Patent Infringement Disputes in the 1 billion of Claims-The Impact of Patents on Corporate IPOs Not to be Underestimated

On March 4 this year, Jiangsu Tongling Technology Co., Ltd. v. Bull Group's patent infringement dispute was heard in Nanjing Intermediate People's Court. The plaintiff Tongling Company claimed a compensation amount of nearly 1 billion yuan, and its high compensation request aroused widespread attention. The amount of 1 billion yuan is almost the net profit of Bull Group for a whole year. Bull Group has a high market share in the domestic socket industry, and Tongling Company is an export-oriented export company that has won many US patent lawsuits and has a strong sense of patent protection. The time point of the prosecution of the case also caused media speculation. In October last year, Bull Group disclosed its prospectus and planned to publicly issue no more than 60 million shares and raise 4.887 billion billion yuan. The patent infringement lawsuit suffered by Bull Group at the critical moment of IPO may have a certain impact on its listing process.

According to the relevant investigation of the State Intellectual Property Office, 49% of the intellectual property issues of IPO companies involve patents, especially those listed on the Science and Technology Innovation Edition and the Growth Enterprise Market. Due to their development orientation, high-tech, growth-oriented and other directions, The quantity and quality of patents are considered to be important measures of listing success. In previous IPO cases, some companies have stopped IPOs due to patent issues and lost financing opportunities.

1. patent ownership is unclear

Jilin West Point Pharmaceutical Technology Development Co., Ltd. prepared for IPO in 2012. Its prospectus shows that West Point Pharmaceutical intends to be listed on the Shanghai Stock Exchange through A shares and plans to issue no more than 18.05 million shares. During the reporting period, its core product "can be the same" there is the use of other people's patent rights. There is a complicated patent licensing relationship between West Point Pharmaceutical and Jiangsu Wante Pharmaceutical Co., Ltd. and other enterprises. If West Point Pharmaceutical does not obtain a patent license and no longer enjoys the right to use the patent, it may bring great risks to the company's production and operation.

The reasons for the rejection of West Point Pharmaceutical involve many aspects such as commercial bribery prevention and distribution model. The issue of patent authorization has been repeatedly raised by the relevant regulatory authorities. For innovative enterprises, their intellectual property rights and other intangible assets should be sorted out before listing, and the ownership relationship of core patents should be clarified.

The other two situations where the patent ownership is unknown are: when the 1. company is established, the promoter or shareholder contributes capital with the patent right or the company assigns the patent right of others, but has not completed the patent change registration procedures, then the change registration procedures should be completed as soon as possible and the patent right certificate should be obtained; 2. patents may involve job inventions and creations, for example, the patent contributed by shareholders or the patent assigned to others may belong to job inventions and creations, the funder, transferor and the original unit shall be required to sign a confirmation letter on the attribution of the patent right, and the funder and transferor shall be required to make relevant written commitments.

2. patent disputes cannot be effectively handled

Guangzhou Fangbang Electronics Co., Ltd. plans to be listed on the Growth Enterprise Market in 2018 and plans to raise 0.433 billion yuan. The company's main business is to develop, produce and sell electronic film material products. Its prospectus disclosed that Fangbang Electronics developed electromagnetic shielding film in 2000 and successfully developed electromagnetic shielding film products with patent rights in 2012. In 2017, Fangbang Electronics was sued for patent infringement by rival Japan Tuozida. The patent involved was "shielding film for printed wiring boards". The total amount of compensation for infringement damages and reasonable expenses was 92.72 million yuan, while Fangbang Electronics' non-net profit in the first half of 2017 was only 37.47 million yuan. Therefore, relevant analysis believes that Fangbang Electronics' profitability may be an important reason for the rejection of its IPO. In addition to business aspects, litigation disputes related to core patents are also a stumbling block to its listing.

