Dagens industri: Tech giants forced to compensate Swedes after patent dispute: "Very pleased"

Counterflo, which develops cables with "visible current", took giants Amazon and Walmart to court in the US for patent infringement. After about a year of negotiations, including claims for damages, the parties have now reached a settlement.
- I am unable to mention any amounts, but we are very satisfied, says CEO Leif Bremark.

The Swedish company Counterflo and its subsidiary PowerAware have been in a legal dispute with e-commerce giant Amazon and retail giant Walmart in the US. In early 2022, the company filed a patent infringement lawsuit in a Texas court. Earlier this spring, after about a year of negotiations, Counterflo reached a settlement with both Amazon and Walmart. The exact terms are confidential.

- I am prevented from mentioning any amounts, but we are very satisfied, says Leif Bremark, CEO and co-owner of the company.

Di has taken note of the original lawsuit. No exact amounts were specified there either, but the company sought compensation for "lost profits" or "reasonable royalties" both historically and in the present, as well as a sales ban at Amazon and Walmart. The dispute centred on a number of patents held by Counterflo in Europe and the US. These revolve around "visible power", i.e. various cable products that glow with a flowing light when power passes through the cable.

When the product is fully charged, the light flow goes out, prompting the user to unplug the cable to save money on the electricity bill and reduce the carbon footprint. Even when electronic products are in 'standby' mode, they usually still consume electricity.

The patent was first developed at the government research institute Rise in Sweden, but has long been owned by Counterflo.

- When we went to the US around 2017, we realised that there was a lot of competition, especially from Chinese manufacturers. They were throwing up copies directly on platforms like Amazon, with no middlemen, at a much lower price. We realised that we had to get them off the market, says Leif Bremark.

It is difficult to estimate how much damage has been done to Counterflo. But according to research firm QY Research, there will be around 39 million luminous charging cables sold between 2016 and 2023, the period covered by the dispute.

Once the copies were sold on Amazon, the price was often $10-15, while the e-commerce giant has a market share of around 55-60 per cent in online consumer electronics in the US. According to a report by the US Securities and Exchange Commission (SEC), the royalty share to which the patent holder is entitled is often around 5 per cent of the sales price.

This would potentially translate into a turnover of around $10-16 million, or £105-170 million, on Amazon alone in the relevant years.

- We can't comment on the financials. But in general, a financier is not very interested in just being satisfied with the products simply ceasing to be sold, even if that may be the most important thing for the company, but they also have a financial interest in the form of damages, says Thony Lindström Härdin, CEO of the litigation financing company Litigum Capital.

Patent litigation in the US can often be very expensive. In the autumn of 2020, Leif Bremark contacted Litigium Capital, which helped finance the dispute together with its Swiss industry colleague Nivalion. Their business concept is to bear the financial risk of the legal process, in return for taking a share of the damages in the event of a successful outcome.

- We immediately judged that the patents were very strong. It is in a situation like this, with unequal power relations between the parties, that dispute financing really comes into its own, says Thony Lindström Härdin.

Counterflo has never had its own sales take off in earnest, but has at most had a turnover of around SEK 3-4 million in 2018 and 2019. Leif Bremark, who at the turn of the millennium co-founded the well-known booking site Bokadirekt, believes that the modest turnover is largely due to the patent infringements.

- We will contact Amazon and ask them to take down companies that sell products with our technology. Now we're hoping that one of the big manufacturers in China will approach us and want to licence the technology instead, and then sell legally in the US, he says.

Initially, Counterflo's main focus was on gate boxes, but more recently it has been on its own range of USB cables that can be used for charging. However, given the high costs associated with developing new products, there is no question of making a large-scale investment under its own auspices, according to Leif Bremark.

- The idea going forward is really to live solely on licence revenues. If you have to do it yourself, it takes at least a year before you go from idea to finished product, during which time it only generates costs, says Leif Bremark, who points out that the company has already licensed the technology to the German car giant Volkswagen, for example.

The patents are valid until the end of the 2020s in Europe, says the CEO, and well into the 2030s in the US. Counterflo has now identified more infringers selling products with their patents and the ambition is, with the support of Litigium Capital and Nivalion, to go after them as well.

- We would never have been able to afford the sums required to pursue this in the US. Our investors would not have dared to take a chance. Without this solution, we would probably have closed the company, says Leif Bremark.