Letter to the Honorable Gary F. Locke, Secetary of the US Department of Commerce - Request for Assistance

Letter

Dear Secretary Locke:

I am writing to request your assistance in a matter involving Illinois-based Fellowes, Inc., the leading manufacturer of office shredders worldwide, in its dispute over the operation of its joint venture in Jiangsu Province, China. I respectfully request that you initiate contact with your Chinese counterparts, including Vice Premier Wang Qishan, to broker an appropriate resolution to the dispute and facilitate the prompt return of Fellowes' lawful property.

It is my 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, a change in management at Shinri resulted in that company usurping control of the JV in direct violation of the JV contract. They then stopped the flow of shipments from the JV facility and refused to allow employees to continue the JV's work. Fellowes has been denied 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.

As a result of Shinri's decision to stop shipments, vendors have filed suit against the JV for its failure to fulfill its contracts. A Changzhou court has initiated proceedings to auction all of the JV's assets, including equipment, tools, injection molding, and nearly 70,000 unshipped paper shredders. The court has limited Fellowes' ability to participate in this process. Further, Shinri appears to be positioning itself to purchase all the assets, including Fellowes property, at a fraction of the fair market value. In anticipation of securing control of these assets through the 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 on the market. 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 globally compete.

Multiple letters on this issue to Chinese Ambassador Zhang Yesui from members of the Illinois Congressional Delegation went unanswered for several months. A recent reply from the Ambassador's office, however, reflected an understanding of the dispute that runs counter to Fellowes' account. As such, I respectfully request that you raise this matter with your Chinese counterpart to facilitate a reasonable solution and ensure that Fellowes' legal interests and intellectual property rights are adequately protected. With a growing number of Illinois businesses seeking to gain access to the Chinese market, the current dispute between Fellowes and Shinri raises serious concerns regarding future trade ventures between our two countries. However, I remain hopeful that your expeditious action will bring this conflict to a fair conclusion.

Thank you for your assistance in this matter.

Respectfully,

Richard J. Durbin
United States Senate

cc: Cam Kerry, General Counsel

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