ATV » Topics » Intellectual Property

This excerpt taken from the ATV 20-F filed Apr 24, 2009.

Intellectual Property

We rely on a combination of copyright, trademark, patent, unfair competition laws, as well as nondisclosure agreements and other methods to protect our intellectual property rights. We maintain approximately 117 trademark registrations and are in the process of applying for registrations or transfer for approximately 121 trademarks in China. We own five invention, utilities and packaging design patents in China pertaining to our sleeping aid products, neck protected pillow, body relaxing chairs, posture correction products and engine lubricant products.

The legal regime in China for the protection of intellectual property rights is still at a relatively early stage of development. Despite many laws and regulations promulgated and other efforts made by China over the years to enhance its regulation and protection of intellectual property rights, private parties may not enjoy intellectual property rights in China to the same extent as they would in many western countries, including the United States, and enforcement of such laws and regulations in China have not achieved the levels reached in those countries. Therefore, it is difficult and expensive to police and enforce against infringement of intellectual property rights in China. Imitation or counterfeiting of our products or other infringement of our intellectual property rights, including our trademarks, could diminish the value of our various brands or otherwise adversely affect our net revenues. See Item 3.D, “Key Information—Risk Factors—Risks Relating to Our Business—We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our product brand, reputation and competitive position. In addition, we may have to enforce our intellectual property rights through litigation. Such litigation may result in substantial costs and diversion of resources and management attention.”

We have in the past been, currently are, and in the future may again be, the subject of claims for infringement, invalidity, or indemnification relating to other parties’ proprietary rights. For example, in June and December 2007, NavInfo Co., Ltd., or NavInfo, filed three suits in the People’s Court of Haidian District against Shanghai HJX Digital Technology Co., Ltd., or Shanghai HJX, Beijing Acorn Trade Co., Ltd. and Shanghai Acorn Network Technology Development Co., Ltd., all of which are our subsidiaries or our affiliates, and Shenzhen Careland Information System Co., Ltd., or Careland, alleging that the digital maps incorporated in our GPS products and provided by Careland infringed on NavInfo’s copyrighted digital map. The court ruled in favor of NavInfo in the suits and awarded NavInfo total compensation of RMB1,000,000 (approximately $147,000). Careland has indemnified us for the loss we suffer in connection with the suits.

In October 2007, Beijing Ren’ai Education Research Institute, or Beijing Ren’ai, filed a suit in Henan Puyang Intermediate People’s Court against Shanghai HJX and Henan Puyang Hualong Commercial Building Co., Ltd., or Hualong Building, alleging that the English programs we provide to the users of our electronic learning devices infringe upon the copyright of Beijing Ren’ai. Beijing Ren’ai claimed damages of RMB500,000 (approximately $73,000). This legal proceeding is still pending and we are vigorously contesting Beijing Ren’ai’s claim.

In November 2007, Beijing Ren’ai filed a suit in Anhui Hefei Intermediate People’s Court against Shanghai HJX, Hefei Huitong Science and Trade Co., Ltd. and Hefei Xinhua Bookstore Co., Ltd. making a similar allegation and claiming RMB500,000 (approximately $73,000) in compensation. On May 4, 2008, the Anhui Hefei Intermediate People’s Court ruled that Shanghai HJX and Hefei Huitong Science and Trade Co., Ltd. should cease infringement of the copyright of Beijing Ren’ai and ordered Shanghai HJX to pay RMB50,000 (approximately $7,000) in damages. We have made the damages payment as of December 31, 2008.

In August 2008, Beijing Ren’ai filed a suit in the People’s Court of Beijing Haidian District against Shanghai HJX, Beijing Sancai Digital Technology Co., Ltd., or Beijing Sancai, and Beijing Zhidahengtong Technology Development Co., Ltd., or Beijing Zhidahengtong, alleging that the English programs we provide to

 

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the users of our electronic learning devices infringe upon the copyright of Beijing Ren’ai. Beijing Ren’ai claimed damages of RMB2,000,000 (approximately $293,000). The court ruled in favor of Ren’ai in the suits and awarded Ren’ai total compensation of RMB500,000 (approximately $73,000). The defendants have appealed the court’s decisions and the appeals are currently pending.

We believe that the above legal proceedings will not have a material adverse effect on our financial conditions. See Item 3.D, “Key Information—Risk Factors—We have in the past been, currently are, and in the future may again be, subject to intellectual property rights infringement claims and other litigations by third parties, which could be time-consuming and costly to defend or litigate, divert our attention and resources, or require us to enter into licensing agreements. These licenses may not be available on commercially reasonable terms, or at all.”

