Shenzhen Chitado and Hangzhou CHIC's U.S. Patent Litigation Case Briefing

**I. Case History and Background**

In August 2020, Hangzhou CHIC Intelligent Technology Co., Ltd. (CHIC) and its exclusive U.S. sales company, Unicorn Global, Inc., filed a lawsuit in the U.S. District Court for the Northern District of Illinois against multiple defendants (Case No.: 1:20-cV-04806), alleging infringement of CHIC's four U.S. design patents D737,723, D738,256, D785,112, and D784,195.

One of the defendants in the lawsuit initiated by CHIC was Shenzhen Chitaidou’s (Chitado) Amazon store "GYROOR." CHIC applied for a relevant injunction against the GYROOR store and froze the store's sales funds. In response, Chitado spent millions of dollars in U.S. legal fees and/or expert fees to defend itself, such as overturning injunctions, asserting non-infringement defenses, and seeking compensation from the other party.

On November 24, 2020, the U.S. District Court for the Northern District of Illinois issued an injunction prohibiting the defendant GYROOR from promising to sell, selling, and importing any products that copy the patented products without the authorization of the plaintiff. On August 24, 2021, the plaintiff CHIC filed a second request for an injunction, which was granted by the district court. Chitado subsequently appealed to the U.S. Court of Appeals for the Federal Circuit (CAFC) and successfully overturned these injunctions. At issue in the CAFC's consideration was whether the plaintiff CHIC had demonstrated a likelihood of success on the merits that GYROOR's accused infringing products infringed the asserted patents, but CHIC failed to provide substantial proof. In essence, CHIC's injunction was malicious in nature, as it used several U.S. design patents to sue a large number of Chinese balance bike sellers in a single lawsuit. CHIC's pursuit of injunctions against so many Chinese sellers was primarily based on the assumption that these Chinese sellers would not dare to hire expensive lawyers in the United States to defend themselves. This approach was clearly malicious, as the vast majority of the products in question did not infringe any patents. However, in retrospect, CHIC did achieve its goal. Among the group of defendants (dozens of Chinese companies), the vast majority of companies chose to settle with CHIC and pay a settlement fee. Only Chitado (GYROOR) insisted on fighting back and defending itself.

In order to counter CHIC, Chitado hired relevant technical experts in the United States to produce expert reports that provided an in-depth analysis of the non-infringement facts. The conclusions of these expert reports were ultimately accepted by the judges (both at the CAFC and the lower courts). On October 28, 2022, the U.S. Court of Appeals for the Federal Circuit (CAFC) issued a judgment revoking the injunction imposed by the U.S. District Court for the Northern District of Illinois on the GYROOR store. The primary reason for this decision was that the plaintiff CHIC did not have sufficient evidence to prove the likelihood of success on the merits. The specific reasons included the following four aspects:

  1. The district court applied an incorrect legal standard;
  2. The district court failed to analyze the existing design from the perspective of an ordinary observer;
  3. The district court failed to conduct a product-by-product analysis from the perspective of an ordinary observer;
  4. The scope of the injunction issued by the district court was too broad.

After the CAFC revoked CHIC's injunction in October 2022, Chitado's aforementioned GYROOR store was unblocked by Amazon. Additionally, after our victory in the CAFC in October 2022, mainstream legal media outlets in China and abroad (ipwatchdog/Bloomberg/law360/China Council for the Promotion of International Trade/Shanghai Fair Trade/China's Ministry of Commerce China Trade and Economic Information Network) reported on this judgment. The reason for this attention is that this CAFC judgment can serve as an important precedent for other courts in handling similar cases in the future. The most significant impact of this judgment is that it clearly rectifies the current ease and lack of rigor with which injunctions are issued in U.S. lower courts, thereby increasing the difficulty/threshold for obtaining similar patent infringement injunctions in the future. This is of great significance, especially in the current trend of cross-border e-commerce, where companies, primarily on Amazon, are abusing patent injunctions to maliciously suppress their competitors (especially Chinese companies targeting other Chinese companies).

However, even after CHIC's defeat in the CAFC in October 2022, they still refused to give up and continued to use their aforementioned four U.S. balance bike design patents to apply for an injunction against GYROOR balance bikes in the U.S. District Court for the Northern District of Illinois. This time, however, the district court denied CHIC's motion for an injunction, finding that CHIC had no likelihood of success on the merits.

