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VMI, Chinese firm in patent dispute

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VMI Group
(Crain News Service photos by Bruce Meyer) Harm Voortman is president and CEO of the Dutch firm VMI Group.

AKRON (Oct. 12, 2016) — Two manufacturers of tire building machines are embroiled in a patent infringement dispute over alleged theft of intellectual property on equipment primarily sold in China.

The battle pits VMI Holland B.V. of the Netherlands, the self-proclaimed largest company in the tire-building machinery industry, against Safe-Run Machinery (Suzhou) Co. Ltd., a relative newcomer to the industry, having been formed in China in 2009.

The matter between the firms apparently started earlier this year when VMI Group accused Safe-Run of infringing on patents covering mechanical portions of a uni-stage passenger tire building machine. The Chinese company denied the allegations and said it has filed lawsuit in Chinese court to affirm it did not infringe on VMI’s intellectual properties.

Each company then released statements on the matter three days apart in the first half of September.

Safe-Run said in its statement that it had filed a suit “to confirm the non-infringement of VMI patents,” adding that the Dutch group had not offered legally admissible evidence to support its claims.

“VMI cannot claim infringement on its patent rights by Safe-Run Group without any factual or legal proof,” Safe-Run said.

The Chinese firm added it had focused on developing its own innovative technologies, and had been granted national-level patents.

In a follow-up statement to European Rubber Journal, a sister publication of Tire Business, Safe-Run said it had acted to sue VMI in the Court of Suzhou in April and the Court of Shanghai in July, adding that it was “the first one taking legal steps, and up to now Safe-Run has not received any (notice of) lawsuits from VMI.”

The Chinese machinery company claimed its legal actions followed a top-level meeting with VMI at which the Dutch company’s managers raised the issue of patent infringement but without offering “any legally admissible evidence.”

In its Sept. 12 statement, VMI said it was planning to take legal steps against Safe-Run. “Despite repeated warnings, Safe-Run did not stop the infringement on several of VMI’s patents,” the statement said. “VMI therefore decided to take legal steps against Safe-Run.”

The Dutch machinery company, however, didn’t detail what those steps were.

On the heels of this latest statement, both firms exhibited at the International Tire Exhibition & Conference (ITEC), held Sept. 13-15 in Akron. Their booths were side by side at the front of the expo floor, and officials from both discussed the patent infringement dispute.

Perspective from VMI

VMI President and CEO Harm Voortman said in general he thinks competition is good for the industry. “It helps our company to stay sharp, to stay focused on being cost effective, and it brings the best out of our people to help our customers,” he said at ITEC. “There is quite some competition in the tire machinery division, and we respect that highly.”

What is not good, he added, is when a limited number of companies are not playing what VMI sees as a fair game.

“You can imagine for a Western-based company like VMI, we will never be the cheapest,” Mr. Voortman continued. “So I always tell my people we better be the best. And that is what we have been working on.

“I think we have the largest research and development staff in this industry, with top engineers working day in, day out to create solutions for our customers for them to be successful.”

With that business model, he said VMI works to stay ahead of the competition — something that costs a lot of money and dedication. “But from that business perspective, you cannot have this developed technology that has cost so much to be copied in a very short period of time.”

Because of that, he said VMI has a three-pronged approach to defend its intellectual property.

First, it continues to work diligently on research and development to bring new technology to the tire industry. “You can copy yesterday’s paper,” he said, “and if you’re very quick, today’s paper. But tomorrow’s newspaper you cannot copy.”

The second part of the approach involves offering top-flight service. “We want to show our customers that we really add value for them,” Mr. Voortman said. “After sales we help them. We install equipment very quickly, and we have short delivery times. We really help them to make money.”

Finally, VMI is taking a number of steps to protect its technology to avoid copying, according to Mr. Voortman. That includes putting part of the software behind encryption, along with the planned introduction of some dedicated hardware that has smart cameras with software and analysis built-in. “You cannot copy the software and buy the camera on the street,” he said. “This is a dedicated VMI-developed camera technology.”

It’s more difficult to protect technology on the mechanical side, the VMI executive said. “You can see it, you can measure, and you can use watches to check the timing.

“In order to protect that, there’s no other way than to use patents. There is an international patent law, and I think it is very good.”

So part of VMI machines are covered by patents, mainly the mechanical movements and the way the machine works, he said.

“Our policy is that if companies are obviously violating our patents, then we will start a lawsuit and bring them to court and let the judge decide whether they violated or not,” Mr. Voortman said.

In the past couple of years, VMI has filed several lawsuits in China accusing competitors of copying parts of the machine — cases the Dutch firm won. One such case in 2015 involved Shuangjun Plastic and Rubber Machinery Ltd., which it accused of infringing on a patent involving VMI’s tire-building drum.

