Hebei Dama was accused of infringement and paid more than 7 million yuan in compensation

Infringement cases are frequent in the cross-border e-commerce industry, and claims are also common. Recently, a big seller in the industry was sued for infringement, which attracted attention due to the high amount of claims. This incident once again sounded the alarm for peers!

Infringement compensation exceeds 7 million yuan

On January 10, Kangtai Medical Systems (Qinhuangdao) Co., Ltd. (hereinafter referred to as Kangtai Medical or the Company) issued an announcement on the progress of a litigation matter , mentioning that the company reached a settlement with the plaintiff on the patent dispute case and paid the other party US$1 million (equivalent to approximately RMB 7.3 million).

The matter can be traced back to an infringement case in the United States in 2018.

On January 31, 2018, Beijing Chaosi Electronic Technology Co., Ltd. (hereinafter referred to as Beijing Chaosi) filed a lawsuit in the United States, accusing Kangtai Medical and Kangtai USA (hereinafter collectively referred to as "Kangtai") of infringing its patent applied for in the United States "FINGERTIP OXIMETER AND A METHOD FOR OBSERVING A MEASUREMENT RESULT THEREON" (US Patent No. 8,639,308) (hereinafter referred to as the "308 Patent"). The case was accepted by the United States District Court for the Northern District of Illinois.

On December 10, 2024, Kangtai and Beijing Chaosi reached a settlement on the aforementioned patent dispute case and signed a "Settlement Agreement".

On December 12, 2024, Kangtai Medical paid the agreed amount of US$1 million to Beijing Chaosi by wire transfer. On December 13, the company received the aforementioned settlement compensation payment from Mr. Hu Kun, the controlling shareholder and actual controller, in accordance with the "Commitment on Matters Related to the U.S. Patent Litigation Case" issued by him.

On January 9, 2025, Kangtai received the "Agreed Permanent Injunction and Dismissal Order" issued by the United States District Court for the Northern District of Illinois based on the above-mentioned "Settlement Agreement" signed by both parties. According to the ruling, before December 31, 2025, if Kangtai and Beijing Chaosi do not apply for the resumption of the case, the case will be prohibited from filing the same lawsuit again , which means that this infringement case ends with Kangtai's payment of US$1 million.

It is reported that the patent rights involved in this case do not involve the company's core patents, technologies and products. After Beijing Chaosi filed a lawsuit in the United States in 2018, the company has upgraded the product functions accused or mentioned in the lawsuit, and American Kangtai also stopped selling related products in the United States after 2018, and currently has no related product inventory. The company and American Kangtai no longer have the infringement mentioned in the "Settlement Agreement". The result of this ruling will not have an adverse impact on the company's production and operation.

Kangtai Medical was founded in 1996. The company is located in the Economic and Technological Development Zone of Qinhuangdao City, Hebei Province. It is a high-tech enterprise specializing in the research and development, production and sales of medical diagnosis and monitoring equipment. The company's products cover multiple categories such as blood oxygen, electrocardiogram, ultrasound, monitoring, blood pressure, etc.

The company has established a global marketing network that combines distribution and direct sales, and B2B and B2C. It has its own stores on mainstream e-commerce platforms at home and abroad, such as Alibaba International Station, Amazon, AliExpress, and eBay. Its products are sold to more than 140 countries and regions in North America, Europe, Southeast Asia, Latin America, and the Middle East.

Revenue and profit both declined

This infringement ruling may affect Kangtai Medical's profits. The specific impact on profits or post-period profits needs to be determined in conjunction with the final implementation of the "Settlement Agreement".

In the first three quarters of 2024, Kangtai Medical achieved operating income of 334 million yuan, a year-on-year decrease of 45.91%; achieved attributable net profit of 9.9029 million yuan, a year-on-year decrease of 94.92%; and achieved non-net profit of -6.4569 million yuan, a year-on-year decrease of 103.53%.

