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After "AVIC Lithium" received the "(2021) Min 01 Min Chu No. 1995, 1996" complaint about "CATL" patent infringement dispute from the intermediate people of Fuzhou City, a "public opinion war" that lasted for several years finally entered everyone's view.

From the perspective of the development process of the industry, patent infringement is inevitable in any technology intensive industry, and the patents of leading companies in the industry are also a sign of the maturity of an industry, such as well-known industries such as air conditioning, switches, and communication chips.

The CATL v. Tafel case, which has been adjudicated in the first instance, and the ongoing CATL v. AVIC Lithium Battery incident, mark that China's power lithium battery energy industry has entered the era of core technology competition from cost (human resources) competition, and also provide a direction for thinking about how to deal with the risk of intellectual property infringement and improve the company's core competitiveness.

1、 Event analysis: CATL v. Tafel or as a template

On July 21, 2021, the media successively reported that CATL had recently initiated patent infringement against AVIC Lithium Battery. The infringing products involved covered all series of power lithium battery products such as household vehicles and commercial vehicles of AVIC Lithium Battery, and were also confirmed by relevant departments of CATL.

AVIC Lithium responded through its official website and the media, "Adhering to independent research and development, supplying customers with products that have been investigated by FTO and are confident that the products produced do not have the patent rights of others.".

From the above information, one can quickly associate the patent infringement of CATL v. Tafel, which has been adjudicated in the first instance. This process and progress are likely to become the "template" for the future direction of the AVIC Lithium case (see Figure 1).

Figure 1: Time Flow Chart of CATL v. Tafel

2、 Event Impact: Product, Market, Trust, and IPO Challenges

In the author's opinion, the timing of patent infringement initiated by CATL against Tafel and AVIC Lithium is a key stage of their IPO inquiries, and core patents and intellectual property rights have also become the focus of inquiries on the Science and Technology Innovation Board listing, as it is not uncommon for patent infringement and instability in core patent rights to disrupt the IPO process and terminate IPO applications.

Secondly, related trust in product production, sales, and customers may be affected in multiple ways. From the property preservation application of "CATL" v. "Tafel", it can be seen that Tafel's cash flow was frozen at 80 million yuan. Due to its uphill production period, the freezing of cash flow is bound to have a certain impact on its business development.

If the possible infringing products cover the entire product line, and if the behavior preservation is established, the consequences are the cessation of the entire production line and marketing system (cessation of infringement). You can refer to the 2018 Fuzhou Intermediate People's Support for Qualcomm's Application for Preservation of Apple's Conduct, which states that "Apple is prohibited from importing and selling some models of mobile phones, including the iPhone X, in the Chinese market." If such a ban appears in CATL's lawsuit "Avic Lithium", it will have a significant impact on the power lithium battery market of Avic Lithium.

As a user of the product, customers will also assess the overall risk of using products with infringement risks, making it difficult to maintain the continuous trust of customers; Opening a market requires time and accumulation, and restarting after a sudden stop, especially for a mature market, the marketing cost of returning to its original market share is immeasurable.

3、 Event trend: the stability of patent rights and whether they fall within the scope of protection will become key points

In the future, the stability of patent rights and whether they fall within the scope of protection will become key points. As shown in Figure 2-4, it can be seen from searching the Smart Bud Patent Law Database that Tafel filed a patent invalidation procedure for five patents of CATL. Among them, the first, second, and third patents are partially invalid, and the fourth, fifth patents are fully maintained. It can be seen that CATL's patents have withstood the test of patent invalidity by Tafel.

Figure 2: List of invalid patents filed by Tafel against CATL

Figure 3: Details of patent invalidation procedures for "explosion-proof devices"

Figure 4: Details of "Secondary Battery" Patent Invalidation Procedure

Further referring to the first instance judgment results and infringement comparison details of the patent "explosion-proof device" in question shown in Figures 5 and 6, it is found that the product in question falls within the protection scope of all claims 1-8. The Fujian Provincial High Court supports most of CATL's appeals, requiring Tafir to stop infringing acts and sellers to stop selling the infringing product, with a compensation amount exceeding 20 million. The first instance judgment results are quite unfavorable to Tafir.

The patent infringement related to "AVIC Lithium" has not yet been disclosed. According to media information, AVIC Lithium has filed a patent invalidation procedure for related patents. Subsequently, by tracking the patent invalidation procedure that occurred in CATL and positioning the originator of the invalidation request, it is possible to delineate the approximate scope of the patent infringement related to the lawsuit, and at the same time, it is possible to preliminarily assess the impact on AVIC Lithium.

Figure 5: First Instance Decision of CATL v. Tafel Patent Infringement

Figure 6: Details of infringement comparison between CATL and Tafel patent infringement

4、 Event Thinking: The Inevitability of Inward Volume and the Possibility of Shuffle

When the industry is in its infancy and growth stage, companies usually invest a large amount of costs in R&D and design, product line optimization, market development, etc. Incremental market space becomes the focus of attention, and there are relatively few intellectual property disputes between companies; However, when the industrial chain reaches a relatively mature stage, the company will face competition in core technologies, defend its legitimate interests by means of patents and other means, and maintain a favorable position in market competition in the "inside roll".

The market share of AVIC Lithium has jumped to the fourth place in the domestic market, with the patent application fields of the two highly overlapping (as shown in Figure 7 and Figure 8). As a leading company in the industry, CATL has initiated patent infringement against Tafir and AVIC Lithium (especially at the key node of its sprint IPO) to safeguard its legitimate interests and market position, which is also expected.

Figure 7: Top 10 Load Capacity of Power Lithium Battery Companies in China from January to May 2021

Figure 8: CATL, AVIC Lithium Battery - IPC Classification Ranking

So, is the lithium battery market starting to roll in facing a reshuffle?

As the respondent to the infringement, Tafel was identified as infringing in the patent, which not only suspended the IPO process, but also faced a large amount of compensation. AVIC Lithium, as the main body in the industry with a rapidly rising market share in recent years, should draw lessons from Tafel's previous experience and conduct due diligence on patent infringement before applying for an IPO. Subsequent invalidation procedures, the filing of a lawsuit confirming non infringement, and the defense that does not constitute patent infringement are expected to serve as corresponding means of responding to the lawsuit.

At the same time, CATL recently announced a fixed increase of 58.2 billion yuan. At this critical juncture, AVIC Lithium can also file invalidation requests for other CATL patents, especially those related to next-generation sodium batteries, not limited to patents that have been infringed. This will provide additional assistance for the resumption of the IPO process and the further development of the company.

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