Tela Innovations Files Complaint Against Lenovo, China’s Largest PC Supplier

December 23, 2018 Updated: December 23, 2018

Tela Innovations, a California-based tech company, filed a complaint with the U.S. International Trade Commission charging that Lenovo, China’s largest supplier of personal computers, exports products to the United States that infringe on its patents.

On Dec. 19, Tela filed complaints with the commission (USITC) to protect its patent rights on lithography-optimized design solutions for integrated circuits. Lenovo Group Ltd. of China, and Lenovo (United States) Inc. of Morrisville, North Carolina, are listed among the respondents.

Tela, which is headquartered in Los Gatos, claimed that Lenovo’s 520S-231KU compact all-in-one desktop and other items produced by the Chinese company use “certain integrated circuits and products containing the same” components as its own products.

Lenovo’s electronics are made in China, then exported to and sold in the United States. Should Tela win the case, it would indicate that Lenovo acted in violation of Section 337 of the Tariff Act of 1930 (19 U.S.C. 1337). Lenovo could then be barred from marketing these products.

To support its claims, Tela supplied product introduction and photos of the Lenovo 520S-231KU, showing the relevant parts.

In 2017, Lenovo’s revenue was $45.35 billion, as compared with Dell’s $78.66 billion. Thirty-one percent of Lenovo’s revenue that year came from the Americas.

According to Section 337 of the Tariff Act, the USITC will first review the complaint, after which a decision to start an investigation is usually reached within 30 calendar days. Historically, the USITC has strived to complete most investigations within 15 months. If Lenovo is found guilty of the charges, it could face three outcomes: general-exclusion orders, limited-exclusion orders, or cease and desist orders.

A general-exclusion order directs the U.S. Customs and Border Protection (CBP) to exclude all infringing products, without regard to source, from entry into the United States. A limited-exclusion order directs the CBP to exclude the infringing products that originate from a specified firm, Lenovo in this case, from entry to the United States. A cease-and-desist order directs the defendant to cease its unfair acts, including selling the offending products in the U.S. market.

In its complaint, Tela asked for a limited-exclusion order plus a cease-and-desist order.

In the same case, Tela also filed complaints against Taiwan’s Acer, AsusTek, and Micro-Star International, as well as Intel and MSI Computer.

Lenovo was founded in 1984 as a branch of the Chinese Academy of Sciences. The Academy became Lenovo’s holding company following its joining the Hong Kong stock exchange in 1994.

In 2005, Lenovo accelerated its access to foreign markets by acquiring IBM’s personal-computer business, including its ThinkPad laptop and tablet lines. In 2014, Lenovo acquired Motorola Mobility from Google. Apart from these acquisitions, Lenovo also had acquired CCE’s owner, the Brazilian electronics company Digibras, and U.S. software company Stoneware.

Lenovo has set up joint ventures with Japanese electronics firms NEC and Fujitsu, German electronics manufacturing company Medion, as well as America’s EMC and DataCore.

Since 2013, Lenovo PCs and laptops have been found to contain backdoors in their hardware that allow remote manipulation of the devices, media reports say. Australia, the United States, the United Kingdom, Canada, and New Zealand have announced bans on Lenovo products by their intelligence agencies.

In 2015, the Israeli software Superfish, which came pre-installed on Lenovo laptops, was discovered to be leaving users vulnerable to security loopholes. In 2017, Lenovo agreed to pay $3.5 million as part of a settlement with the U.S. Federal Trade Commission.

Filing complaints with the USITC has increasingly been a tool for both U.S. and Chinese firms to settle patent disputes. In May, American sound equipment maker Bose filed a complaint alleging that a number of firms, in China and elsewhere, have infringed on the company’s copyrights on earpiece devices.

In September, Autel Robotics, a U.S. subsidiary of the China-based Autel, alleged that Chinese rival DJI had infringed on its patented drone features for aerial photography.

Meanwhile, China is the source for more than 70 percent of the world’s physical trade-related counterfeiting, at a value of more than $285 billion, according to a 2016 report by the U.S. Chamber of Commerce.