A sector of China's manufacturing has broken through a strong defensive line of its European and American competitors: patent protection.

A victory over Energizer in a patent lawsuit in Germany brought by the international battery giant has encouraged Xia Xinde, the chairman of Guangzhou Nicebattery Technology Co., to launch a domestic lithium-iron battery in the market under its own brand, "Nicebattery." Nicebattery has been subcontracting the manufacturing of lithium-iron batteries for international brands for five years.

In June last year, Energizer launched a lawsuit against Nicebattery on patent infringement in the International Tribunal. Nicebattery won the lawsuit two months later. Xia Xinde says this victory cleared the last obstacle for Nicebattery to transform from a subcontractor to a brand manufacturer.

The competition between Nicebattery and Energizer is now moving from the law courts to the market. A few days ago, Nicebattery released its first independently developed disposable high-energy lithium-iron battery, with a discharge 7 times that of commonly used alkaline batteries and 42 times that of the traditional carbon-zinc batteries.

Energizer's lithium-iron battery sells for 20 yuan per unit, while Nicebattery's price is half of that. "We want to break the monopoly of the international giants in the lithium-iron battery industry with competitive pricing," Mr. Xia said.

The patent issue has been a shadow over the rapidly rising Chinese battery industry. Nicebattery has two factories, in Guangzhou and Zhuhai, with 4,000 employees and OEM orders totaling more than 600 million yuan each year. Had it lost the lawsuit, it would have been a devastating blow to the company.

China's battery industry has been fighting the patent battle for nearly six years, a battle launched by Energizer, which is headquartered in the US.

On April 28, 2003, Energizer brought suit at the US International Trade Commission (ITC) against nine mainland China and Hong Kong firms, including Nanfu, Shuanglu, Tigerhead, Changhong, Hi-watt, Baowang, Zheng-Long, Goldpower, and 3turn over a "709 mercury-free alkaline manganese battery patent." At the same time, Energizer was suing Chinese enterprises in Europe to prevent them from entering the U.S. and European markets.

Over the past six years, China's battery industry has pooled money to respond to the lawsuit and lost twice. Then last May, the U.S. Federal Circuit Court of Appeals upheld an ITC verdict that the patent held by Energizer was invalid.

Its lithium-iron battery is Energizer's best product, though its production costs are very high. Although low price is a fine advantage for Nicebattery, the company has a long way to go before it can dominate the market.

The lithium-iron battery is very high-grade and its market is not large. Energizer's lithium-iron battery sales are limited in the domestic market because of the costly raw materials. Nanfu, China's largest battery manufacturer, has also launched a lithium-iron battery, with a market price of 27 yuan, while another Nicebattery product costs 19 yuan. At these prices, alkaline batteries can still dominate the current domestic market.

The high price is a threshold for the universal use of lithium-iron batteries. A decade ago, an imported alkaline battery sold for 12 yuan in China. With competition from domestic brands, prices eventually fell to 2 yuan.

At present, the domestic battery recycling rate is only 2%. A lithium-iron battery equal to 7 alkaline batteries or 42 traditional carbon-zinc batteries contains no toxic or harmful substances. Vigorously promoting lithium-iron batteries from the environmental perspective might be a useful marketing tool in China.

According to China Battery Industry Association statistics, China is the world's largest battery manufacturer and consumer. In 2008, China's battery industry value was 246.8 billion yuan, and battery output was 39.2 billion, with 40% export, up over 40% compared to 2007. From 2005 to 2008, the high-energy environmentally-friendly batteries increased one billion a year, while carbon-zinc and nickel-cadmium batteries shrank to an annual average of 200 million.
                                                                                    Source: ChinaStakes.com