Sharp Sues China’s Hisense for ‘Eroding and Destroying’ Brand With Deliberately Poor TVs

Japanese TV giant claims Hisense is making shoddy Sharp-branded sets in attempt to devalue brand

Venerable Japanese electronics firm Sharp Corp. has been synonymous with consumer products innovation for much of its 105-year history, developing the first LCD calculator in 1973 and becoming one of the earliest companies to produce extra-large, high-end flatscreen TVs. But after selling a Mexican factory and licensing its North and South America TV business to Chinese manufacturer Hisense Co., the picture became a lot blurrier — literally.

On Monday, Sharp filed a lawsuit against Hisense in the San Francisco Superior Court alleging the Chinese company willfully manufactured subpar Sharp televisions in an attempt to devalue the brand as a future competitor. The suit also alleges that Hisense misrepresented the actual picture size on several Sharp models, and exaggerated the brightness of one television set by 35 percent in its marketing materials, which harmed consumers who paid money for a certain level of performance, as well as hurting Sharp’s reputation.

In addition, the suit claims the Hisense-manufactured Sharp television sets “emit excess radiation, in violation of FCC standards,” violations which “have harmed and have the potential to create continuing harm to the California public, as well as Sharp’s goodwill and brand equity in its products, including but not limited to televisions.”

Hisense did not immediately respond to TheWrap’s request for comment.

China’s Hisense, a 48-year-old conglomerate that has recently become a significant player in the flatscreen TV market, acquired a Sharp-owned factory in Mexico in 2015 at a time when the Japanese company’s TV business was struggling with an increasingly competitive market, as manufacturers like Samsung, LG and Vizio battled each other on price. As part of the deal to acquire the factory, which primarily produced larger-screen Sharp TVs for sale in North America, Hisense agreed to a five-year licensing agreement to sell Sharp-branded TVs (including its Aquos, Quattron and other trademarks) in North, Central and South America, excluding Brazil. According to the complaint, the licensing deal required Hisense to “maintain the licensed brands in such a way as not to devalue them during the term” of the agreement.

But while the average retail price of televisions in the U.S. declined by less than 10 percent throughout the course of 2016 — and Hisense’s prices remained basically unchanged — Sharp-branded TVs saw their price drop by 40 percent in the 12 months following January 2016, when Hisense first started selling Sharp TVs, the suit claims.

Sharp terminated its licensing agreement with Hisense in an April 17 letter, and the company claims it will suffer “irreparable injury” if Hisense ignores that termination and continues to sell inferior Sharp-branded TVs. Taiwanese company Foxconn acquired a majority stake in Sharp last year.

“If Defendants are permitted to continue to manufacture televisions with the Sharp brand, the trademarks, and all of the goodwill built up in them since as early as 1912, are at risk of being destroyed by the time the five-year term of the [license agreement] expires,” the suit alleges.

Sharp is asking the court for an injunction preventing Hisense from using Sharp’s trademarks, as well as general, special, consequential, exemplary and punitive damages.