Mr. Voortman said the Safe-Run case came to its attention because VMI — which claims to be the market leader in tire building machinery — knows all the customers in the market. “We have been in their plants and have seen what is going on,” he said. “I think it is impossible for any company to do anything on tire building equipment that does not come to our attention.”

And VMI is of the opinion Safe-Run violates a number of patents “spread all over the passenger tire building machine,” Mr. Voortman said. “We discussed this with them and warned them that in our opinion they are violating our legal rights. They left us no choice but to take further steps. It is up to the judge to decide.”

Safe-Run’s view

Being a small company and relative newcomer in the tire machine building industry, it is almost natural for customers to believe the larger supplier that has a more entrenched place in the market, said Armin Lutz Seidel, a consultant and head of international sales for Safe-Run. But the Chinese firm will fight the allegations and maintained the facts will be on its side.

Safe-Run Machinery
Armin Lutz Seidel is a consultant and head of international sales for Chinese company Safe-Run Machinery (Suzhou) Co. Ltd.

Mr. Seidel joined Safe-Run at the beginning of 2016 as the Chinese company — located about an hour from Shanghai in Jiangsu Province — looks to spread its base outside of China where, he said, “we have really a very stable customer base.”

In an interview at ITEC, Mr. Seidel said that, “all in all, we have sold more than 200 tire-building machines in the last four years.”

Safe-Run concentrates on uni-stage tire building machines, along with curing presses. It employs about 400 and in July opened a new factory that represents an investment of about $45 million and covers nearly 600,000 square feet, according to a company statement.

At the opening ceremony, Safe-Run Chairwoman Zhang Yingzi said the upgrade for the company was imperative and that the new base would help the firm “to further increase investment in R&D and strive to build a high-level manufacturing enterprise for the provision of better service to the tire industry.”

She added that the project was developed according to Industry 4.0 and Made in China Initiatives 2025 to become a world-class intelligent and fully automated machinery supplier.

Mr. Seidel said because China doesn’t have as strong a base of sub-suppliers as the U.S. or Europe does, it has a daughter company near its headquarters concentrated in steel frame to guarantee the quality. The only part of the process Safe-Run doesn’t do itself, he said, is surface treatment and painting, and for that it has quality suppliers.

Part of his job is to help establish a worldwide sales and service network. “That’s very important because without good service, you don’t sell the machines,” he said.

Mr. Seidel added he would classify Safe-Run as an “interesting” supplier because of its quality, performance and price. “I’m convinced that at the moment in passenger car tire uni-stage machines, Safe-Run has the best price/performance ratio in the world,” he said. “I don’t say cheap, but a very competitive price. We don’t want to be the cheapest.”

In the dispute with VMI, he said Safe-Run went on the offensive by filing suit because VMI was telling customers that the Chinese firm was infringing on its patents. “But they never proved it,” according to Mr. Seidel. “They didn’t go to court and open suit against them. And now we have sued them.”

VMI’s actions have impacted Safe-Run’s activities in trying to build its business, he acknowledged. “I don’t like to justify what is right and what is wrong in what they do. But the fact is there is another supplier of tire building machines to the market. It’s a new situation for them, and now we will see what happens.”

While Safe-Run does have some patents on its technologies, Safe-Run knows VMI has more. But what Mr. Seidel said his company can’t understand is how VMI would think Safe-Run could sell machines in the market using infringed patents.

“It’s simply impossible,” he said. “So we will not have patent infringement. This is a really clear statement. We are collaborating with one of the best law firms in Shanghai and with German law firms. Our machines will not infringe patents. We are highly focused because we know no one would buy machines from whomever with such problems. No one in the world anymore.”

Dispute going forward

Neither company would speculate on what the next moves will be in the IP case.

Mr. Voortman acknowledged it’s not easy to fight alleged IP violations in China, but that the legal system there has improved the last couple of years. “That gives us a better basis for filing cases like this,” he said. “In general you can say it has made it a little bit easier to protect your rights. On the other hand, it is still a very complicated fight. We think it is worth picking up this fight.”

He added that it’s not something VMI likes to do — it would much rather focus on its customers.

“We believe in developing technology, bringing the industry a step forward,” Mr. Voortman said. “That is our main focus. And in order to be successful in that, we have to work very hard, very diligently. Work with the customers. Listen to the customers. Do the development and, if needed, product our rights. And we will do so. We are convinced that we have a very strong case.”

Mr. Seidel said when Safe-run deals with potential customers that have heard these claims, the only way it can address them is by presenting Safe-Run’s set of technical facts.

“How you can fight against rumors is with facts,” he said. “We are a young company. VMI has the better reputation, so people believe VMI mentally. But we will fight with facts. It’s the only way for us. And we have good facts.”

_______________________________________

European Rubber Journal contributed to this report, which appeared in Rubber & Plastics News, an Akron-based sister publication of Tire Business.

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