Netac takes on global players
By Li Weitao (China Daily)
Updated: 2005-03-07 09:11

Chinese flash disk drive maker Netac Technology Co Ltd, which is suing Japan's Sony over alleged patent infringements, may broaden an IPR (intellectual property right) battle to take on some big US names.

The move represents a major shift in China's technology sector which is being besieged by foreign vendors' well-honed patent protection systems.

"We are pondering lots of options for our IPR strategy, including lawsuits in the United States, against some US firms which allegedly infringed upon our IPRs," said Frank Deng, president of Shenzhen-based Netac.

The targeted firms may include US flash-data storage card maker Sandisk and one of Dell or Hewlett-Packard.

"One of these US computer giants is selling computers to its customers in the United States bundled with flash disk drives, to which we own the IPRs," Deng told China Daily.

But he would not reveal which firm he was referring.

Netac has signed deals with Samsung Electronics, IBM, BenQ and Siemens under which Netac either co-operates with these foreign firms or allows them access to its patents.

Deng alleged that Apple Computer Inc had also infringed upon his firm's IPRs.

Apple, which sells Mac computers and the popular MP3 players iPods, in January launched iPod Shuffle, its first flash-based digital audio player.

These players infringe upon Netac's patents, Deng said.

The president announced on Wednesday that Netac had won the rights to a major patent for flash-disk drives from US authorities after filing the application approximately four years ago.

This marked a major victory for Netac which is currently embroiled in lawsuits with Sony and its Chinese rival Beijing Huaqi Information Digital Technology Co Ltd.

A preliminary ruling last June by a Shenzhen court ordered Huaqi to stop selling flash-disk drives that infringed upon Netac's patents and compensate Netac.

Huaqi appealed to a higher court to overturn the ruling and joined with NASDAQ-listed M-Systems Flash Disk Pioneers Ltd in asking Chinese patent authorities to rule Netac's patent ineffective, claiming the patent is a "publicly known technology."

Netac last August also filed a lawsuit in Shenzhen against Sony which is still pending. Deng said Sony is trying to delay any litigation, but the publicity has already taken effect, with Sony's flash-disk drive business shrinking since the filing of the suit.

Netac's overseas market share, on the other hand, has been gaining ground.

Gaining the patent in the United States would help consolidate Netac's position, and make it easier to launch broadsides against those US firms allegedly guilty of infringing on the Chinese firm's IPRs, he said.

In 2003, Netac sent a letter to Sandisk warning the latter of its alleged patent infringement but received no response.

Deng said going through the courts was not the only solution, adding that Netac may consider charging patent fees from US firms or even seek alliances.

The president would not disclose the state of the privately-held firm's finances.

But he expects more than 40 per cent of the company's annual revenues to come from overseas markets by the end of the year.

Other Chinese manufacturers can learn to take advantage of the patent protection system to deter foreign rivals, Deng said.

Chinese makers, especially those in the consumer electronics sector, are being increasingly burdened with IPR lawsuits filed by foreign rivals in US courts.

The past three years have seen China's technology icon Huawei Technologies sued by Cisco Systems, Chinese battery maker BYD Co Ltd sued by Sanyo Electric Co Ltd and mainland chip maker SMIC sued by Taiwan's TSMC, the world's largest maker of made-to-order chips.

Recent cases also include Hitachi Global Storage's lawsuit against a Chinese mini hard-disk drive maker based in Southwest China's Guizhou Province.

But Chinese firms are starting to fight back, Deng noted.

"We have put together a tight patent network related to flash-disk drives and other technologies," Deng said.

"We have also applied for patents in digital entertainment, wireless networks and chip technologies."

Netac's application for a patent on its flash disk drive technology in Europe is under review by local authorities, he added.

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