Hot Air

Counterfeiting Case Shocks German Firms

Swiss E Technik. Source: Handelsblatt
Jörg Füllemann, inventor of a low-emission boiler he says was stolen by a German company.
  • Why it matters

    Why it matters

    Germany’s famed mid-sized companies have been shocked by a counterfeit scandal emanating from home, rather than carried out by foreign plagiarists.

  • Facts

    Facts

    • Swiss firm Swiss E-Technic patented its low-emission, highly efficient wall heating unit in 1997.
    • German company Viessmann Group approached the Swiss proposing a collaboration.
    • The Swiss claim the Germans dropped the deal and then stole their invention.
  • Audio

    Audio

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High in the Swiss alps overlooking the Chur Rhine Valley is the villa-HQ of Swiss E-Technic, a small but highly innovative firm making heating systems.

But managing director Jörg Füllemann has little time to stare out at the spectacular view. He is in the final stages of a legal battle with much larger German rival, the Viessmann Group, which he accuses of copying his invention.

In May, it seemed Mr. Füllemann had finally won his case. The German Federal Supreme Court upheld an earlier ruling making the German company liable to pay millions in damages to the Swiss firm.

But Mr. Füllemann says he hasn’t yet seen a cent.

It’s a case that’s struck a nerve among Germany’s famed Mittelstand sector of mid-sized, mostly family-run businesses. For many years German businesses have been complaining of outsiders appropriating their hard-won innovations and producing counterfeits.

The main shock for many Germans is that here, the roles have been reversed.

This time, the plagiarizers aren’t Chinese industrial spies, but typical German businessmen. Viessmann now stands accused of a very un-German crime: Counterfeit ‘Made in Germany.’

The Swiss delivered the requested documents. The Germans analyzed them, and suddenly did not want to have anything more to do with collaborating.

“Viessmann’s behavior has been the worst I’ve experienced over my entire career,” said Mr. Füllemann.

It’s a battle between David and Goliath.

While Mr. Füllemann says Swiss E-Technic has just 15 staff and annual sales “in the single digit million range,” the well-established Viessmann group boasts 11,500 employees and yearly sales of €2.2 billion ($2.4 billion).

There’s no reason why with such resources a firm like Viessmann should have had to copy a tiny operation such as Swiss E-Technic. But that’s exactly what appears to have happened.

On March 23, 1997, Mr. Füllemann registered a patent for what would be a revolutionary low emission wall-hung boiler and heating unit. The combustion chamber was half the size of other conventional heating devices and the oil burner-heat exchange was extremely compact and low-emission. It was a feat of technical engineering.

The Swiss were able to do it by diverting the flame in the combustion chamber. As a result, the flame was cooler than usual, which meant reduced nitric oxide emissions. The heat radiates 360 degrees around a spiral-shaped heat exchanger, meaning higher energy efficiency.

“Conventional burners release about 250 milligrams of nitric oxide per kilowatt-hour, ours only 60 to 90 milligrams,” said Mr. Füllemann, the inventor. The Swiss company has won several prizes for the combustion system with heat exchangers, including the International Award for Innovation in Paris in 1999.

While a born innovator, Mr. Füllemann has always relied on capable manufacturing and marketing partners. Often, the quality of his products mean he is approached and does not have to go looking for them. That was the case with the low-emission burner.

“Viessmann had already contacted us at the end of 1997, to sound out ideas for a possible collaboration,” said Mr. Füllemann. The German company wanted to produce and market the Swiss heating systems under license.

Both parties signed a non-disclosure agreement on May 27, 1998. In it, Viessmann promised not to use the knowledge gained for its own purposes.

Behrouz Ahmadi, the then head of development for Viessmann and a member of its senior management, signed the document for the German company. Viessmann checked the Swiss invention in detail, but the licensing negotiations went nowhere.

In September 1999, Mr. Füllemann lost his patience and withdrew his offer. According to Mr. Füllemann, Viessmann still expressed interest in working together. The Germans reportedly simply wanted only to examine the specifications more closely.

The Swiss delivered the requested documents. The Germans analyzed them, and suddenly did not want to have anything more to do with collaborating.

“The applications for the burners and for the boiler” would only “offer limited protection or be disassociated a little from the known state-of-the-art procedures,” wrote Mr. Ahmadi, the Viessmann head of development. He said there were “too few facts” for a positive decision on a contract.

In other words: The Germans openly doubted whether the Swiss development represented an invention worthy of protection.

 

Viessmann factory in Hesse, central Germany. Source: PR
Viessmann factory in Hesse, central Germany. Source: PR
The Viessmann factory in Hesse, central Germany. Source: Viessmann

 

Mr. Füllemann immediately became suspicious. He answered Viessmann immediately and told Mr. Ahmadi outright what he suspected: That the Germans only wanted to doubt the patent because they wanted to use the technology themselves, and that they wanted to recreate Mr. Füllemann’s burner-boiler unit without paying anything for it.

Viessmann actually presented something at ISH, the international trade fair for bathroom design, energy-efficient heat and air-conditioning technologies, in Frankfurt in 2001, which reminded Mr. Füllemann quite a bit of his invention.

When he asked why the German company was offering a burner that used the know-how from the Swiss company, the company only answered: “We cannot recognize any violation of your property rights.”

Since then there has been a war, fought in the courts.

The development of the heating device took seven years, and the legal battle has been going on for eight. Its end was first visible in 2014, when on February 27, the Higher Regional Court in Düsseldorf found in favor of the Swiss company.

In May 2015, the Federal Supreme Court upheld that decision. The judgment is therefore legally binding. The plaintiff is to be “compensated for all damages” that it sustained since Jan. 6, 2002, according to the ruling.

But still Mr. Füllemann hasn’t got his money.

Viessmann is stalling over providing a detailed breakdown of how many of the copied units it has sold since 2002. So far, Mr. Füllemann says the information provided is incomplete and implausible.

When asked for comment, Viessmann declined to provide figures on how many units it has sold, and at what price. “We disclosed what we were required to,” said a Viessmann spokesman. “Now it is the other side’s turn. They must inform us of the damages they suffered. So far, nothing has been made available to us about that.”

In the meantime, Viessmann has come up with something new.

After losing an eight-year legal battle, the Germans apparently want to turn back the clock. At the end of April 2014, when defeat was in sight, Viessmann suddenly filed an action for annulment.

The goal was for Mr. Füllemann to simply lose the patent that caused the entire battle.

“We continue to remain convinced that no patent infringement exists because the registered patent represented the then state of technological development,” said Viessmann spokesman Jörg Schmidt.

“For this reason we have lodged an action for annulment at the Federal Patent Court in Munich. In the event that the Federal Patent Court upholds the complaint, it will cancel out the legal basis for the judgment of the Higher Regional court in February of last year.”

The German firm also points to an earlier 2007 ruling in which a Düsseldorf court found in their favor. “The product continued to be sold until 2014 in reliance on this decision,” said Mr. Schmidt.

Viessmann said it was surprised when the court then ruled against that decision last February and took steps to replace the disputed product with an “altered version.”

The Swiss company also took action for temporary injunctions on this version, but failed in two instances, according to Viessmann. Now Mr. Füllemann must send out a lawyer again to get his money. Half disgusted, and half respectful, he said: “Viessmann is pulling out all the stops.”

 

Holger Alich is Handelblatt’s Switzerland correspondent, covering the financial industry. Sönke Iwersen leads Handelsblatt team of investigative reporters. To contact the authors: alich@handelsblatt.com, iwersen@handelsblatt.com

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