Patent Holder Goes to Court in China

Lawsuits initiated by foreign companies in China are still rare, particularly in the chemical industry. With good reasons, most foreign companies consider the Chinese legal system to be too immature to be of any practical use. Nevertheless, Syngenta filed a lawsuit in Nanjing in May, accusing two local companies of illegally producing and selling thiamethoxam (TMX), an insecticide patented by Syngenta. The case is scheduled be heard in a Nanjing court on Aug. 13.

Syngenta's lawyers think they have such a strong case that the court will have to rule in their favor. Yancheng Lvye Chemical and Yancheng Yongli Chemical, the two companies it is suing, were caught virtually red-handed, according to Syngenta. "We found they were offering thiamethoxam for sale on their Internet website, although since filing our case with the court, they have deleted all references to TMX," says Susan Zhang, Syngenta's spokeswoman in Shanghai.

The Swiss company became most alarmed when it discovered that illegally made TMX was being exported from China. The Chinese market is not yet a major one for Syngenta, but exports by Chinese companies could harm business elsewhere in the world. Zhang says Syngenta lawyers are discovering whether the exporters include the two Yancheng firms.

Yancheng Lvye and Yancheng Yongli are both part of the same corporate group l ocated in Yancheng, a city that, like Nanjing, is in Jiangsu province. Contacted by C&EN, the president of Lvye, Zhou Wengong, declined to comment on the case. But he told the Dow Jones newswire in May that his firm had produced only a small amount of TMX in its labs. Syngenta insists that the Yancheng group was delivering the product in commercial quantities and that, at any rate, to claim to be producing only samples is not an acceptable defense in patent violation cases in China.

Syngenta is demanding that the Yancheng companies pay it the maximum damage allowed under Chinese law--the equivalent of $60,000. It is also asking that they stop producing TMX and publicly apologize to Syngenta. By adopting a hard line, the Swiss company is hoping to send a signal to other Chinese agrochemical producers that they cannot violate patents with impunity. The Yancheng group has not filed a defense to the court, but Zhang expects that they will show up at the August 13 hearing because the judge cannot rule without their input.

Up to now, Chinese courts have generally appeared to favor local companies. But Syngenta could win this case. Having invested about $150 million in China, mostly in Jiangsu, Syngenta can make the point that it is itself a local player. The Nanjing court hearing the case is one of 10 in China that specialize in intellectual property issues. And as an increasing number of Chinese companies are filing patents in China and abroad, Chinese courts are facing intense pressure to better protect intellectual property.