer of the Dacheng Group, noted that not until the company got involved in the legal battle did it realise the importance of patents.

 

Since then, the company has  established a set of strict IPR protection regulations within the group and formed a panel of IPR specialists to strengthen management regarding commercial confidentiality and patents, Wang said.

 

Liu Limin, vice director of Changchun Intellectual Property Rights Bureau, said fighting Section 337 can be long and difficult and small Chinese companies should get a better understanding of the section 337 and wield the power of the business association to raise a defense as an active response to the accusation.

 

Calling Dacheng's victory a great example for other Chinese companies, Liu said it showed how international law can be successfully applied to protect export businesses if handled well.
 

More people with expertise in IPR and international laws should be welcomed and cultivated in Chinese companies if they intend to export, he added.

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