CEPT prevails in 8-year legal saga

An eight-year-long infringement battle has ended with China Environmental Project Tech Inc (CEPT) winning a victory "of great significance" over two foreign firms, according to experts.

Late last year China's Supreme Court ruled that the Japanese company FKK and US-invested Huayang Electronic Co Ltd must jointly pay CEPT more than 50 million yuan for infringement on patented technology.

"We are happy with the final judgment," He Ke, CEPT's vice-president, told China Daily. "It protects our legitimate interests and establishes strong proof that our frontier technology, long-claimed to be from overseas, is really a China-developed one."

CEPT applied for a patent in 1995 on a technique to use seawater for fuel gas desulphurization (FGD), "without any industrial chemicals or fresh water," He said, which was granted four years later.

CEPT, which was founded in 1994, is the only one of 19 companies granted thermal power desulphurization licenses by the National Development and Reform Commission with proprietary core technologies.

Need for ore

The technology, which has yet to bring significant profits, set off an unexpected lawsuit.

In 1997, Huayang built a thermal power plant in Fujian and purchased desulphurization facilities from FKK. The facility requires magnesium ore as a raw material to remove sulfur, which is a byproduct of fuel-fired power generation.

Huayang's need for about 50,000 tons of magnesium ore annually placed it in a predicament - it was hard to get sufficient and timely supplies.

The company then turned to CEPT for its seawater FGD solution.

Later, without authorization, Huayang's subcontractor FKK used CEPT's seawater solution when it overhauled the desulphurization facilities, according to the lawsuit.

Put into operation in 1999, the improved facility helped Huayang reduce raw material costs and earn tens of millions of yuan annually.

Huayang denied that it used CEPT's patented technology, claiming that both the technology and equipment originated overseas.

As it was central to the country's first large desulphurization project in fuel-fired power generation, Huayang's claim had a wide-reaching effect on already fierce competition between industrial players from many nations vying to get a foothold in the potentially vast Chinese desulphurization market, according to He.

Huayang's denial that it used Chinese technology created the impression that China lacks core technologies and relies on foreign designs, a contributing factor to ensuing market domination by foreign technologies, He said.

Some local governments even made it a requirement for project bids that desulphurization technologies and core facilities must be imported from abroad.

As a result, CEPT lost business opportunities. In 2001, the company filed an infringement lawsuit against Huayang and FKK in the Fujian provincial high court, beginning its eight-year-long legal saga. In the end, the case was appealed to the Supreme Court.

Patent validity

As the case dragged on, FKK filed a petition with the Patent Re-examination Board of the State Intellectual Property Office to invalidate the CEPT's patent.

After the board upheld the patent, FKK sued in the Beijing No 1 Intermediate Court and appealed to the Beijing High Court. The two courts decided against the company.

The originality of the patented technology and accuracy in patent documentation were keys to CEPT's cases before the re-examination board and law courts, He noted.

"We feel that the hardest part of maintaining rights over the years was the shortage of support and faith in Chinese companies' proprietary green technologies," He said.

The final court ruling is expected to help change opinions about China-developed technologies, he said.

"In the field of environmental technologies, various nations are on the same starting line for the race ahead," he said with confidence.

"Every good technology, no matter what country it is from, can serve the entire global society. And fair competition provides a guarantee for that."

Compared with traditional approaches that use large amounts of fresh water and mineral resources, seawater FGD technology reduces desulphurization costs by some 60 percent, he added.

Richard B Dasher, director of the US-Asia Technology Management Center of Stanford University and consultant for the Japanese government, said CEPT's design provides a new way to resolve the conflict between energy and the environment, according to the Patent Protection Association of China.

Industry implications

"The lawsuit is apparently a dispute over a patented technology between Chinese and foreign companies, yet actually it is a fight over the industry," Wu Handong, professor with the Zhongnan University of Economics and Law, told China Intellectual Property News.

Statistics show that desulfurizing facilities with a combined capacity of about 458 million kWh are operational in the country and 33 percent are suitable for using the seawater FGD solution. Only 9.9 percent now use the technology.

The infringement was one of the greatest impediments to CEPT's industrializing its technology, according to experts.

As China implements a national intellectual property strategy to sharpen its edge in innovation while also promoting a low-carbon economy, resolution of CEPT's lawsuit should attract the attention of other authorities, Wu said.

The government should give priority to more support for eco-friendly and resource-efficient projects, encouraging Chinese companies to enhance their strength in proprietary innovation, Wu stressed.

"Intellectual property issues should be analyzed from a multifaceted perspective of economics, technology and social development."

The case also reflects Chinese companies' increasing awareness and capability of maintaining their legal rights, experts said.

To date, CEPT has applied for an international patent with an upgraded version of the seawater DGD technology, according to company Vice-President He.