**II. Decisive Victory**

On January 12, 2024, the U.S. District Court for the Northern District of Illinois finally issued a decisive judgment, ruling that GYROOR balance bikes do not infringe CHIC's patents. Thus, after more than three years of patent litigation, Chitado achieved a decisive victory, and CHIC's last hope of winning the lawsuit was dashed. Subsequently, Chitado will continue to seek compensation from CHIC for the losses incurred by Chitado due to the patent litigation over the past three years. We are determined to fight against CHIC's despicable and arrogant behavior to the end.

**III. Those Who Do Evil Will Eventually Suffer**

Incidentally, CHIC's behavior over the years has aroused the disgust of many peers. Numerous companies, both domestic and foreign, have launched challenges against their core patents and achieved remarkable victories:

  1. CHIC's Chinese Core Invention Patent 1 (201810180450.1) was invalidated:

Out of the invalidation requests initiated by three requesters, this core patent 1 was successfully invalidated. Meanwhile, this invalidation case (4W113042) was also selected as one of the ten typical invalidation cases of the year handled by the Reexamination and Invalidation Department of the China National Intellectual Property Administration in 2022. Furthermore, after CHIC appealed the invalidation decision to the Beijing Intellectual Property Court, the Beijing Intellectual Property Court upheld the invalidation decision of the Patent Office ((2022) Jing 73 Xing Chu 15510). Faced with this harsh reality, CHIC eventually gave up its further appeal. This invalidation case dealt a heavy blow to CHIC's arrogance and was a fatal blow to its so-called core balance bike patents. After this invalidation case, CHIC could no longer use its so-called core patents to threaten and extort the many hard-working and diligent balance bike manufacturers in China.

  1. CHIC's Chinese Core Invention Patent 2 (201810180448.4) was invalidated:

This patent was also invalidated by three parties (invalidation decision number: 59848). The invalidation of this patent was another fatal blow to CHIC's so-called core patents.

  1. CHIC's U.S. Core Invention Patent (10,597,107 B2) was invalidated (IPR2022-00844):

This patent is CHIC's most core and fundamental balance bike three-layer structure invention patent. It has a global layout with numerous family patents. CHIC has also used this patent to sue numerous Chinese and American balance bike manufacturers. However, this has not changed the fact that the patent lacks patentability and was ultimately invalidated.

In essence, CHIC fails to recognize and find its proper position. The two-wheeled balance bike (twist bike) was originally invented by Chinese American Mr. Shane Chen, not CHIC. CHIC merely made insignificant and obvious structural and/or appearance improvements based on Mr. Xing Chen's invented balance bike. In essence, it is still copying the inventions and creations of others. Yet, CHIC attempts to take center stage and use its inferior and low-quality patents to extort numerous real manufacturers in the industry who are truly dedicated to making balance bikes. Their intentions are undoubtedly malicious, and their actions are undoubtedly despicable.

In addition, in October 2023, CHIC was sued in the United States by the renowned law firm LOEB & LOEB LLP for non-payment of legal fees (Case 1:23-CV-08993-AT). As can be seen from the publicly available complaint, CHIC's total outstanding legal fees exceed $3.4 million. This is the perfect proof that those who do evil will suffer. This is one of the heavy prices CHIC must pay for its blind ignorance and arrogant patent trolling. CHIC will face more than just these consequences; Chitado will continue to seek compensation from CHIC for the astronomical losses it has caused Chitado.

  1. Chitado's Persistence

Since 2014, Chitado (GYROOR) has been a technology-driven, high-tech company in the industry capable of providing complete balance bike solutions. The company focuses on research and development and technology accumulation while also respecting and protecting various intellectual property rights. Since its establishment, Chitado has accumulated nearly 300 patents both in China and abroad, and this number is still growing rapidly. This is one of the manifestations of Chitado's leading technological strength.

Chitado has always adhered to the principle of focusing on practical work and research and development. Chitado is willing to pay for genuine intellectual property rights in the balance bike industry but will never compromise or give in to any patent troll behavior, especially patent trolls like CHIC. Now, Chitado has accumulated rich experience in both domestic and international battles. For example, whether it is patent lawsuits in court or invalidation confrontations in the patent office, Chitado can handle them calmly. Chitado has access to top Chinese and American legal resources and is always ready to wield the sword of justice to strike down patent trolls like CHIC and eradicate them. This is something that Chitado does for itself and a contribution Chitado makes to the healthy development of the balance bike industry.

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