This is a 2025 typical utility‑model patent civil judgment published by a local intellectual‑property intermediate court, reflecting a common risk‑isolation strategy in China’s hardware manufacturing sector. To avoid patent litigation, execution of compensation and administrative penalties, the actual manufacturer establishes an independent sales‑oriented shell company. The production factory never appears on product outer packages, e‑commerce store qualifications, invoices or public sales channels; all outward‑facing commercial activities are conducted exclusively by the shell sales entity. Once litigation arises, the shell claims it merely purchases finished goods from third‑party suppliers and disclaims manufacturing liability. In this case, the real manufacturing enterprise is anonymized as Orion Equipment Co., Ltd., and its sales shell company is named Horizon Trading Co., Ltd. The plaintiff holds a valid utility‑model patent for an industrial auxiliary fixture widely used in metal processing workshops.
The plaintiff obtained utility‑model patent authorization for its industrial fixture in 2021 and invested substantial costs in product iteration and market promotion. In late 2024, the patent holder discovered large quantities of infringing fixtures sold across multiple domestic e‑commerce platforms. All online shops, product packaging, sales invoices and after‑sales service information identified Horizon Trading Co., Ltd. as the sole commercial subject. The plaintiff purchased infringing products through notarized procurement and confirmed that all technical features of the accused product completely fell within the protection scope of the asserted utility‑model patent.
The plaintiff issued a cease‑and‑desist letter to Horizon Trading. The shell company responded that it only engaged in trading business and did not operate any production workshop. It argued that all accused fixtures were externally sourced from unidentified suppliers, and it should bear no manufacturing‑related patent infringement liability. Horizon Trading maintained low registered capital, no production equipment, no workshop site and only several sales‑focused employees. If the court only held the sales shell liable, the plaintiff could only obtain compensation corresponding to sales profits, while the real high‑volume manufacturer Orion Equipment would escape primary liability for manufacturing infringement.
The plaintiff initiated litigation naming Horizon Trading as the initial defendant. During pre‑trial evidence exchange, the shell submitted simple purchase contracts without exposing the specific supplier identity. Realizing that surface documentary evidence was deliberately incomplete, the plaintiff filed an application to the court for evidence production order and on‑site evidence preservation, requesting access to Horizon’s complete supplier ledger, payment bank records, logistics delivery manifests, supplier communication records, and product‑source tracing materials.
After the court granted the evidence‑collection application, critical factual evidence gradually emerged. Large‑amount payment records proved that nearly all payments for infringing fixture stock were transferred to Orion Equipment’s corporate bank account. Delivery manifests showed goods were directly shipped from Orion’s industrial plant address to e‑commerce warehouses. Internal chat records further demonstrated that Horizon Trading’s product pricing, technical parameter adjustment and after‑sales technical support were all directly formulated and provided by Orion Equipment. Horizon Trading had no independent product‑sourcing decision‑making power; it functioned purely as a front‑facing sales channel deliberately set up by Orion Equipment to separate manufacturing exposure from public market sales. The two entities had overlapping core management personnel, and Horizon’s operating costs were continuously subsidized by Orion Equipment.
The core legal dispute focused on whether Orion Equipment, as the hidden actual manufacturer, should jointly bear patent infringement liability even though its name never appeared on any public sales‑related materials. The defendant Orion Equipment contended that it had no direct contractual relationship with end customers and all outward sales acts were performed by the independent legal‑person Horizon Trading.
The intellectual‑property court comprehensively reviewed payment flow, logistics data, personnel connection, business dependency and the purpose for establishing the shell company. The court ruled that manufacturing liability for patent infringement shall not be exempted merely by transferring all public‑facing sales activities to a separately‑incorporated shell company under actual control. Horizon Trading did not conduct independent sourcing; the whole infringing product series was designed, manufactured and supplied by Orion Equipment. Orion Equipment and Horizon Trading jointly completed the full chain of patent infringement including manufacturing, selling and offering for sale. The court ordered both defendants to immediately stop manufacturing, selling and offering for sale the infringing fixtures, destroy special production moulds, and jointly compensate the plaintiff for economic losses plus reasonable rights‑protection expenses including notarization fees, forensic appraisal fees and attorney fees.
This case delivers high‑value practical takeaways for patent owners. First, patent right holders cannot rely solely on information printed on product packages or e‑commerce merchant pages to confirm infringement subjects. Sales‑focused shell entities are frequently deliberately deployed to hide real manufacturers. Second, in patent‑infringement lawsuits involving hardware goods, right holders should actively apply for court‑ordered evidence production to obtain supplier books, capital transfer records and logistics documents, which constitute core evidence to trace hidden manufacturing entities. Third, when discovering suspicious shell‑controlled structures, plaintiffs should try to add the suspected hidden actual manufacturer as a co‑defendant at an early litigation stage, rather than only suing the visible sales subject. Winning a judgment only against an asset‑light sales shell often leads to unsatisfactory enforcement results. Enterprises should also pay attention to collecting multi‑dimensional circumstantial evidence including shipping addresses, payment targets and internal business communication records, which play decisive roles in piercing deliberately separated corporate structures in patent disputes.
1. National Intellectual Property Administration official website: https://www.cnipa.gov.cn
2. Supreme People’s Court IPR Judgement Database: https://ipr.court.gov.cn
3. China Patent Protection Association official portal: http://www.ppac.org.cn
4. ICLG Patents Laws and Regulations China 2026: https://iclg.com/practice‑areas/patents‑laws‑and‑regulations/china
