A conflict over use of the Sharp brand name in the US market for televisions has pitted the Foxconn-owned display maker against Chinese licencee Hisense in IP and commercial lawsuits across multiple jurisdictions since last June. Now, disclosures made by Sharp in the process of withdrawing a patent infringement lawsuit and an ITC investigation suggest that the two parties have agreed to a patent truce as they move towards a broad resolution.
The dispute is over a 2015 agreement which gave Hisense, an appliance and electronics maker from Qingdao, the right to sell Sharp-branded televisions in the Americas (except Brazil) until 2021. That deal did not sit well with executives at Foxconn, which bought Sharp in 2016 as part of its efforts to transition to a product company. But while the Taiwan company has announced plans to build a huge Sharp TV factory in the United States, it faces a three year wait until it can actually use the Sharp brand in the market.
Sharp’s attempt to terminate the licence in April 2017 triggered an arbitration proceeding at the Singapore International Arbitration Centre. But after an arbitrator issued an “emergency” order upholding the contract in the interim and prohibiting Sharp from commenting publicly on the case, the Japanese company responded with lawsuits in New York, California and District of Columbia district courts.
In June 2017, it also asked the San Francisco County Superior Court to terminate the agreement on the grounds that Hisense’s conduct as a brand licencee was doing serious damage to the well-known Sharp brand. Among other things, it accused the Chinese company of false advertising, breaking FCC rules and violating safety regulations. Despite the ‘gag order’ issued in Singapore (which a DC district court judge declined to overturn on First Amendment grounds), Sharp’s complaints about Hisense were now out in the open.
Sharp, whose IP function was spun out into an independent entity called ScienBiziP Japan after its acquisition by Foxconn, also turned to patent assertions to coerce Hisense to return its brand. In a lawsuit filed in a New York federal court in July 2017 and later transferred to Georgia, it accused Hisense of infringing two WiFi-related patents, which it called “the latest in a series of actions Hisense has taken to harm Sharp by severely compromising Sharp’s intellectual property rights”. An ITC complaint followed in short order.
Hisense has not stood idly by. On November 29th, the Beijing IP Court announced that it had accepted a patent infringement complaint made by the Chinese company against Sharp.
But now it looks like the two sides have agreed not to use patent conflicts as proxies for their underlying dispute over the Sharp brand name, which is still being arbitrated in Singapore. Sharp asked the ITC to terminate its investigation of Hisense on December 22nd, and on January 8th it withdrew its patent infringement litigation against the Chinese company. Attorneys for Sharp told the ITC that while the parameters of a settlement had been discussed, there was no deal yet in place. Nevertheless, heavily redacted documents submitted by Sharp suggest that the two companies have worked out some kind of framework for finding a “win-win situation”, and that the withdrawal of patent claims is part of this.
Given the patent risks involved, that seems like a positive for both sides. Hisense is far from an experienced patent player, and it faced the prospect of taking on an experienced and well-armed Sharp team (backed by the very capable IP team at Foxconn) in an ITC fight that could result in an import ban. And Sharp, you can be sure, wanted no part in a Beijing IP Court battle with a state-owned Chinese company that could result in an injunction.
From a trademark perspective, too, the conflict seems uniquely destructive to both parties. To recover its brand, Sharp was ironically forced to argue in public that it was presently being used on shoddy and even unsafe products. That kind of charge sticks in consumers’ minds – and it could be hard to change if and when Sharp gets its name back.