August 10, 2022
Lighting Distributor Gets Pulled into Lawsuit, Owes $298K
Patent litigation over LED Tubes leads to recently-enhanced $15M+ judgment for Chinese lamp maker
WACO, TEXAS — When a China-based LED lamp maker sues another China-based LED lamp maker it’s usually not an event that makes industry headline news. But this case is unique. In Texas, a federal judge recently ordered a lighting manufacturer defendant, who is already on the hook for $13.9 million, to pay enhanced damages – while one of the biggest electrical distributor chains in the U.S. also owes $298,000.
A 2020 lawsuit filed by Jiaxing Super Lighting Electric Appliance Co. (Super Lighting) in U.S. court claimed that CH Lighting Technology Co. (CH Lighting) and its sales arm, Shaoxing Ruising Lighting Co. (Ruising), infringed upon the patents of Super Lighting's direct-wire T8 LED Tube. Super Lighting made numerous contentions and accusations, but the core issues surrounded the circuitry of the LED tube, the validity of Super Lighting’s patents and CH Lighting’s alleged violation of those patents.
Elliott Electric Supply gets roped in
And that’s not all. Elliott Electric Supply, one of the country’s largest electrical distributor chains which, according to Electrical Wholesaling, has 168 locations and generated $1.5 billion in 2021 sales, was also named as a defendant alongside CH Lighting and Ruising.
What was Elliott Electric Supply guilty of? Some observers believe that Elliott was simply “guilty” of:
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having distributor branches located in the litigation-friendly Western District of Texas – a U.S. court district that sees a high proportion of intellectual property lawsuits and is reputed to be very plaintiff friendly, and
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doing business with brands that are generally well-regarded in electrical distributor circles – brands like Keystone Technologies, TCP and Ushio.
It is common for distributors and retailers like Home Depot, Ace Hardware and Lowe’s to be named in patent lawsuits in Texas for similar reasons. Lighting agents aren’t immune either. In December 2021, Heavy Duty Lighting filed a patent infringement lawsuit against lighting components manufacturer Xicato and its local Austin-San Antonio agent, Design Build Lighting. That case was swiftly dismissed.
So what was Elliott really sued for? Super Lighting argued that Elliott facilitated the sale of certain patent-infringing products from the following brands and product families. Each of the brands reportedly sourced the LED tube from CH Lighting.
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Keystone Technologies' Direct Drive T8 LED lamp
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TCP's LED LiberaT8 Double Ended Bypass Tube
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Ushio's Ubiquity™ 2 LED T8 Direct Wire LED T8 Bypass Lamps
Court filings indicate that the accused products were obtained by Super Lighting's agents, including relatives of their legal counsel, who placed “special orders” to buy the items from Elliott between November 2019 and January 2020.
Plaintiff awarded $13.9M from CH Lighting and $298K from Elliott
Presiding Judge Alan Albright determined that one of the contested patents was valid, which led to an eventual November 2021 jury verdict in Super Lighting’s favor. The jury went on to determine that multiple other Super Lighting patents were also valid and infringed by all defendants. The jury also decided that CH Lighting and Ruising willfully infringed the patents and that they should pay $13.9 million. Elliott was cleared of willful infringement, causing the jury to assign lesser damages of $298,000 to them.
How has this affected Elliott’s relationship with Keystone?
Even though three manufacturers – Keystone, TCP and Ushio – were cited in the original complaint, the filings emphasized the Keystone accused products over all others. The defendants explained that of the four accused products in the original complaint, Elliott sells only the Keystone-branded KT-LED7T8-24GC-840-DX2 product in its regular course of business.
This might lead one to imagine that a time-consuming and costly lawsuit might strain the relationship between Elliott Electric Supply and Keystone Technologies, but that is not the case. We spoke with Bill Elliott of Elliott Electric Supply on Tuesday who informed us that Elliott Electric Supply “received great support from Keystone” and that “the lawsuit will not affect our future decisions to do business with them.”
One major factor that may have impacted Mr. Elliott’s positive words is that Keystone has reportedly covered all of Elliott’s legal costs, causing Mr. Elliott to state “the only thing we really lost was a whole bunch of time.”
Mr. Elliott went on to say that he felt that there was a lot of evidence that the jury may not have fully grasped and that they may not have understood how much of the accused products are actually in circulation in the marketplace. Mr. Elliott told us that he believes Keystone is now sourcing the Direct Drive product family from another vendor, not CH Lighting.
TCP and Ushio did not return our multiple email inquiries since Friday. Keystone asked us to send them some questions but haven’t yet responded to the five questions that we emailed on Sunday.
Judge ratchets up the penalties with Enhanced Damages
Last week, on August 2, Judge Albright filed an opinion and order finding that Super Lighting was entitled to enhanced damages stating that “this case is egregious and therefore enhancement is warranted here based on: the Jury’s willfulness finding; the fact that this case was not very close;” and numerous other factors. Thus, the court is doubling the damages for CH and Ruising for the period between filing their initial lawsuit answer in early 2020 and receiving an adverse jury verdict in late 2021. The exact total damages are to be finalized and are expected to exceed $15 million.
Takeaways
One of the many takeaways from this case is that Elliott Electric Supply did not have a direct business relationship with China-based CH Lighting, who the court says egregiously violated another company’s patents, yet the jury still found Elliott responsible for $298,000 in damages. If Keystone hadn't provided "great support" and legal cost coverage to Elliott, this 2-year ordeal would have likely had a very unhappy ending for the electrical distributor.
With so much offshore product passing over distributors’ counters, will lawsuits like this one cause electrical distributors to investigate suppliers' suppliers with more scrutiny and/or demand more robust liability-shifting indemnification clauses in supplier agreements?
As the lighting industry continues to look more and more like a technology industry, more lawsuits like this one could become more common in the future. More than ever, manufacturers and distributors must be prudent and thorough on the engineering and sourcing side, while also mitigating their respective legal business risks with strong contract language to protect their business’ best interests.
