The Japanese firm accused Geely, the sector's sole private firm in China, of violating intellectual property rights last December.

"Toyota accused us of installing their 8A engines illegally, but in fact, their factories in China publicly sold those engines to us," said Geely Group lawyer Lou Tao yesterday.

He said the official contract of the deal is still locked inside Geely's office.

The Tianjin Toyota Motor Co Ltd, a joint venture between Toyota and its Chinese partner Tianjin Xiali Automobile, had been supplying motor engines to several models of Geely automobiles over past three years, with trade hitting almost 400 million yuan (US$48 million).

In another accusation, according to Geely Group, Toyota accused Geely's Meiri series of automobiles of using a similar logo as Toyota's, and asked Geely to stop using the logo and pay compensation.

Lou said Geely had registered the logo in 1996 in related administration, and was authorized to use it.

"We discussed the logo issue with Toyota early last year, and had applied to the Trademark Office of the State Administration of Industry and Commerce for arbitration," Lou said. The office was still investigating the issue when Toyota decided to take it to court.

Geely prefers to consider the lawsuit as a sign that Toyota wants to take on its potential competitors in China before they develop, since the claimed 14 million yuan (US$1.6 million) compensation means next to nothing for both companies.

"They just want to block our development with barriers of intellectual property rights," said a Geely official surnamed Gu.

The description of the lawsuit from Toyota China Company apparently differs with Geely's words. It said the concentration of its lawsuit was on the similarity of the two brands' logos.

The Geely Group produced a logo similar to Toyota's, which could mislead consumers, said Sun Tuoya, an official with Toyota China Company. She denied Toyota sued Geely Group for installing the 8A engine, which they sold commercially to Geely.

Sun said Toyota would not comment on Geely's announcement since the case had entered the courts.

Analysts were also divided on the issue.

Qu Weihai, director of Beijing Bitauto E-commerce Co, said Toyota wants to use the case to declare its presence in China's automobile markets "Toyota is just telling people 'I'm coming', and hopes it can attract consumers' attention," he said.

Another independent analyst, Zhong Shi, said the case is just a common dispute concerning intellectual property rights, and Geely's reaction was far too extreme.

(China Daily February 25, 2003)