Flash Electronics India Ltd, a New Delhi Based automobile component manufacturer, has filed a law suit against country’s largest premium motorcycle manufacturer, Royal Enfield, in the US regarding a patent infringement of a component known as regulator-rectifier. Flash will subsequently file similar law suits against the motorcycle manufacturer in the Europe and Asia-Pacific, including India.
A regulator-rectifier is a component that efficiently converts the AC (Alternating Current) voltage produced in motorcycle engines into DC (Direct Current) voltage to charge batteries, power headlights, light up instrument panel, thus driving the motorcycle’s electrical systems.
Flash Electronics was granted patent for the device by authorities in the US and in European countries like Germany, France, Italy, UK, Spain and others.
According to Sanjeev Vasdev, founder and managing director Flash Electronics, Royal Enfield approached the company for some samples of regulator-rectifier in September 2014, following which Enfield asked another company to manufacture the product.
After the development came to light, three senior executives of Royal Enfield flew down to Delhi to meet the senior management of
Flash and accepted the mistake but sought time to settle the issue.
“On October 12, 2018, we met in JW Marriot in Aerocity and one of the three executives was known to me personally. It was because of his request I decided not to file a law suit then, but they sought some time because the company was launching the new products in different markets. I don’t know if the top management including the managing director of the company knew about this infringement," Vasdev told Mint over a phone call.
In the last couple of years, the management of Royal Enfield has been actively looking to promote the brand in developed and other emerging markets across the world and this kind of a development will become a setback for the company.
This is not the first time an Indian automobile manufacturer has been dragged to courts in developed markets for flouting of intellectual property rights.
In August 2018, Fiat Chrysler Automobile N.V. (FCA) filed a complaint with the US ITC, a federal agency that deals with unfair trade and intellectual property practices of foreign companies, alleging that Mahindra and Mahindra Ltd’s Roxor, an off-road utility vehicle, infringed the intellectual property rights (trademarks and trade dress) of its Jeep design, potentially putting at risk the Indian auto maker’s renewed attempt to enter the US market.
“We would ensure that Royal Enfield recalls all the products in different parts of the world where our component was used. Flash has received patent from the authorities in United States and Europe, after extensive tests and it took us almost a year and half to complete the legal formalities. We will approach the courts in India as well but here, it takes time to get a verdict. In US and other markets in the West, the courts deliver verdicts quickly and Intellectual Property rights infringement is taken very seriously," add Vasdev.
If the verdict goes against Royal Enfield and the company has to recall its products across the world, then the financials of the company might take a hit.
In the March quarter, the company’s motorcycle sales fell 13% year-on-year. But revenues declined only 1.2%, thanks to higher realizations. Ebitda (earnings before interest, tax, depreciation and amortization) margin fell a sharp basis points to 27.4% from a year earlier in Jan-Mar.