The Japan Times reported on the 14th of October about a lawsuit filed by Japanese steel-maker Nippon Steel against Baosteel and Toyota.

Nippon Steel is accusing Toyota and Chinese steel-maker Baoshan Iron & Steel (Baosteel) of patent infringement of a patent for an important steel product used in electric vehicles (EVs).

The Japanese steelmaker is seeking damages equal to 20 billion yen (about 176 million USD) from each of the two companies. Moreover, Nippon Steel has asked the court to make Toyota stop the sale of EVs that contains motors using steel sheets allegedly made by infringing its patent.

This type of legal action is rare in Japan where big companies usually do not engage in legal battles with their business partners. According to Nippon Steel, the company had tried to discuss the matter with both companies, but it was not possible to reach an agreement.

Toyota on the other hand says that when it chose to sign a contract with Baosteel, it had confirmed that there was no patent violation. It said it had learned about the lawsuit with great regret and believes that such matters should be discussed between material manufacturers.

The Reuters article from October 21 elaborates on the issue with more details and further background.

The claim by Nippon Steel is that its patents for non-oriented steel are being infringed upon in terms of composition, thickness, crystal grain diameter and magnetic properties of the steel.

In general steelmakers in Japan are more focused on advanced niche markets, such as these specialized components, which has enabled them to maintain an advantage over larger Chinese competitors. For Nippon Steel, then, keeping this edge is of crucial importance, and it may therefore have more to lose than Toyota. The large car manufacturer after all is unlikely to be really affected by the damages and could always opt to buy more from overseas competitors of Nippon Steel to avoid disruptions to its supply chain. The biggest concern for Toyota would be if the court prevented it from using Baosteel’s steel, as it would hamper its ability to increase the production of electric vehicles.

Despite this lawsuit, Reuters reports that UBS analyst Harunobu Goroh does not see a fundamental impact on the relationship between Nippon Steel and Toyota, who will remain strategic partners.

For more information, please click here for article 1 and article 2.