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issue: August 2007 APPLIANCE Magazine

Appliance Line
Piracy or Patent Infringement

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Tim Somheil, Editor

Intellectual property rights violations hurt OEMs everywhere, but distinguishing patent infringement from product piracy is never easy.

Tim Somheil, Editor

In recent months, the U.S. Chamber of Commerce Coalition Against Counterfeiting and Piracy (CACP) proposed a new agenda. The July issue of APPLIANCE quoted a response from John Engler, president of the National Association of Manufacturers: "The greatest advantage of U.S. manufacturers in international trade is the creative genius of our people, and we’re not going to stand by and watch as this is ripped off by piracy crooks."

No business should have to stand by and let the fruit of its labors be stolen away, in the United States or anywhere else. It’s not right, and it may compromise consumer safety.

Consumers themselves are more aware of the problem of counterfeit products. The recent discovery of toxic substances in Chinese-made off-brand toothpaste was alarming; then came the news that toxin-containing counterfeits with well-known brand names, Sensodyne and Colgate, were found on retail shelves in Europe and North America.

Consumers do have avenues for reporting suspected counterfeits. Electro-Federation Canada, the industry group that encompasses the Canadian Appliance Manufacturers Association, offers an unsafe/counterfeit product incident report on its Web site, www.electrofed.com. U.S. consumers can go to CACP’s site, www.thetruecosts.org, to file a report. But relying on the buying public to report counterfeit products is a poor option. It means the counterfeit products are already in the hands of consumers, where they can do the most damage.

A better way to cut down on the trade of counterfeit goods is to educate the importers, distributors, and retailers, most of whom do want to keep counterfeits out. The CACP offers a free "No Trade in Fakes Supply Chain Tool Kit." It documents strategies that small and large companies can use to protect their supply chains from counterfeiters.

Manufacturers uncover counterfeiting of their own products, and often it comes to light when manufacturer and counterfeiter cross paths at industry trade shows.

Outdoor power equipment maker Solo, Inc. (Newport News, VA, U.S.) has been there, battling with China’s ZheJiang Shixia Sprayer Co., Ltd., over "a list" of trademark infractions. "We…have had repeated communications and confrontations with ZheJiang Shixia over the last several years, particularly regarding our popular Model 425 professional backpack sprayer," says Solo president David Longfield.

Communication failed to solve the issue again, when ZheJiang Shixia set up an exhibit at the 2007 National Hardware Show. Solo asked ZheJiang Shixia to remove sprayers that it felt violated Solo trademarks but met with refusal. Solo’s law firm called for help from U.S. Department of Homeland Security Immigration and Customs Enforcement. Department agents were in the ZheJiang Shixia booth for nearly two hours—and left with the disputed sprayers.

In recent weeks, microcontroller supplier Microchip Technology Inc. (Chandler, AZ, U.S.) filed a copyright infringement lawsuit in China against China’s Shanghai Haier Integrated Circuit Co., Ltd. (SHIC). Microchip alleges SHIC made unauthorized copies of microcode embedded in Microchip’s proprietary PIC16CXXX microcontrollers, as well as the microcontrollers’ datasheets. Both the datasheets and the microcode are copyright-protected in the U.S. and in China. SHIC called the accusations a "distortion" and said its MCU "is not completely compatible with Microchip’s."

The real issue is: were microcode and datasheets copied, as alleged? If so, it should be judged a copyright violation. If not, it’s not.

I’m sure the case is far less clear-cut. Still, in most infringement cases, the design differentiation or patent applicability can’t rely on a red flag as significant as identical code.

Korea’s LG Electronics is taking legal action on a number of technology fronts. The company’s international portfolio includes thousands of patents related to plasma display panels (PDPs), DVDs, and computers. In one case, LG has been embroiled in legal wrangling over PDP patents with Hitachi America Ltd., Hitachi Ltd., and Fujitsu Hitachi Plasma Display Ltd. since 2005. LG characterized the case as "…a result of a difference of opinion over the proprietary nature of each company’s PDP technologies."

Such differences of opinion are often best resolved through licensing agreements. LG recently settled lawsuits against Taiwanese computer makers Compal Electronics and First International Computer. LG had sued the companies for infringement of its patents on Peripheral Component Interconnection (PCI) technology, which is used in most computers. LG already has licensing agreements with 10 computer makers and has a broad-based technology licensing agreement with Intel Corp. It is pursuing agreements with 30 other computer makers.

Just a few weeks ago, Ericsson renewed a worldwide patent cross-license agreement with Samsung, and both companies agreed to dismiss all pending patent infringement lawsuits between them.

Licensing agreements can’t be the answer to all patent infringement lawsuits, but they come with broad-based benefits. They create renewed levels of cooperation instead of corporate antagonism, and they let the parties involved get back to their real business of making products for consumers. Importantly, a cooperative resolution helps distinguish respectable industry members from the piracy crooks.


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