On 17 August 2012 Hitachi Metals filed a complaint with the US International Trade Commission (USITC), alleging unfair competition under section 337 of the US Tariff Act of 1930 by the importation into the USA and sale of certain sintered rare earth magnets, methods of making them, and products containing these magnets that infringe patents asserted by Hitachi Metals. There were 29 identified respondents. The battle ended with the parties reaching settlement agreements. However, this was merely a prelude to ongoing litigation at the Ningbo Intermediate Court on IP abuse and a series of attacks on the validity of certain US patents directly associated with sintered NdFeB magnets.

Owning 600+ patents associated with sintered NdFeB magnets, Hitachi Metals is the recognised worldwide leader in this field. Seven Chinese producers of rare-earth magnets formed an alliance to fight Hitachi Metals over its US Patent Nos. 6,491,765 and 6,537,385. In early 2016, these US patents were found to be partially invalid by the Patent Trial and Appeal Board of the USPTO, although Hitachi Metals announced that it intended “to continue to vigorously defend and protect its sintered NdFeB magnet patent portfolio, and advance its views and positions on behalf of itself and its licensees and customers.”

At the end of 2015, four Chinese rare earth companies lodged an antitrust case with the Ningbo Intermediate Court over Hitachi Metals, seeking USD 3.4 million. This is the first case in China on what constitutes abuse of non-essential patents (non-SEPs). Generally non-SEPs owners are less restricted on licensing compared to SEP owners who are subjected to FRAND (fair, reasonable and non-discriminatory terms) license obligations. There appear to be no formal standards in the NdFeB field. The plaintiffs requested the court to license non-SEPs by arguing that these are de facto standards and an essential facility for the industry.

The plaintiffs took advantage of a previous public statement by Hitachi Metals that “the company considers it’s almost impossible for other companies to commercially manufacture the magnets if avoiding our entire patent network”. The plaintiffs seemed to be deploying the essential facilities doctrine originated from the USA – the licence granted by Hitachi Metals may be presented as the use of market power to create a bottleneck obstructing competitors.  If the argument succeeds, it may deter patent filing and prompt IPR owners to seek alternative protection.

We await the decision from the Ningbo Court, which will have an impact on the global NdFeB market given that the USA is the largest NdFeB market and China potentially the largest exporter.