- Top Glove Corporation (Top Glove) yesterday announced that
three of its subsidiaries (namely Top Glove Sdn Bhd, TG Medical Sdn Bhd and
Flexitech Sdn Bhd), three other glove manufacturing companies and two glove
machinery parts suppliers were served a writ of summons on 18 January 2013 by
Sentinel Engineering Sdn Bhd and Hartalega Sdn Bhd (both subsidiaries of
Hartalega Holdings Bhd).
- According to the announcement on Bursa, the summons was
for the “alleged infringement of the arrangement of assembling [glove] former
holders”, which is part of Hartalega’s Patent No. MY 140770-A. No other
information was provided.
- We gather that Hartalega had developed this technology
back in 2005, when it launched the world’s first light weight nitrile glove
(4.7g). Since then, its idea of using a double former line as well as the
previously mentioned former arrangement in its glove manufacturing facilities
has been widely adopted by the other industry players and is customary in every
glove makers’ production lines.
- We do not deem this development to have a material impact
on Top Glove or the other defendants, as we believe Hartalega’s intention
is to seek further recognition for its technological
prowess and innovative culture rather than to follow through with the actual cease-and-desist
order.
- Having said that, Hartalega would nonetheless want to be
compensated in monetary terms. As such, we do not rule out Hartalega’s search
of some financial gain through the licensing of its patent to the other
manufacturers.
- Our channel checks confirmed that two of the other three
glove manufacturers have indeed approached Hartalega to seek out-of-court
settlements, which include an undisclosed amount of payment as licensing fees.
- No change to our BUY recommendation and fair value of
RM6.50/share as we await further details from Top Glove’s management.
Source: AmeSecurities
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