China Innovation Airlines is about to go public: Will the "old injury" of the 188 million patent infringement case recur?

「Core Tips」

Technology is the lifeblood of the development of high-end manufacturing. However, as a rapidly rising power battery dark horse, Zhongxin Airlines is facing patent infringement lawsuits from the Ningde era, which also makes its development variable.

Author | Gokuneng

Edited by | Li Xin

"A battery company, whether it can be done, technical strength is fundamental."

At the strategy conference of AVIC Lithium Battery (now known as China Innovation Airlines) on November 17, 2021, Liu Jingyu, chairman of China Innovation Airlines, said in an interview that without technology, even if there is money to expand production, it is useless. Therefore, as long as the company's technology passes, there will be no overcapacity.

However, the technical battlefield that makes Liu Jingyu proud has encountered infringement lawsuits.

On March 11 this year, the prospectus of China Innovation Airlines published on the official website of the Hong Kong Stock Exchange disclosed for the first time the details of the battery patent dispute between CATL times and China Innovation Airlines:

CATL sued Zhongxin Airlines for a total of 5 infringing patents, claiming 188 million yuan.

While emphasizing technology, what kind of challenges will China Innovation Airlines face while being sued for infringement?

1. Listing is imminent: The prospectus discloses infringement claims of 188 million

Bloomberg news on March 9, people familiar with the matter revealed that China Innovation Airlines plans to file an initial public offering (IPO) application in Hong Kong as early as this week, planning to raise $1.5 billion, about 9.5 billion yuan.

If it goes well, it is expected to be the largest IPO in Hong Kong so far this year. The person said that China Innovation Airlines is negotiating with Huatai Securities on listing, and the scale and time rhythm of the IPO may change.

On March 11, the Hong Kong Stock Exchange announced the prospectus of China Innovation Airlines.

The ip infringement complaint in the prospectus said that in August and October 2021, China Innovation Airlines received a notice from the Fuzhou Intermediate Court informing China Innovation Airlines that CATL sued for patent infringement in July and September 2021, involving a total of five patents.

CATL asked the court to determine:

Immediately stop infringing relevant patents, stop manufacturing, selling or selling relevant products that apply the above patents, and compensate 185 million yuan, including patent fees, and bear 3 million yuan in expenses incurred to stop infringement, a total of 188 million yuan.

China Innovation Airlines believes that the lawsuit lacks basis and is preparing to raise a defense.

In the prospectus, China Innovation Airlines stated that the lawsuit would not have a material adverse effect on the Group's overall business, financial condition or results of operations.

China Innovation Aviation has applied to the State Intellectual Property Office for invalidation of five patents, and the application is currently being reviewed by the State Intellectual Property Office.

As early as last November 17, after the strategy conference of China Innovation Airlines, Chairman Liu Jingyu replied to the patent infringement in an interview.

But because the listing plan had been launched at that time, Liu Jingyu was playing Tai Chi.

Liu Jingyu first denied the motive of malicious infringement of AVIC Lithium Battery, saying that it was inconvenient to disclose more details due to confidentiality requirements.

Directly avoiding the infringement, Liu Jingyu introduced the topic to praise Zeng Yuqun, chairman of the Ningde era: his pattern will not be small, and he must have his amazing talent.

Liu Jingyu claims that in her dictionary, there is no concept of competition with her peers, "I think the most important point is still in myself." The market has always been there, and whoever can make the market bigger and do a good job must rely on strength. ”

So, what is the so-called patent infringement?

2. 5 patent infringements: China Innovation Airlines proves that there is no infringement "relatively hanging"

There are five patents in the battery patent dispute between CATL times and China Innovation Aviation, namely: China Utility Model Patent No. 201520401861.0, No. 201521112402.7 and China Patent No. 201810696957.2, No. 201810039458.6, No. 201910295365.4.

Five patents, two for utility and three for the remaining three, two for 10 years and the remaining three for 20 years.

The first patent application number is 201520401861.0, the filing date is June 11, 2015, approved in September 2015, and is valid until June 2025, which is valid for 10 years.

