The Sept. 4 news release announcing Ford's (NYSE: F) August sales results were going to be good; analysts were talking about an 8.5% increase as consumers opted for gas-saving models. As it happens, that wasn't even close to how well Ford's month turned out.

It's a shame that a company like Ford that's been undervalued for so long is forced to answer questions about a patent-infringement lawsuit, at the same time it's announcing a stellar sales month.

But first, the rest of the sales story
The nearly 200,000 units Ford sold in August blew the doors off expectations: The 37% jump in its Escape SUV sales for the month helped drive a 19% improvement companywide. Both the Escape and Fusion sales results in August were Ford's best, ever.

Ford's popular F-Series trucks sales results improved for the 13th consecutive month, and its steady monthly sales improvements are hardly unique to the industry. Domestic auto sales improved for virtually every manufacturer. Chrysler sales improved 14% in August, and both Toyota (NYSE: TM) and Honda (NYSE: HMC) are expected to continue the trend.

Of course, after last year's tsunami-induced decline in auto sales, sales increases for Toyota and Honda are not surprising. But if analyst estimates are even close, the jumps go well beyond simply "getting back on track." Honda is expected to lead the way domestically with a 59% improvement in August, and don't be surprised to find Toyota announcing similar results.

The exception to the giddiness-inducing auto sales news was (once again) expected to be General Motors (NYSE: GM). Like everyone else in the industry, August unit deliveries were bound to improve at GM, but it wasn't expected to post the level of improvements as their brethren. Looks like the recently expired money-back guarantee and no-haggle pricing incentives that were in effect paid off. GM's 10% jump in August sales lagged the rest of the industry but handily beat the 3% analysts expected.

Now, Ford's legal "stuff"
In 2004, Ford entered into negotiations with Harvard-educated engineer Shou Hou about licensing his recently patented fuel-injection technology. It's supposed to improve performance, while enhancing fuel efficiency as much as 35%. With gas prices at $4 a gallon, that's a winning combination to say the least.

But after several years of talks, Ford decided in 2008 that it wasn't that interested after all and broke off further discussions. Now fast-forward to today: Ford's new Eco-Boost F-Series models, according to Hou, use his patented technology. The recently filed lawsuit asks for money, and for Ford to immediately stop using the Eco-Boost system. And that takes us to China.

A threat to Chinese expansion
Ford's made no secret about its efforts to grow market share in the all-important Chinese market. Its two new plants are being built at a cost of nearly $1.5 billion, in addition to the facility already in place. The new Chongqing plant is of particular interest. At $600 million, the investment will boost Ford's production capabilities to 250,000 units annually at this one site alone and bring its total financial commitment in China to $6 billion annually by 2015.

So what's all this have to do with the fuel-injection lawsuit? The Chongqing facility, which will be the largest in the world outside Michigan upon completion in 2014, will produce -- you guessed it -- the Eco-Boost engines at the center of the patent infringement controversy.

Now, I'm no conspiracy theorist, but you have to admit the timing of Hou's lawsuit is impeccable. The courts are notoriously fickle, so it's impossible to tell what the legal and financial ramifications will be for Ford. But one thing is clear: There's a lot riding on the Eco-Boost engine, particularly as it relates to Ford's plans for China.

Now what?
Though it's unwise to sweep the legal snafu under rug, it shouldn't overshadow what Ford brings to the investment table. It remains an outstanding value relative to the industry, it pays a solid 2.14% dividend, and Ford CEO Alan Mulally continues improving efficiencies and growing margins. There is simply too much riding on Ford's new Eco-Boost F-Series product line to allow a lawsuit -- legitimate or not -- to stand in the way of growth in China.

Ford is a sound option in a growing industry, but does that make it right for you and your portfolio? For an even more comprehensive look at Ford, don't miss our premium report detailing the upside potential, along with potential challenges.