SHENZHEN: Frank Deng is embroiled in a row that resembles a battle between an ant and an elephant.

But Deng is confident he - the ant - will beat the elephant.

Deng, who co-founded Shenzhen-based Netac Technology Co Ltd, a small business, has filed a lawsuit against Sony, one of the world's global technology giants.

Netac, the largest maker of USB flash storage products in China, alleges Sony violated its IPRs (intellectual property rights). Netac is seeking 10 million yuan (US$1.2 million) in compensation.

The suit names Sony's manufacturing plant in Wuxi, a city in East China's Jiangsu Province, and Sony's sales agent in Shenzhen.

"I know clearly that Netac will die unless we file the lawsuit against Sony," Deng told China Business Weekly last week.

The row with Sony follows a lawsuit filed by Netac against its domestic arch rival, Beijing Huaqi Information & Digital Technology Co Ltd, involving similar allegations.

A preliminary ruling in June by a Shenzhen court favoured Netac. That ruling ordered Huaqi to stop selling flash products that infringed upon Netac's patents. Huaqi was also ordered to compensate Netac.

Now, Netac is setting its sights on Sony.

"As far as I know, Netac is the first Chinese firm to sue a multinational for IPRs infringement," Deng said.

"We hope to set a good example for other domestic firms, in terms of blocking global giants that violate Chinese IPRs."

But Sony is currently not available for comments.

The impacts of the lawsuit against Sony could be far-reaching in China, where domestic firms are frequently criticized, or sued, for violating IPRs.

Sony knows well that Netac owns the core IPRs of the flash disks, said Deng, adding the two firms even discussed, two years ago, co-operation in manufacturing of flash products.

"Nevertheless, Sony announced plans to enter China's flash disk market, which showed its disrespect for our patents and China's IPRs system," he said.

Netac has five core invention patents on flash disks, and Deng has been billed as the father of flash disks in the world.

Sony has been selling flash disks, manufactured at the Wuxi plant, in China, Japan, Europe and the United States, Deng said.

Deng said he anticipates a hard battle with Sony. He does not think Sony will settle the lawsuit.

Deng, Netac's president and chief executive officer dismissed the speculation that Netac is using the lawsuits to monopolize the market.

Netac has signed co-operation deals with Samsung Electronics and IBM, under which Netac makes flash disks with the two foreign firms' brands, he said.

"We know many global firms are making flash disks, but the scale is very small. And we usually try to negotiate with them on the issue," Deng said.

"But Sony is different. If we fail to block Sony from manufacturing flash disks, Sony, with its well-known brand and enormous strength, will eventually stamp us underfoot," he added.

Netac previously issued a warning to US-based maker of storage products, SanDisk, but did not receive a response, Deng said.

But SanDisk is not performing well in the flash disk market, and seems to be pulling out of the market, he added.

Netac, founded in 1999, has invested 100 million yuan (US$12 million) in research and development (R&D), Deng said.

The privately held firm's revenues last year exceeded 100 million yuan.

Netac, which is expanding its business into the digital entertainment and wireless equipment sector, has applied for about 100 patents.

Lucrative market

Deng said the flash disk industry promises much growth potential, and will bring enormous business opportunities to manufacturers such as Netac.

Sales of flash disks in China reached 1.6 billion yuan (US$192 million) last year, indicates Beijing-based CCID Consulting.

"As China's PC penetration remains quite low, we expect the flash disk market will continue growing rapidly in the years to come," Deng said.

It is already the trend that flash disks are replacing the clumsy floppy disks.

Microsoft Chairman Bill Gates said in May "the floppy disk is dead."

Flash memory is widely used in consumer electronics products - such as MP3 players, digital recorders, digital cameras and PDAs (persona digital assistants).

"The flash disk market will be on a roll," Deng said.

(Business Weekly 10/20/2004 page16)