When the power battery is overcharged, the decomposition of the electrolyte will cause excessive heat energy to be generated inside the battery, causing the battery to catch fire or explode.

Therefore, before the thermal runaway, it is necessary to cut off the fuse structure in the main circuit of the power battery with the help of an external short circuit structure to prevent further charging.

The overcurrent capacity of the external short-circuit structure is stronger than that of the fuse, and it cannot be blown before the fuse. This invention was made to solve the problem of power battery top cover structure and flip plate easy to fuse.

The second patent application number is 201521112402.7, the filing date is December 29, 2015, approved in May 2016, valid until December 2025, valid for 10 years, the name is an explosion-proof device.

Lithium-ion batteries are filled with a large number of chemicals, charging and discharging process will produce a large number of gas mixtures, so that the battery inside the continuous accumulation of pressure, if the pressure is not released in time, will lead to battery explosion.

In order to prevent the battery from exploding, the most common measure is to set up a safety protection device on the top cover of the battery. However, the common safety protection device is easy to deform due to the poor strength of the battery top cover, and the processing requirements are high.

This invention provides an explosion-proof device that enhances the strength of the battery top cover and reduces the processability requirements.

The third patent application number is 201810696957.2, the filing date is June 29, 2018, the application publication date is November 23, 2018, approved in April 2019, valid until June 2038, valid for 20 years, named "cathode plate and battery".

During the battery cycle, it is easy to swell, there is a safety hazard, and the battery performance is deteriorated. This invention provides a positive electrode piece with small expansion and excellent kinetic properties.

The fourth patent application number is 201810039458.6, the filing date is January 16, 2018, the application publication date is July 6, 2018, approved in September 2020, valid until January 2038, valid for 20 years, and the name is "Collector Components and Batteries".

The lithium-ion battery collector member and the pole ear were previously welded and assembled, that is, the collector member was bent, thereby reducing the internal space occupied by it and increasing the energy density. However, when the collector member bends, it deforms and presses against the electrode assembly, damaging the electrode assembly. This invention in the Ningde era can avoid damage to the electrode assembly when the collector is bent.

The fifth patent application number 201910295365.4, the filing date is April 28, 2018, the application publication date is July 12, 2019, approved in August 2020, valid until April 2038, valid for 20 years, the name is "lithium-ion battery".

Battery charging speed is one of the key technologies, and the key to determining the charging speed is the negative electrode. The invention mainly provides a reasonable polar design to achieve a fast charging effect.

An industry insider who has worked in the technical department of well-known domestic battery manufacturers told Chaoyuanli that at present, there is a difference between utility patents and invention patents on the market, "simply put, the gold content is not the same."

According to its introduction, the invention patent has not been reinvented before, and the term of protection is generally 20 years. Utility patents are micro-innovations made on the basis of existing ones, with a lower technical content than the former, and the term of protection is 10 years.

"Specific to the above 5 patents, such as the power battery top cover structure and explosion-proof device, involving the process structure, it is not an invention patent, but a practical patent." According to the above-mentioned person, when it comes to the content of material formulas, it is generally necessary to apply for invention patents.

Before the manufacturer produces the product, if it finds that the patent has been applied for and the authorization announcement is issued, it will generally consider circumvention.

"For example, explosion-proof valves, some manufacturers make it like a fish bone shape, and some make an opening similar to the shape of X, this patent is easier to avoid."

The above-mentioned person pointed out that in the field of battery production, it is rare for manufacturers to apply for authorized patents. If negotiated, the two sides will directly use the amount of a patent, "for example, to grant 1 million or millions of licenses, so many operations." It is not possible to calculate the cost based on the number of production units involved in the patent, and "the evaluation is very troublesome".

When a lawsuit arises, the manufacturer's first reaction is generally how to deal with it, to see if it can be resolved through consultation; if it comes to the stage of responding to the lawsuit, the enterprise will strive for patent authorization; and then no, it is the two sides sitting down to negotiate compensation. According to the analysis of the above-mentioned person, the company will find out what the plaintiff's original intention is.