The "Administrative Measures for the Initial Public Offering and Listing of Stocks" puts forward strict requirements on enterprises in terms of "standardized operation", "finance and accounting", etc. The issuer does not have major debt repayment risks, and there are no guarantees, litigation and arbitration that affect continuous operations. Such as major contingencies, patent litigation often has a large amount of litigation, and the final amount of compensation is not clear, which brings great debt repayment risks to the issuer. For patent litigation that has already arisen, both parties can negotiate or invite a third party to participate in mediation to reach a settlement with the prosecutor and reach a withdrawal plan. If the prosecutor does not withdraw the lawsuit, it needs to be argued whether the lawsuit will have a significant adverse impact on the company. It can be argued through legal professional institutions that the possibility of patent infringement is small, or that even if the infringement is finally determined, the amount of compensation will not have a greater impact on the company's financial situation, or that the patent dispute only involves some of the company's secondary products, which has no substantial impact on the company's production and operation.

Inaccurate disclosure of 3. patent information

In January 2010, the China Securities Regulatory Commission's GEM Issuance Review Committee approved the IPO application of Suzhou Hengjiu Optoelectronic Technology Co., Ltd. The prospectus disclosed that the company has a total of 5 patents, and listed the information of these 5 granted patents. However, before Suzhou Hengjiu planned to land on the GEM on March 19 of that year, it was pointed out that all five patents were terminated due to unpaid annual fees. Due to the inconsistency between the patent legal status published on the website of the State Intellectual Property Office and the patent status listed in the prospectus and declaration documents, the China Securities Regulatory Commission requested relevant agencies to verify the company's patent issues, and the company's shares were suspended from listing. In June 2010, the GEM Issuance Review Committee re-examined Suzhou Hengjiu's IPO application, and eventually the IPO application was withdrawn, and the CSRC asked Suzhou Hengjiu to return the subscription money to the securities holders in accordance with the issue price plus the interest on the bank's deposits for the same period.

When judging whether the information disclosed in the declaration documents is inconsistent with the facts, intellectual property rights such as patent rights and trademark rights that have a greater impact on the production and operation of the enterprise are the focus of the review by the China Securities Regulatory Commission. The disclosure of information related to IPO patents mainly includes: patent ownership, patent licensing, patent disputes, patent transfer, patent number and other information (GEM applicable), patent changes and main influencing factors (GEM applicable).

Due to the enterprise patent management system is not standardized, due diligence and other reasons, often appear: patent information disclosure is not true, information disclosure is not accurate, information disclosure is incomplete, information disclosure is not standardized. These are all issues that companies need to strictly control and treat with caution when preparing application documents. If necessary, they can entrust professional intellectual property service companies to investigate.

4. other patent-related issues

In addition to the above, the use and valuation of patents is a key concern for regulators and investors, for example,Beijing Jinfang HVAC Energy Saving Technology Co., Ltd.and other companies are asked to explain the patent's support for the main business,Beijing Yubang Electric Power Technology Co., Ltd.Many companies are asked to patent the use of technology,China Shipbuilding Industry Hanguang Technology Co., Ltd.andSuzhou Yubang New Material Co., Ltd.The unreasonable pricing of the purchase patent is also required to be explained.

(Quote:http://dy.163.com/v2/article/detail/E9E1F2PR0511BK66.html)

Whether it is high-tech enterprises or traditional industries, intellectual property is the core competitiveness of the company. Companies should raise their awareness of intellectual property protection, especially small and medium-sized enterprises that want to be listed on the ChiNext and Science and Technology Innovation Board. They should focus on strengthening the effectiveness and stability of patents and the management of litigation disputes.The road clears the obstacles. Bull Group faces 10It is not clear what impact the 100 million patent infringement lawsuit will have on its IPO. According to the trial process of similar cases in the past, the caseIt will take at least two years to obtain a final legal judgment. During this period,Bull GroupofIPOApplications are subject to certain restrictions. For investment institutions, the case is also an important consideration.