In November 2023, Nippon Steel announced that it had waived claims in the patent infringement litigation against Toyota Motor Corporation (“Toyota”), and Mitsui & Co., Ltd. and Mitsui & Co. Steel Ltd. (“Mitsui”). “Waive of claim” means the plaintiff terminates the litigation and same effect as final judgement. Nippon Steel filed lawsuits in 2021 alleging that Toyota, Mitsui, and Baoshan Iron & Steel (“Baosteel”) infringed its patents related to electromagnetic steel sheets. It is reported that the court had not held oral proceedings in each of the lawsuits, but instead heard arguments from the companies concerned and negotiated with them behind the courtroom door. Meanwhile, Nippon Steel continues the patent infringement litigation against Baosteel. Below is a brief procedural history of the lawsuits.
Why the court cases attract much attention?
1. Nippon Steel sued not only Baosteel (manufacturer) but also Toyota (user/seller) and even Mitsui (supplier).
Baosteel manufactured electromagnetic steel sheets with Nippon Steel’s patented technology. Mitsui then imported and supplied the sheets to Toyota, and Toyota used the sheets for production of its EVs and sold them. The target of the patent infringement litigation extended not only to “manufacturer” but also to “supplier” and “user and seller.” Under the Japanese Patent Law, any party engaged in manufacturing, supplying, using or selling an infringed patented product is subject to liability for the infringement. However, it is very difficult in Japanese business practice that one party files a patent litigation lawsuit against a party other than the manufacturer.
2. Further, both the supplier and the user concerned were clients of Nippon Steel
Toyota is one of Nippon Steel’s major clients. It is rare occurrence that Japanese major companies under close business relationships between file a lawsuit. By taking series of legal actions, Nippon Steel unequivocally shows its concrete attitude to protect IP assets in the entire supply chain. Given that the genuine purpose of the litigation against Toyota and Mitsui was to restrain the distribution of steel sheets made by Baosteel, it is convincible that Nippon Steel waived claims against Toyota and Mitsui.
Electromagnetic steel sheets are expected to contribute to decarbonisation
The patents in question relate to “Non-Oriented Electromagnetic Steel Sheets” (Japanese Patent Nos. 6497176, 4023183, and 5447167). Nippon Steel obtained these patent rights only in Japan. For the technology overview, please refer to our past article in March 2022. There are only a few steel manufacturers that can produce high-performance electromagnetic steel sheets in the world. Japanese companies, such as Nippon Steel, have a strong presence in this field. “Non-Oriented Electromagnetic Steel Sheets” are considered highly profitable compared to other steel sheets. For that reason, Baosteel as well as other Chinese and Korean companies are devoting their efforts in this field.
Litigation against Japanese companies concluded / continues against Baosteel
It was initially believed that the impact on Toyota from the lawsuits was limited, even if the judgments were issued. This is because:
- One of the patent rights under dispute has already expired, and what Nippon Steel can request is only compensation for damages.
- Two years have already passed since the cases were filed. Toyota might have replaced the sheets with another material while the lawsuits are in progress.
Although the process of the court’s decision and negotiation have not been unveiled, the above reasons may have led Nippon Steel to decide the waiver.
Nippon Steel stated that “continuing the legal dispute will not be beneficial for strengthening Japan’s industrial competitiveness, especially under the fierce global competition in technological innovation for carbon neutrality”. Considering the importance in enhancing Japan’s competitiveness, it is expectable that Nippon Steel will improve relationships with Toyota and Mitsui with forward-looking view rather than contentious attitude. In the meantime, Nippon Steel stated that it will continue legal action against Baosteel. According to “territorial principle” in patent law, the technology in question is granted patent only in Japan and its rights are not effective in other countries. Accordingly, it is difficult to suspend the production in China because patent protection is not covered in the country. It will be at issue whether the Japanese court can examine an act of providing products to Japanese market which are made in a foreign country but infringing Japanese patents. We will monitor the progress and provide updated further information as soon as it becomes available.
Litigation between such major companies appears to have an extensive impact not just on the parties concerned. It fosters awareness of patent litigation for Japanese companies. Some Japanese manufacturers have switched their products’ materials from made in China to Japan. On the other hand, since Chinese companies are boosting their technological competence, it is unquestionable that they are becoming strong competitors in the material industry. Amid of globalization of supply chains, manufacturers and even other companies should build business strategies that conscientiously consider the intellectual property aspect.
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