Durbin Meets with Fellowes, Inc CEO to Discuss Dispute in China
Senator asks Commerce Secretary to help resolve Itasca company's dispute
[WASHINGTON, D.C.] – U.S. Senator Dick Durbin (D-IL) today met with the CEO of Illinois-based Fellowes, Inc., Jamie Fellowes, to discuss the company’s effort to recover hundreds of millions of dollars worth of capital assets and intellectual property that were stolen by the company’s onetime Chinese business partner. Late last night, Durbin sent a letter to the Secretary of Commerce, Gary Locke, asking him to intervene in order to help resolve the dispute.
In his letter to Secretary Locke, Durbin wrote: “I respectfully request that you raise this matter with your Chinese counterpart to facilitate a reasonable solution and ensure that Fellowes’ legal interests and intellectual property rights are adequately protected. With a growing number of Illinois businesses seeking to gain access to the Chinese market, the current dispute between Fellowes and Shinri raises serious concerns regarding future trade ventures between our two countries. However, I remain hopeful that your expeditious action will bring this conflict to a fair conclusion.”
Mr. Fellowes is in town today to testify at a hearing of the House Foreign Affairs Subcommittee on Asia and the Pacific. The hearing, chaired by Congressman Don Manzullo (R-IL) will use Fellowes, Inc.’s situation to discuss the need for adequate trade protections for American companies doing business overseas, especially as it relates to their intellectual property.
In 2006, Itasca-based Fellowes, Inc – the leading manufacturer of office shredders worldwide – entered a joint venture with Shinri, a Chinese firm, to produce its line of paper shredders. In 2009, Shinri took control of the joint facility, stopped shipping products, and locked Fellowes employees out of the factory. Because Shinri stopped shipping Fellowes products, the joint venture was unable to pay its vendors. Those vendors filed suit in a Chinese court for non-payment and that court is expected to rule on the vendors’ behalf. As a result, Fellowes' assets, including tools owned by Fellows and unshipped products will be auctioned off with Shinri, Fellowes one-time-partner, set to buy the equipment for a fraction of their market price.
Actions of this kind are becoming increasingly common in China with American businesses frequently finding their contracts voided and their intellectual property stolen. Many Chinese firms are protected from prosecution and go on to flagrantly use stolen property for the creation and marketing of their own products.
Last month, Durbin and Manzullo joined Senator Mark Kirk (R-IL) and Representatives Peter Roskam (R-IL) in sending a bipartisan letter to the Chinese Ambassador asking for him to intervene in the case of an Illinois business that has been locked out of its own plant and had its intellectual property stolen by its onetime Chinese business partner.
[Text of Durbin’s letter to Locke is below]
March 30, 2011
The Honorable Gary F. Locke
Secretary of Commerce
Herbert Clark Hoover Building
1401 Constitution Ave, N.W.
Washington, D.C. 20230
Dear Secretary Locke:
I am writing to request your assistance in a matter involving Illinois-based Fellowes, Inc., the leading manufacturer of office shredders worldwide, in its dispute over the operation of its joint venture in Jiangsu Province, China. I respectfully request that you initiate contact with your Chinese counterparts, including Vice Premier Wang Qishan, to broker an appropriate resolution to the dispute and facilitate the prompt return of Fellowes’ lawful property.
It is my understanding that in 2006, Fellowes entered into a joint venture with Shinri Machinery Co., Ltd. (“Shinri”) in Changzhou, Jiangsu Province. Paper shredders manufactured under this joint venture (“JV”) have been marketed under the Fellowes brand and distributed worldwide. In 2009, a change in management at Shinri resulted in that company usurping control of the JV in direct violation of the JV contract. They then stopped the flow of shipments from the JV facility and refused to allow employees to continue the JV’s work. Fellowes has been denied access to the physical and intellectual property housed in the facility in violation of its contractual rights. Certain of these assets are wholly owned by Fellowes under the terms of the JV.
As a result of Shinri’s decision to stop shipments, vendors have filed suit against the JV for its failure to fulfill its contracts. A Changzhou court has initiated proceedings to auction all of the JV’s assets, including equipment, tools, injection molding, and nearly 70,000 unshipped paper shredders. The court has limited Fellowes’ ability to participate in this process. Further, Shinri appears to be positioning itself to purchase all the assets, including Fellowes property, at a fraction of the fair market value. In anticipation of securing control of these assets through the subsequent legal process, Shinri has begun to market paper shredders internationally.
The intangible value of Fellowes’ injection tools is much more than the mere cost of labor and materials to create them. Fellowes’ engineering expertise and intellectual property is what sets their shredders apart as the most precisely designed and durable on the market. The operation in Changzhou accounted for over one-third of Fellowes annual revenue and the theft of their proprietary intellectual property would severely hinder the company’s ability to globally compete.
Multiple letters on this issue to Chinese Ambassador Zhang Yesui from members of the Illinois Congressional Delegation went unanswered for several months. A recent reply from the Ambassador’s office, however, reflected an understanding of the dispute that runs counter to Fellowes’ account. As such, I respectfully request that you raise this matter with your Chinese counterpart to facilitate a reasonable solution and ensure that Fellowes’ legal interests and intellectual property rights are adequately protected. With a growing number of Illinois businesses seeking to gain access to the Chinese market, the current dispute between Fellowes and Shinri raises serious concerns regarding future trade ventures between our two countries. However, I remain hopeful that your expeditious action will bring this conflict to a fair conclusion.
Thank you for your assistance in this matter.
Richard J. Durbin
United States Senate
cc: Cam Kerry, General Counsel
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