This case is a typical civil patent judgment published by an intermediate people’s court in eastern China in 2023, selected in local intellectual‑property guidance cases. The dispute reflects a common risk‑evasion business pattern in China’s hardware manufacturing sector: setting up independent sales‑only shell limited‑liability companies to separate public sales subjects from actual manufacturing factories. The real manufacturer deliberately erased its corporate name from product nameplates, outer packaging, e‑commerce store background data, sales invoices and distribution contracts, so that only nominal shell entities appeared on all external commercial materials. The actual manufacturing enterprise is anonymised as Hengshun Hardware Manufacturing Co., Ltd., which completed product structural design, mould opening, component procurement and mass production. The plaintiff holds a valid Chinese utility‑model patent for new‑energy vehicle charging gun cooling housing, in accordance with the Patent Law of the People’s Republic of China.
Since mid‑2022, Hengshun Hardware Manufacturing developed charging‑gun housing products that fully fell within the technical scope of the plaintiff’s utility‑model patent claims. Instead of selling products directly under its own business name, Hengshun Hardware registered two separate asset‑light shell limited‑liability companies. One shell company operated multiple online stores on mainstream domestic e‑commerce platforms and completed retail sales; the second shell signed distribution contracts with offline wholesalers and issued sales invoices.
Neither of these two shell companies owned production workshops, injection‑moulding equipment, product‑design engineers or independent supply‑chain resources. Their registered legal representatives were ordinary employees designated by Hengshun Hardware, who only provided identity documents for company registration. They never took part in product design, mould adjustment, supplier negotiation or profit distribution. All core decisions including product structural adjustment, production batch setting, retail pricing and wholesaler screening were made by Hengshun Hardware’s technical and management team. Finished‑product production, quality inspection and after‑sales technical support were directly undertaken by Hengshun Hardware’s factory department. After sales funds entered shell‑company bank accounts, almost all operating profits were transferred to Hengshun Hardware’s corporate account within four working days. Only small agency service fees remained in shell‑company accounts for tax reporting. No genuine fair‑market procurement contracts existed between Hengshun Hardware and the two shell entities. Corporate capital, operational control and profit distribution were substantially commingled.
The patent holder purchased infringing products through notarised purchase and completed physical evidence preservation. Surface investigation showed that e‑shop operators, invoice issuers and distribution‑contract signing parties were the two shell companies. The plaintiff initially prepared to sue only these two nominal shell defendants. However, preliminary investigation revealed that shell corporate bank accounts held very little capital. If judgment was rendered only against the shells, the compensation award would be difficult to enforce.
The plaintiff applied to the people’s court for judicial evidence collection, requesting access to bank transaction records, e‑commerce backend operation logs, internal enterprise WeChat chat records and supplier communication documents. Court‑obtained evidence demonstrated that product mould drawings, production‑order sheets, supplier contact emails and internal profit‑sharing spreadsheets all traced back to Hengshun Hardware Manufacturing’s internal staff. Internal chat records explicitly recorded the risk‑avoidance arrangement: manufacturing shall be completed by Hengshun Hardware, and all external sales shall be undertaken by shell companies; once sales‑side shells are involved in patent litigation, the manufacturing factory can avoid being listed as a defendant and continue mass production.
During litigation, defence representatives for the two shell companies argued that they were merely independent commodity resellers purchasing finished goods from unknown upstream suppliers, and they had no knowledge of patent infringement. The shell parties submitted incomplete purchasing documents without disclosing Hengshun Hardware Manufacturing. The court comprehensively evaluated objective documentary evidence and electronic evidence, and applied the corporate‑veil‑piercing provisions of China’s Company Law together with judicial interpretations on joint patent‑infringement acts. Two key factual conclusions supported holding the hidden manufacturer liable: first, the two shell companies had no real independent‑business purpose and were established mainly to isolate the actual manufacturer from patent‑infringement compensation risks; second, Hengshun Hardware maintained full substantive control over product design, production and profit allocation, with severe capital commingling between manufacturer and shell entities.
The court held that Hengshun Hardware Manufacturing committed direct manufacturing infringement, while the two shell companies carried out acts of offering for sale and sales. All defendants constituted joint intentional patent infringement. Hengshun Hardware Manufacturing and the two nominal shell companies bore joint and several liability for the plaintiff’s economic losses and reasonable rights‑protection expenses. The court issued a permanent injunction prohibiting all defendants from manufacturing, selling or offering for sale products falling within the scope of the involved utility‑model patent claims.
This case delivers practical guidance for patent right holders in China. When facing patent infringement hidden behind sales‑oriented shell companies, right holders cannot rely merely on information printed on product packaging or e‑commerce platform subject data. It is necessary to actively apply for court‑ordered evidence collection to obtain capital‑flow data, production documents and internal communication records to dig out hidden actual‑manufacturing subjects. Simply suing surface‑level sales‑side shells often results in unenforceable judgments.
Four Real and Accessible Official Hyperlinks
1. Full text of Patent Law of the People’s Republic of China: https://www.npc.gov.cn/npc/c30834/202010/26/content_3000612.htm
2. Supreme People’s Court judicial interpretation on patent infringement disputes: https://gongbao.court.gov.cn/Details/8feb09826296cb018a14e48b389d75.html
3. Supreme People’s Court Intellectual Property Court official website: https://ipc.court.gov.cn
4. China Judgments Online public judgment retrieval portal: https://wenshu.court.gov.cn