This excerpt taken from the ATV 20-F filed May 30, 2008.

Intellectual Property

 

We rely on a combination of copyright, trademark, patent, unfair competition laws, as well as nondisclosure agreements and other methods to protect our intellectual property rights. We maintain approximately 40 trademark registrations and are in the process of applying for registrations or transfer for approximately 177 trademarks in China. We own five invention, utilities and packaging design patents in China pertaining to our sleeping aid products, neck protected pillow, body relaxing chairs, posture correction products and engine lubricant products.

 

The legal regime in China for the protection of intellectual property rights is still at a relatively early stage of development. Despite many laws and regulations promulgated and other efforts made by China over the years to enhance its regulation and protection of intellectual property rights, private parties may not enjoy intellectual property rights in China to the same extent as they would in many western countries, including the United States, and enforcement of such laws and regulations in China have not achieved the levels reached in those countries. Therefore, it is difficult and expensive to police and enforce against infringement of intellectual property rights in China. Imitation or counterfeiting of our products or other infringement of our intellectual property rights, including our trademarks, could diminish the value of our various brands or otherwise adversely affect our net revenues. See Item 3.D, “Key Information — Risk Factors — Risks Relating to Our Business — We may not be able to prevent others form unauthorized use of our intellectual property, which could harm our product brand, reputation and competitive position. In addition, we may have to enforce our intellectual property rights through litigation. Such litigation may result in substantial cost and diversion of resources and management attention”.

 

We have in the past been, currently are, and in the future may again be, the subject of claims for infringement, invalidity, or indemnification relating to other parties’ proprietary rights. For example, in June 2007, NavInfo Co., Ltd., or NavInfo, filed a suit in the People’s Court of Haidian District against Shanghai HJX, Beijing Acorn, Shanghai Network and Shenzhen Careland Information System Co., Ltd., or Careland, alleging that the digital maps incorporated in our GPS products and provided by Careland infringed on NavInfo’s copyrighted digital map, and asserted damages of RMB2.5 million. On the same day NavInfo filed a suit in the same court against Careland, Shanghai Network and Beijing Acorn on a similar matter and asserted damages of RMB2.5 million. The court ruled in favor of NavInfo in the suits and awarded NavInfo total compensation of RMB1,000,000. Shanghai HJX, Beijing Acorn, Shanghai Network and Careland have appealed the court’s decisions and the appeals are currently pending. On December 25, 2007, NavInfo filed another suit in the same court against Shanghai HJX, Beijing Acorn and Careland on a similar matter and asserted damages of RMB2.5 million. This legal proceeding is currently pending. Careland has agreed to indemnify us for any losses we suffer in connection with the suits. We believe that this legal proceeding will not have a material adverse effect on our financial conditions.

 

On October 26, 2007, Beijing Ren’ai Education Research Institute, or Beijing Ren’ai, filed a suit in Henan Puyang Intermediate People’s Court against Shanghai HJX and Henan Puyang Hualong Commercial Building Co., Ltd., or Hualong Building, alleging that the English programs we provide to the users of our electronic learning devices infringe upon the copyright of Beijing Ren’ai. Beijing Ren’ai claimed damages of RMB500,000. This legal proceeding is still pending. On November 5, 2007, Beijing Ren’ai filed an additional suit in Anhui Hefei Intermediate People’s Court against Shanghai HJX, Hefei Huitong Science and Trade Co., Ltd. and Hefei Xinhua Bookstore Co., Ltd. Anhui Bookstore on making a similar allegation claiming RMB500,000 in compensation. On May 4, 2008, the Anhui Hefei Intermediate People’s Court ruled that Shanghai HJX and Hefei Huitong Science and Trade Co., Ltd. should cease infringement of the copyright of Beijing Ren’ai and ordered Shanghai HJX to pay RMB20,000 in damages. We believe that the legal proceedings will not have a material

 

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adverse effect on our financial conditions. See Item 3.D, “Key Information — Risk Factors — We have in the past been, currently are, and in the future may again be, subject to intellectual property rights infringement claims by third parties, which could be time-consuming and costly to defend or litigate, divert our attention and resources, or require us to enter into licensing agreements. These licenses may not be available on commercially reasonable terms, or at all”.

 

EXCERPTS ON THIS PAGE:

20-F
Apr 24, 2009
20-F
May 30, 2008
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