In her view, at the moment, the litigation may have two outcomes:

First, China Innovation Airlines found evidence to prove that it had not infringed or had circumvented it, "this point is relatively hanging at present";

Second, the two sides eventually settled privately and negotiated compensation costs.

The above-mentioned person told "Super Source Force" that at the beginning, The new aviation battery in some host manufacturers was in a hurry, in order to adapt to mature car companies, it can only be improved on the battery, and strive to be similar or similar to the products previously used, which buried the risk of patent infringement.

3. Hidden worries in reality: China Innovation Airlines has low gross profit margin and weak bargaining power

The above-mentioned person told "Super Source Force" that the strongest thing in the Ningde era is its overall layout from upstream materials to battery production line equipment supply, using such advantages to promote the iteration of its own products, "Otherwise, its product quotation is 10% higher than other manufacturers and can it be accepted by car companies? ”

"In fact, the competition is all-round, involving the whole body." She pointed out that in the past two years, battery manufacturers have announced expansion, but the landing speed is slower, because equipment suppliers prefer to supply the Ningde era, resulting in insufficient equipment supply of other battery companies, and the production capacity landing cycle is delayed.

The person also pointed out that the competition in the power battery industry has intensified, and the gross profit margin has declined year by year, "at present, there are a few people such as the Ningde era that make money."

According to the company's annual financial report, the gross profit margin of China Innovation Airlines in the past three years was 5.20%, 13.70% and 5.50% respectively.

China Innovation Airlines is a "catch-up enterprise" and its ability to counter factors such as the rise in raw materials remains to be seen.

The prospectus shows that due to the rise in raw material costs, the gross profit margin of China Innovation Airlines has declined. If the price of raw materials rises by another 5%, that is, the cost increase is 270 million yuan, and the pre-tax profit of China New Guinea Last Year was 63 million yuan, which will completely become negative.

In order to open up the market, the bargaining power of China Innovation Airlines is weak.

According to the calculation of the proportion of revenue and installed capacity in 2021, the price of China New Aviation Power Battery is 0.65 yuan per watt-hour, which is lower than the industry average of 0.84 yuan in that year, and the gross profit per watt-hour is 0.03 yuan after deducting other factors.

An investor told Chaoyuanli that The listing of China Innovation Airlines in Hong Kong was mainly to raise funds to complete the expansion plan, and the above problems could not be taken into account at this time.

According to media reports, China Innovation Airlines plans to raise US$1.5 billion, equivalent to RMB9.5 billion. "For a company valued at 60 billion yuan, this money can solve some of the expansion problems." said the above-mentioned investment source.

China Innovation Airlines has been "catching up" in recent years.

Founded in 2007, the predecessor of China New Ventures was Sky Energy, in 2009 the company was reorganized and renamed as AVIC Lithium Battery, and in 2010, Sichuan Chengfei integrated into the main business, adjusting the lithium battery business to the main business. In 2017, due to the adjustment of the subsidy policy for new energy vehicles, the ternary lithium battery benefited, and the lithium iron phosphate battery, the main focus of AVIC lithium battery, was frustrated, the customer was affected, the technical route was not adjusted in time, and the loading volume fell out of the top ten.

On July 20, 2018, Liu Jingyu became the chairman of the board and began to adjust. After taking office, she focused her production capacity on ternary batteries. As a novice, AVIC Lithium Battery avoided the high-nickel route and chose the 5 Series (NCM523) direction to enter the market.

In the meantime, Liu Jingyu completed the restructuring of the company, and AVIC Lithium Battery was renamed to China New Airlines on November 18, 2021. Liu Jingyu explained that one of the purposes of the shareholding system reform is to go public.

Liu Jingyu later concluded that after she took office, the company went through four stages: how to survive, how to go forward together, and create a win-win situation with partners, and the fourth stage was "not to hold the pipa and half cover your face, to dare to show the sword".