Rare earth al­liance to fight Ja­pan’s patent bar­rier

China Daily (Hong Kong) - - FRONT PAGE - By DU JUAN du­juan@chi­nadaily.com.cn

A dozen Chi­nese rare earth com­pa­nies have formed an in­dus­trial al­liance to sue Ja­pan’s Hitachi Met­als for hold­ing in­valid patents and in­fring­ing patent rights of Chi­nese com­pa­nies.

The le­gal process could start in early Septem­ber in the United States and China.

At the cen­ter of the dis­pute is some­thing called a neodymium iron boron mag­net, a ma­jor prod­uct that ac­counts for half of rare earth con­sump­tion.

The al­loy mag­net, mainly com­posed of neodymium, iron, boron and other mi­croele­ments, is used in man­u­fac­tur­ing mo­tors, au­dio speak­ers, head­phones, cord­less tools and com­puter hard drives.

In Au­gust 2012, Hitachi Met­als asked the US In­ter­na­tional Trade Com­mis­sion to stop the sales of such prod­ucts and their down­stream prod­ucts that did not have a patent li­cense in the coun­try.

Three Chi­nese com­pa­nies in­volved in the case fi­nally rec­on­ciled with Hitachi Met­als on May 14 by pay­ing a sum of money to gain the patent li­cense.

But Sun Baoyu, pres­i­dent of Shenyang Gen­eral Mag­netic Co and head of the coali­tion, said Hitachi Met­als no longer has any right to claim the patents.

One of Hitachi Met­als’ patents ex­pired in 2003, and an­other will ex­pire in 2014. But the com­pany has ex­tended its ex­pi­ra­tion date to 2029.

He said the Ja­panese com­pany’s patent ex­ten­sion, which he thinks is in­valid, has hin­dered the mar­ket ex­pan­sion of Chi­nese rare earth man­u­fac­tur­ers.

“Hitachi Met­als’ ac­tion has se­verely af­fected China’s rare earth in­dus­try, es­pe­cially for the ex­ports of China’s down­stream rare earth prod­ucts,” Sun said.

“Mean­while, Hitachi Met­als has in­fringed upon patents of some Chi­nese com­pa­nies,” he said, with­out elab­o­rat­ing.

Zhao Hu, lawyer and part­ner of Bei­jing’s Eastbright Law Firm, said Hitachi Met­als’ patent ex­ten­sion blocks tech­no­log­i­cal progress.

‘‘ We re­spect in­tel­lec­tual prop­erty rights. But what Hitachi Met­als has done is to set up trade bar­ri­ers.”

SUN BAOYU PRES­I­DENT OF SHENYANG GEN­ERAL MAG­NETIC CO

“Based on Chi­nese law, no patent ex­ten­sion is al­lowed. All patents ex­pire af­ter 20 years. In­ter­na­tion­ally, patent ex­ten­sion can hap­pen based only on rea­son­able, ef­fec­tive and strong causes,” which Zhao thinks do not ap­ply in Hitachi Met­als’ case.

Ac­cord­ing to Sun, eight Chi­nese rare earth com­pa­nies have gained patent li­censes from Hitachi Met­als. How­ever, there are about 200 com­pa­nies pro­duc­ing such mag­nets in China. Of those, five have an­nual pro­duc­tion ca­pac­i­ties of 3,000 met­ric tons, and about 20 have ca­pac­i­ties of 1,000 tons to 3,000 tons.

Hitachi Met­als is dom­i­nant in the rare earth sec­tor, with more than 100 patents in the United States, about 300 in China and 600 in Ja­pan.

This means a large por­tion of Chi­nese prod­ucts con­tain­ing the mag­nets can­not be ex­ported be­cause they don’t have patent li­censes, said Sun.

And Hitachi Met­als will not sell its patent rights, he said.

Gao Yunhu, chief of the Rare Earth Of­fice un­der the Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy, said the govern­ment will pro­vide as­sis­tance to the Chi­nese com­pa­nies if asked.

At present, China pro­duces about 80,000 tons of the mag­nets each year, and about a quar­ter of the prod­ucts have patent li­censes en­abling them to be sold abroad.

About 30,000 to 40,000 tons of such prod­ucts are used do­mes­ti­cally.

With­out a patent li­cense, “our for­eign clients will not buy our prod­ucts”, Sun said.

“We re­spect the in­tel­lec­tual prop­erty rights. But what Hitachi Met­als has done is to set up trade bar­ri­ers,” he said.

So far, each mem­ber com­pany of the al­liance has paid $1.5 mil­lion to cover pos­si­ble costs of the law­suits. Chi­nese and US le­gal teams will act on be­half of the Chi­nese com­pa­nies in the courts of the two coun­tries.

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