[Patent Talk] Nippon Steel's Rebellion Against Toyota

This is a column contributed by our patent attorney Taeyoung Lee to Etoday on October 19, 2021. It discusses Nippon Steel's patent infringement lawsuits against Toyota and Baosteel.

[Patent Talk] Nippon Steel's Rebellion Against Toyota

A very interesting case has arisen. The Yomiuri Shimbun reported that on the 14th, Nippon Steel filed suit in the Tokyo District Court against Toyota Motor and China's Baosteel, claiming that its patent on a special steel material used in automotive motors had been infringed, and seeking JPY 20 billion in damages from each, for a total of JPY 40 billion (about KRW 420 billion).

Toyota expressed regret that it, as an automaker, had been named in a dispute that should be settled between materials suppliers, and stated that there was no problem because it had received a non-infringement warranty from Baosteel for the special steel at issue.

In principle, when a component infringes a patent, the patentee can bring an infringement suit not only against the component maker but also against the manufacturer that uses the component to produce the finished product. Still, it is highly unusual for a parts supplier such as Nippon Steel, which is the weaker party in the supply chain, to sue Toyota, a "super-powerful" automaker customer. The industry reports that the Nippon Steel patent at issue was filed only in Japan, and I think this may be one reason Toyota was included as a defendant: outside Japan, Nippon Steel has no weapon with which to pressure Baosteel.

The key point is Toyota's statement that it received a non-infringement warranty from Baosteel. Generally, when a parts supplier delivers components to a finished-product manufacturer, the parties enter into an indemnification agreement under which the supplier warrants that the components do not infringe any patent. If problems such as a patent infringement suit later arise, the supplier must cover all losses under that agreement.

Accordingly, under the indemnification agreement, Baosteel is likely to have to compensate Toyota for all costs related to the litigation and any damages that may arise in the future. Since the patent in suit is used in hybrid or electric vehicles ...

(Please click the link below for the full article.)

LNB IP Law Firm