FRANKFURT (Reuters) - German battery maker Varta VAR1.DE said on Wednesday that it has warned electronic goods traders after finding products with batteries from Chinese manufacturers which infringe on its patents.

FILE PHOTO: Varta battery cells are displayed in this picture illustration taken September 27, 2017. REUTERS/Fabrizio Bensch/Illustration

The company’s shares plunged 20% after the issue was flagged by a note from analysts at Commerzbank, which downgraded their recommendation for the stock to Hold from Buy.

“If they do not react immediately after the deadline, we will seek preliminary injunctions,” a Varta spokeswoman said, adding that Varta learned of the situation only in December.

Some stock traders also linked Varta's share price collapse to lithium producer Livent LTHM.N cutting its earnings outlook on Tuesday due to a downturn in prices of the battery metal.

Commerzbank cited a report of an active shortseller, which uncovered that Chinese companies have successfully broken into several of Varta's key accounts such as Samsung 005930.KS, Jabra, Sony 6758.T and JBL.

“The Chinese second sources seem to have arisen as the market demand was too strong for Varta to satisfy and its earbud clients seem to have been afraid to lose market share with supply from Varta only”, the brokerage said.

Varta was taking legal steps against the alleged infringement by Chinese producers EVE Energy Company and MIC-Power, it added.

The shortseller, dubbed “Black Mamba”, additionally named battery firms ZeniPower and Great Power as suppliers which are encroaching on Varta’s near-monopoly in supplying batteries for so-called truly wireless stereo (TWS) earphones, one of its core businesses.

“Without a monopoly on the premium TWS market, we believe that the market’s expectations of the value of Varta’s entertainment business are far too rosy”, the shortseller said.

Short selling involves borrowing an asset and selling it with the aim of buying it back at a cheaper price and making a profit.

The Chinese firms had no immediate comment.