[Asia Economy Reporter Kwon Jae-hee] Nippon Steel, Japan's largest steelmaker, has filed a lawsuit against Toyota Motor Corporation. The reason is that Toyota maintained a contractual relationship with Baoshan Steel, a Chinese competitor, despite knowing that Baoshan Steel infringed on Nippon Steel's patents. This is the first time that Nippon Steel, a parts supplier, has sued the 'superior' finished car maker Toyota for patent infringement, and the industry insiders are calling this lawsuit "highly unusual."
According to the Nihon Keizai Shimbun and the Wall Street Journal (WSJ) on the 15th, Nippon Steel filed a lawsuit against Toyota and Baoshan Steel at the Tokyo District Court. The reason is that Baoshan Steel infringed on Nippon Steel's patents regarding electrical steel sheets used in motors for electric and hybrid vehicles produced by Toyota. Nippon Steel claims that Toyota continued to purchase the electrical steel sheets from Baoshan despite knowing that Baoshan infringed on its patents, and thus sued Toyota as well. Using or selling products that incorporate patented technology also constitutes patent infringement.
In this lawsuit, Nippon Steel has filed for a provisional injunction to ban the manufacture and sale of Toyota vehicles in Japan and is claiming damages of 20 billion yen (approximately 207.8 billion KRW) each from Toyota and Baoshan Steel. The patent in question was filed only in Japan and is valid until May 13, 2030. Legal experts expect the lawsuit to take about six months to a year to reach a conclusion.
The electrical steel sheets involved in the lawsuit are components used in motors installed in electric or hybrid vehicles and are considered key parts that suppress energy loss in motors. Electrical steel sheets are difficult to develop and highly profitable, making them a frequent target of industrial espionage. Previously, in 2012, Nippon Steel (then Shin Nippon Steel) sued South Korea's POSCO for patent infringement related to electrical steel sheets. This underscores how electrical steel sheet technology is regarded as a "future growth engine" in the steel industry. Last year, Nippon Steel announced plans to invest an additional 1 billion USD (approximately 1.18 trillion KRW) to increase production of these electrical steel sheets by about 40%.
Nippon Steel explained the background of filing the lawsuit, stating, "We have been negotiating separately with both Baoshan Steel and Toyota, but we could not reach an amicable agreement."
In response, Toyota stated, "It is very regrettable that Toyota, a finished car manufacturer, was sued over an issue that should be resolved between material suppliers," and emphasized, "We received written assurances before the contract that the electrical steel sheets suspected of patent infringement did not infringe any patents."
Baoshan Steel has not issued any particular comment regarding this lawsuit.
The Japanese industrial sector is reportedly surprised that this issue has escalated to a lawsuit. For decades, parts suppliers and manufacturers have maintained cooperative relationships, providing stable business.
Tan Ha-pham, a Japanese steel analyst at global investment bank Jefferies, explained, "Until now, Nippon Steel has been a very Japanese company that respects relationships with its customers, and among them, Toyota was like an emperor."
Nippon Steel stated regarding the lawsuit, "This lawsuit was necessary to protect intellectual property rights," and added, "Nevertheless, we continue to conduct various transactions with Toyota, and the fact that Toyota is an important customer remains unchanged."
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