Two years into a five-year licensing deal, Sharp is looking to reclaim its premium TV badge from Hi-sense and has filed suit in two separate American courts do so.
In the process, Sharp is disparaging the quality of TVs that Hisense has been producing under its name, claiming they leak radiation and are slighter in screen size, brightness and resolution than indicated on packaging and web pages.
Specifically, court documents claim that:
● The screen sizes of seven different Sharp models were misrepresented on packaging, including the LC-75N8000, which was depicted as 75 inches on the carton, but actually measured 74.55 inches;
● 11 out of 28 TVs purchased at retail evidenced electromagnetic interference (EMI) in excess of FCC emission standards;
● at least one model was listed on Hisense’s website as 35 percent brighter than the actual specification; and
● TVs marketed as 4K only qualified for the lower-res Ultra HD spec.
What’s more, Sharp’s lawyers argue, the alleged sub-par production is intentional by Hisense, which used Sharp’s U.S. retail distribution network and diminished product quality to advantage its own TVs, while selling the Sharp-branded products at below tier-1 prices.
Those factors have caused “irreparable harm to Sharp’s reputation and goodwill” to the tune of $100 million, the company said, and effectively abrogated the terms of the trademark licensing agreement, which Sharp unilaterally terminated on April 17.
The suits, filed in a California Superior Court and a U.S. District Court in New York, stem from Hisense’s $24 million purchase of Sharp’s massive TV assembly plant in Rosarito, Mexico in 2015. The deal, which also included access to the company’s brand and channel resources in North and South America, came as Sharp’s TV business and overall finances were in decline, and Hisense was looking to expand its U.S. foothold.
According to counterarguments by Hisense, Sharp’s suits are without merit, and came only after the company lost a May 9 arbitration decision that upheld the licensing deal.
From Hisense’s perspective, Sharp signed away its TV rights at a time when it was in financial distress. Now, flush with cash following its nearly $4 billion acquisition by Foxconn last August, it is seeking to win back its TV business by “disparaging and harassing” Hisense, which had never received any complaints from Sharp, customers or U.S. federal agencies, it said.
In a statement issued to TWICE, Hisense said it “categorically denies Sharp’s claims in the litigation and looks forward to presenting its case in the appropriate forum.” It further stated that it is in full compliance with the licensing agreement, and “will continue to manufacture and sell quality televisions under the Sharp licensed brands.”
Indeed, in an interview with Hisense USA’s Mark Viken (see left) the marketing VP said, “We’re very pleased with the Sharp license,” and noted that sales in year two of the agreement have already doubled Hisense’s first year out with the brand.
For its part, Sharp is seeking damages, an injunction preventing Hisense from using its trademarks, and acknowledgement of the alleged standards violations that could support its efforts to terminate the licensing deal.
Stay tuned …