[WASHINGTON, D.C.] – Members of the Illinois Congressional delegation, led by U.S. Senator Dick Durbin (D-IL), have sent 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.

“We are writing to request your intervention in an ongoing business dispute brought to our attention by Fellowes, Inc., a business products manufacturer based in Itasca, Illinois,” the members wrote. “In 2009, Shinri [Fellowes Inc’s Chinese partner] management usurped control of Fellowes’ factory and stopped the flow of shipments of Fellowes paper shredders and locked fellow’s employees out of their factory. We request that the Government of the People’s Republic of China work with local authorities to ensure fair treatment of Fellowes under Chinese law, ensure the protection of Fellowes’ intellectual and physical property, and prevent Shinri from benefitting from its illegal activities regardless of the result of the pending court suit.”

In 2006, Itasca-based Fellowes, Inc 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 venders. Those venders 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.

“The State of Illinois greatly values the economic relations our companies have built with Chinese firms. We remain hopeful that your government will take action on this matter expeditiously to continue the positive relationship between our state and the People’s Republic of China,” the members concluded.

[A copy of the letter to the Chinese Ambassador is pasted below]

 

February 4, 2011 

The Honorable Zhang Yesui
Ambassador of People’s Republic of China
Chinese Embassy
3505 International Place, N.W.
Washington, D.C. 20008

Dear Ambassador Zhang:

We are writing to request your intervention in an ongoing business dispute brought to our attention by Fellowes, Inc., a business products manufacturer based in Itasca, Illinois.  This is the third request to your office from members of the Illinois Congressional Delegation regarding this matter.  To date, no response has been received to our previous requests. 

It is our 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, Zhou Licheng took over control of Shinri from his brother.  The new Shinri management usurped control of the JV in direct violation of the JV contract, stopped the flow of shipments from the JV facility, and refused to allow employees to continue the JV’s work.  Fellowes has been refused 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. 

Due to Shinri’s decision to stop shipments, the JV was not able to sell its products and therefore was unable to pay its vendors.  Consequently, the vendors of the JV filed suit for non-payment.  Under the resulting judicial proceeding, we have been informed that the Changzhou court will likely decide to auction all the JV’s assets, including injection molding owned by Fellowes tools and remaining manufactured products containing Fellowes intellectual property.  The sale or use of the products would violate Fellowes’ intellectual property rights.  Furthermore, Shinri management, the JV partner responsible for the suspended shipments, appears to be positioning themselves to purchase all the assets, including Fellowes property, at a fraction of the fair market value.  Fellowes is prohibited from participating in this process.  In anticipation of securing control of these assets through its violation of the JV and 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, which is why they are known as “The World’s Toughest Shredder.”  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 compete in the global market.

We request that the Government of the People’s Republic of China work with local authorities to ensure fair treatment of Fellowes under Chinese law and terms of the joint venture agreement.  Also, we request that your Government work with Fellowes, the vendors in suit, and Shinri to reach a resolution ensuring the protection of Fellowes’ intellectual and physical property and preventing Shinri from benefitting from its illegal activities regardless of the result of the pending court suit. 

Due to the potentially short timeline and ramifications of the upcoming court decision, we respectfully request a response before there is a decision in the pending suit. 

The State of Illinois greatly values the economic relations our companies have built with Chinese firms.  We remain hopeful your government will take action on this matter expeditiously to continue the positive relationship between our state and the People’s Republic of China.

Thank you in advance for your assistance in this matter.

 

Respectfully, 

  

Richard Durbin                                                       Mark Kirk

United States Senator                                           United States Senator

 

Donald Manzullo                                                    Peter Roskam

Member of Congress                                              Member of Congress