In the first half of 2024, the company achieved operating income of 212 million yuan, a year-on-year decrease of 57.17%; net profit attributable to shareholders of the parent was 8.1671 million yuan, a year-on-year decrease of 95.53%; non-net profit was a loss of 3.8535 million yuan, compared with a profit of 173 million yuan in the same period last year; net cash flow generated by operating activities was 13.8645 million yuan, a year-on-year decrease of 91.16%.

Overall, Kangtai Medical's performance in 2024 was not satisfactory, with both revenue and net profit falling sharply, and non-net profit being in a loss state.

The decline in revenue is mainly attributed to the decrease in sales orders during this period compared with the same period last year. In the first half of 2024, the global medical device market showed a trend of expanding overall market size, upgrading product innovation, and intensifying industry competition. The demand for household products from customers in the European and American markets gradually returned to normal levels.

The decline in net profit was mainly due to the decrease in sales proceeds caused by the decline in revenue, and the company continued to develop new products to consolidate its core competitiveness and maintained a high level of R &D investment. In the first half of 2024, Kangtai Medical invested 56.055 million yuan in R&D expenses, an increase of 8.83% year-on-year. A number of new products such as blood glucose and uric acid meters, zirconium oxide blocks for all-ceramic dentures, blood glucose test strips, and early pregnancy test strips have been registered and listed for sale, enriching the company's product system and creating new possibilities for the company's future market expansion.

Moving forward, in 2023, Kangtai Medical achieved operating income of 747 million yuan, a year-on-year increase of 4.89%, and net profit attributable to shareholders of listed companies of 166 million yuan, a year-on-year decrease of 15.51%. According to the analysis of relevant institutions in 2023, Kangtai Medical's overall financial status in the past five years was lower than the industry.

The benefits of blood oximeters are hard to continue

During the epidemic, the company's demand for products such as blood oximeters increased significantly, which saved the company's performance to a certain extent.

Kangtai Medical's performance surged in 2020. This year, home oximeters became the most popular anti-epidemic supplies in the market. The company became popular with protective supplies such as oximeters, and its profit reached 600 million, a year-on-year increase of 713.22%-740.32%, a 7-fold increase! As the industry leader, Kangtai Medical has reaped the benefits of the epidemic.

Unlike other medical device companies, Kangtai Medical's blood oximeters have always been its main source of revenue. For a long time, the company's blood oxygen product revenue has accounted for more than 60%.

As for the situation in 2020 , when broken down into specific products, Kangtai Medical's products with the highest revenue share are blood oxygen products ( 63%), analytical testing products (17%), monitoring products (7.12%), electrocardiogram products (4.88%), ultrasound products (3.18%), etc. Among them, the fastest growing categories in 2020 were analytical testing products (increase of 2715%) and blood oxygen products (708%).

Kangtai Medical's blood oximeters and other products have always maintained a leading position on cross-border e-commerce platforms such as Amazon. Its pulse oximeters and other products have been sold to more than 150 countries and regions around the world.

As a bonus stock during the pandemic, Kangtai Medical's blood oximeter can be said to be the mainstay of its performance. Relevant data show that in 2020, Kangtai Medical's sales of blood oximeter products were about 15.604 million units, a year-on-year increase of 824.68%. By 2021, this number was 10 million units. In the past two years, the annual sales volume was about 10 million units.

Apart from the dividends of the epidemic, Kangtai Medical's performance growth actually stagnated from 2016 to 2019, and the unit price of its products gradually declined. From 2016 to 2019, Kangtai Medical's operating income was 442 million yuan, 398 million yuan, 363 million yuan, and 387 million yuan, respectively, and its net profit attributable to the parent company was 103 million yuan, 77 million yuan, 62 million yuan, and 74 million yuan, respectively. This also means that the sales of blood oximeters have reversed the company's performance decline .

Subsequently, as the benefits of the epidemic disappeared, Kangtai Medical's performance returned to normal levels. In addition, the company's R&D level was at a relatively low level in the same industry, and the company's products involved infringement issues. The decline in performance in the past two years was expected.

Infringement

Kangtai Medical

Beijing Chaosi