Too sudden! Shenzhen's best-selling products may be banned in the United States

When Chinese brands explore overseas markets, they will inevitably encounter a series of difficulties.

TP-LINK related products may be banned from sale in the United States

The U.S. International Trade Commission ( ITC) today issued a preliminary ruling making a Section 337 final determination on certain Wi-Fi routers, Wi-Fi devices, mesh Wi-Fi network equipment, and their hardware and software components.

If there is infringement in this case, it is recommended to issue a limited exclusion order against the products involved in the case exported to or sold in the United States by Guangdong TP-Link Technology Co., Ltd. of China, TP-Link Corporation Limited of Hong Kong, China, TP-Link USA Corporation of the United States, and TP-Link Research Institute USA Corp of the United States, and to issue an injunction against the named defendants. This means that if there is infringement, TP-LINK 's related products will be banned from being sold in the United States.

The story of why the U.S. International Trade Commission suddenly made such a ruling against TP-LINK dates back to last year.

In April 2023, US computer networking company Netgear filed a complaint with the ITC, alleging that TP-LINK 's products infringed certain Netgear patents.

The ITC investigated Netgear's allegations and assigned the investigation to Judge Doris Hines on May 8, 2023. Doris made a preliminary ruling that TP-LINK violated Section 337 of the U.S. Tariff Act , determining that TP-LINK 's products infringed Netgear's rights.

It is reported that the preliminary ruling needs to be reviewed by the full committee and the final decision is expected to be issued on October 3, 2024.

It is understood that Netgear was founded in January 1996 by founder Patrick lo and co-founder Mark Merill in Silicon Valley, California, USA . Its main business is to provide innovative products and high-quality smart home wireless solutions for global commercial enterprise users and home personal users. Its products include whole-house Mesh WiFi, WiFi routers, USB WiFi adapters, etc. At present, NETGEAR has established branches in 34 countries around the world, and its products are sold through 59,000 dealers at 31,000 retail terminals around the world.

TP-LINK is a brand of Shenzhen TP-LINK Technology Co., Ltd., which was established in 1996. It is a mainstream manufacturer in the industry specializing in the research and development, manufacturing and marketing of network and communication terminal equipment, and is a leading global supplier of network communication equipment.

TP-LINK products cover Ethernet, wireless LAN, broadband access, and power line communications. In addition to the existing core areas of transmission, switching, and routing, it is vigorously expanding into areas such as mobile Internet terminals, smart homes, and network security.

TP-LINK is headquartered in Shenzhen, China, and has sales and service centers in 21 central Chinese cities including Beijing, Shanghai, and Guangzhou. It has also established overseas subsidiaries or representative offices in 39 countries and regions. Its products have been used in 128 countries around the world, and the total product sales will exceed 900 million units.

On e-commerce platforms such as Amazon and Walmart, TP-LINK has many popular products that are hot-selling, with some single products selling tens of thousands of units per month.

Netgear and TP-LINK have very similar product lines and can be considered direct competitors.

After Netgear filed a complaint with the ITC in April 2023, TP-LINK formally fought back in September 2023.

TP-LINK filed a patent invalidation request with the US Patent and Trademark Office, requesting the review and cancellation of two Netgear patents related to WiFi technology. In the petition, TP-LINK mentioned that the inventions covered by US Patent No. 7,936,714 and US Patent No. 10,327,242 are not patentable, have long been widely available in the public domain, and should not be considered exclusive patents.

Ultimately, it is still unknown whether TP-LINK can survive this "trial". However, if it is finally ruled that TP-LINK has committed infringement, its product sales in the US market will suffer a serious blow and it will face sanctions such as limited exclusion orders and injunctions.

How should Chinese companies respond when faced with a 337 investigation?

TP-LINK is not the first Chinese company to be investigated under Section 337. In recent years, more and more Chinese companies have been investigated under Section 337. According to statistics, Shenzhen companies have encountered 11 "Section 337 investigations" in 2020 alone, 2.2 times that of 2019; by 2023, the number of Section 337 investigations involving Chinese companies has reached 20, accounting for about half of the total investigations for the year.

So many companies are subject to 337 investigations. What exactly are 337 investigations?

Simply put, a 337 investigation refers to an investigation conducted by the U.S. International Trade Commission in accordance with Section 337 of the U.S. Tariff Act of 1930 and related amendments. The investigation targets the infringement of U.S. intellectual property rights by imported products and other unfair practices in import trade, with the aim of prohibiting all unfair competition or any unfair trade practices in products exported to the United States.

Chinese companies are very afraid of 337 investigations. Once a company is found to be in violation, it may face the consequence of having its products blocked from the US market.

In the early days, the companies that encountered Section 337 investigations were usually small and medium-sized enterprises with relatively low profits. In addition, they were unfamiliar with international rules, so they might choose not to respond. In recent years, as China's economic strength has increased and it has become more familiar with and mastered international rules, Section 337 investigations have begun to involve more large Chinese companies.

It should be noted that if you do not respond to the lawsuit, the US International Trade Commission will make a "default judgment", which is even more disadvantageous to the company. Therefore, it is better to choose to respond to the lawsuit.

According to statistics, 15% of Chinese companies that choose to respond to lawsuits will win; in 35% of cases, the two parties will reach a settlement; in 32% of cases, the complainants will withdraw their complaints due to various reasons that the litigation is not completed; and only 5% of companies will be found in violation of regulations and receive exclusion orders after responding to the lawsuit.

I believe everyone still remembers the ban storm involving Shenzhen communications giant Hytera some time ago. The ban was only implemented for 15 days before there was a turnaround. The ban was suspended and Hytera resumed sales.

At that time, the US court issued a ruling ordering Hytera to suspend the sales of two-way radio technology products worldwide and pay a fine of US$1 million to the court every day until it fully complies with the court's ruling. The order will take effect on April 2, 2024.

In accordance with legal requirements, Hytera had to stop the sales of all its walkie-talkie products.

Subsequently, Hytera immediately launched a counterattack.

According to the announcement released by Hytera, the company filed an appeal to the U.S. Court of Appeals for the Seventh Circuit on April 4, 2024, U.S. time, regarding the product ban and other orders, requesting the revocation of the original relevant order of the Illinois Federal District Court.

In the early morning of April 17, the Court of Appeal issued a ruling to suspend the execution of the product sales ban and fines issued by the court of first instance against the company, which took effect immediately. The company will work closely with global partners to immediately resume normal business activities and start sales of related products.

In general, cross-border enterprises must pay attention to intellectual property issues in their daily operations, conduct market research and risk prevention, and conduct early warning research on trademarks and patents to prevent infringement risks. If they find that there may be infringement of the patent rights of American companies, they should modify the products in a timely manner to avoid infringement of intellectual property rights.

Prohibition of sale

Infringement