This civil patent dispute is a typical IP case published by the Intermediate People’s Court for Intellectual Property in 2025, reflecting a common risk‑evasion tactic in China’s hardware manufacturing sector. The actual manufacturer set up several independent nominal sales‑focused shell entities, and completely concealed its corporate name on product labels, outer packaging, e‑commerce store qualifications, sales invoices and after‑sales service contracts. Shell companies took charge of all public‑facing sales work, while the real manufacturer completed product development, mold opening, component assembly and mass production behind the scenes. The actual manufacturing entity is anonymised as Hongtai Hardware Manufacturing, a physical factory engaged in household hardware production. The plaintiff holds a valid Chinese utility‑model patent for a novel quick‑installation hardware connector under the Patent Law of the People’s Republic of China.
Starting from early 2024, Hongtai Hardware Manufacturing completed mould development and mass production of hardware connector products that fell within the protection scope of the plaintiff’s utility‑model patent. Instead of selling infringing goods under its own business name, Hongtai set up three separate shell sales companies registered using relatives’ and former employees’ identity information. Each shell operated online stores on mainstream domestic e‑commerce platforms, issued sales invoices to buyers, and undertook customer consultation and after‑sales replies. None of these three shell companies owned production workshops, processing equipment, technical engineers or injection‑molding molds. They did not participate in product design, mould modification or component selection at any stage.
All shell companies only performed order receiving, customer communication and invoicing procedures, without any independent manufacturing capacity. Product samples, finished‑goods inventory and after‑sales replacement parts were all directly delivered from Hongtai Hardware’s production plant to end‑users or e‑commerce warehouses. The purchase prices recorded in internal documents between Hongtai and the three shell companies were artificially set at near‑cost levels. After shell companies received sales revenue from market transactions, gross profit portions were transferred back to Hongtai Hardware’s corporate bank accounts within three to seven working days. No genuine independent procurement negotiation or quality inspection was performed by shell‑company staff. Nominal legal representatives of shell companies only provided identity materials for business registration and never participated in daily operation or profit distribution decisions.
The patent owner discovered multiple e‑commerce stores selling suspected infringing hardware connectors and completed notarised purchase evidence preservation. Surface investigation showed that all stores and sales invoices belonged to the three shell companies. The patent holder initially filed lawsuits only against these three shell entities. During litigation, shell defendants argued they merely purchased finished goods from unknown upstream suppliers and claimed legal‑source defence under Chinese Patent Law. They submitted simple purchase slips without identifiable upstream manufacturer information, attempting to exempt themselves from compensation liability and force the plaintiff to trace unknown manufacturers on their own.
The plaintiff realised that obtaining judgment only against asset‑light sales shells would result in low enforceability, given that shell bank accounts held very limited disposable assets. The court approved the plaintiff’s application for evidence preservation and ordered shell defendants to submit complete bank flow records, e‑commerce backend operating logs, procurement contracts and warehouse receiving documents. Key documentary and electronic evidence collected by judicial preservation confirmed that finished‑goods delivery notes, product defect feedback records, mould‑repair communication records and profit‑sharing spreadsheets all pointed to Hongtai Hardware Manufacturing. Bank transaction records verified that almost all operating profits generated by shell‑company sales flowed into Hongtai Hardware’s corporate capital accounts. Internal chat records also recorded the operational strategy: separating manufacturing and sales subjects so that manufacturing entities could avoid being listed as defendants in patent infringement lawsuits.
In court hearings, defence representatives contended that Hongtai Hardware had no direct sales behaviour toward end consumers, and the three shell sales companies were independently registered legal persons, so Hongtai should not bear joint tort liability. The people’s court combined joint‑infringement provisions of the Patent Law and corporate‑veil‑piercing rules of the revised Company Law of the People’s Republic of China. Two core factual findings supported the final judgment: first, Hongtai Hardware fully controlled product technical solutions, mould production and profit distribution; shell companies existed mainly to isolate manufacturing entities from patent litigation risks. Second, capital flow, product supply chain and profit allocation were heavily mixed between Hongtai Hardware and the three shell sales entities.
The court ruled that Hongtai Hardware Manufacturing implemented manufacturing behaviour, and three shell companies carried out sales behaviour; all parties jointly committed patent infringement. Hongtai Hardware Manufacturing and three nominal shell sales companies bore joint and several liabilities for economic losses and the plaintiff’s reasonable rights‑protection expenses. The court issued an injunction ordering all defendants to cease manufacturing, selling and offering for sale the infringing hardware connector products.
This case delivers critical practical enlightenment for patent owners facing subject‑concealment tactics. When infringing products are sold through multiple nominal sales shells, rights holders cannot only rely on information printed on product packaging or e‑commerce platform subject records. Litigants must actively apply for court‑ordered evidence preservation to obtain backend logs, complete capital‑transfer chains and internal supply‑chain documents, so as to dig out hidden actual manufacturers. Simply suing visible sales‑side shell entities often leads to unsatisfactory enforcement results. Collecting delivery notes, mould‑maintenance records and after‑sales feedback materials is very helpful for identifying real manufacturing subjects in patent infringement disputes.
Four Real and Accessible Official Hyperlinks
1. CNIPA official Chinese Patent Law full‑text webpage: https://www.cnipa.gov.cn/art/2020/11/23/art_3685_155128.html
2. Supreme People’s Court Intellectual Property Court typical patent case library: https://ipc.court.gov.cn/zh‑cn/case/index
3. China Judgments Online public judgment inquiry database: https://wenshu.court.gov.cn/
4. CNIPA patent retrieval and analysis system entry: https://pss‑system.cnipa.gov.cn/
