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Knowles Says China Court Bars It From Defending Patents

Knowles Corp. (KN), a maker of hearing-aid components and microphones for smartphones, said a Chinese court barred it from a trial where it’s the defendant in a patent dispute with rival Apple Inc. (AAPL) supplier Goertek Inc. (002241)

The decision is the latest in a series of “highly irregular actions” that have denied the company a fair trial in Weifang, Goertek’s hometown, Knowles said in an e-mailed statement yesterday. “Knowles continues to go through official Chinese legal channels and is asking for the most basic of legal rights,” Chief Executive Officer Jeffrey Niew said in the statement.

An official at the court’s communications department, who only gave his last name Wang, said when reached by phone the court couldn’t comment on the case. A woman who answered the phone at Goertek’s headquarters in Weifang, in eastern China, declined to comment and hung up.

The Weifang dispute is one of three that Knowles and Goertek, headed by billionaire Chairman Jiang Bin, are waging against each other in the U.S. and China over patents for microphone technology. Both supply micro-electromechanical systems microphones to Apple, according to IHS Technology, though Goertek gets more of its revenue from Samsung Electronics Co. and Lenovo Group Ltd, according to data compiled by Bloomberg.

Shares Fall

Goertek shares fell as much as 1.9 percent, the most in four days, to 27.41 yuan in Shenzhen trading this morning. Knowles rose 0.1 percent to $31.61 in U.S. trading yesterday.

Carolyn Wu, a Beijing-based Apple spokeswoman, didn’t respond to an e-mailed request for comment.

Knowles lodged a complaint against Goertek in June at the U.S. International Trade Commission for patent infringement, according to the company. Goertek responded by suing Knowles’ Suzhou unit in Weifang for infringement, and the U.S. company counter-sued in Suzhou, 85 kilometers from Shanghai.

The Chinese court “improperly seized excessive quantities of products” from Knowles as evidence and disrupted manufacturing operations, according to the statement. Knowles was also fined 1 million yuan ($161,000) for failing to cooperate with the court.

On March 24, Chinese Premier Li Keqiang pledged to place more emphasis on intellectual property rights protection and underlined harsher penalties for infringements, according to the official Xinhua News Agency.

Knowles’ allegation comes after InterDigital Inc. accused China in December of threatening to arrest or detain its employees over a bid to collect patent royalties from Huawei Technologies Co. China started a probe into alleged violations of anti-monopoly laws after InterDigital filed an infringement complaint against handset makers including Huawei at the International Trade Commission. InterDigital and Huawei agreed to arbitration to resolve their dispute after the Chinese company won in the U.S.

To contact the reporter on this story: Andrea Tan in Singapore at atan17@bloomberg.net

To contact the editors responsible for this story: Douglas Wong at dwong19@bloomberg.net Garry Smith

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