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Chinese firms to sue Hitachi Metals

Patents for rare earth magnets said throttling industry's export efforts

Kyodo

A dozen Chinese rare earth companies are planning to jointly sue Hitachi Metals Ltd. as early as next month, claiming it is holding invalid patents and exercising patent rights in an illegitimate manner, state-run media reported Tuesday.

The China Daily said each member company in the industrial alliance has paid $1.5 million to cover possible costs incurred during the legal process, which could start in early September in both the United States and China.

The newspaper said China’s Ministry of Industry and Information Technology has offered to assist them.

At the center of the dispute are high-performance neodymium-based magnets used in manufacturing motors, audio speakers, headphones, cordless tools and computer hard drives.

Hitachi Metals’ dominance in this sector means a large portion of Chinese products containing such magnets can’t be exported without patent licenses.

Coalition head Sun Baoyu, president of Shenyang General Magnetic Co., insisted Hitachi Metals has no right to claim the patents any longer, and accused it of hindering Chinese rare earth manufacturers by extending their expiration periods.

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

Without a patent license, “our foreign clients will not buy our products,” he said. “We respect the intellectual property rights, but what Hitachi Metals has done is to set up trade barriers.”

Sun said only eight Chinese rare earth companies have gained patent licenses from Hitachi Metals, though there are about 200 companies producing such magnets in the country.

Zhao Hu, a lawyer and partner of Beijing’s Eastbright Law Firm, was quoted by the newspaper as saying that “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,” he said, suggesting that those causes are absent in Hitachi Metals’ case.

Hitachi Metals, which owns more than 600 sintered rare earth magnet patents worldwide, including more than 100 in the U.S. alone, has vowed to “strongly enforce” those patents.

Last August, it filed a complaint with the U.S. International Trade Commission against 29 manufacturers and importers of unlicensed sintered rare earth magnets and products containing them, seeking a halt to their import into and sale in the U.S.

It withdrew that complaint on June 6 this year after having entered into settlement agreements with most of those companies, some of which are Chinese, allowing them to sell their products in the United States in return for payment of fees.