False Announcements of Patent Infringement

Dr. Shoichi OkuyamaVice President, AIPPI Japan

October 20/21, 2015Pre-meeting, AIPLA Annual Meeting

Two Cases, Today + Two Major Trade Secret Settlements

• “False” announcement cases under the Unfair Competition Prevention Act (UCPA)• Nichia’s Press Release Case – Tachibana Eletech v. Nichia Corp.• Imation Corp. Japan v. One-Blue, LLC

• Trade Secret Settlements – trade secrets are protected under UCPA• Toshiba v. SK Hynix • Nippon Steel & Sumitomo Metal v. Posco

Basics of “False” Announcements in Japan• Under the Unfair Competition Prevention Act (UCPA)• Three conditions to qualify as unfair competitive acts (Art. 2(1)(xiv))• (1) Competitive relationship• (2) Falsehood: announcement or dissemination of a falsehood as a fact• (3) Injuries: injurious to the business reputation

• Remedies: damages and injunctions

Nichia’s Press Release Case

• Decided on February 19, 2015 by the Osaka District Court• Plaintiff: Tachibana Eletech • a trading company of electronics / IT products (referred to as “Tachibana”)• A Taiwanese company, Everlight, makes allegedly infringing products• Tachibana is not a sales agent for Everlight products, but sells its products in

general• Tachibana asked for an award of damages – JPY 5,000,000 or US$ 42,000

• Defendant: Nichia Corp. • a manufacturer of LED products (it mass-manufactured blue LEDs and blue

laser devices for the first time)

What Did Nichia Do?

• October 2011, Nichia published a press release saying that it sued Tachibana for patent infringement• The press release had six elements:• (1) Nichia brought actions against Tachibana (2) because it imports, sells, etc.

particular allegedly infringing products Everlight makes• (3) Nichia has taken actions globally against those who infringe its patents• (4) In this regard, Chinese, Taiwanese and Korean makers are recently

behaving very badly in the Japanese market• (5) Nichia sued another company and it stopped sale of Everlight’s products• (6) Actions against Tachibana are following from that lawsuit

Outcomes of Infringement Lawsuits

• In the two lawsuits mentioned in the PR, Nichia sued Tachibana for patent infringement, but the Tokyo District and IP High Courts rejected Nichia’s claim because Tachibana did not import or sell the allegedly infringing products made by a Taiwanese LED manufacturer, Everlight. • The district court cases were filed on October 4, 2011 and a decision for the joined cases was

handed down on January 31, 2013. The IP High Court handed down a decision on July 11, 2013.

• Tachibana’s website mentions Everlight and has a link to the home page of Everlight’s website• Tachibana actually sells Everlight products in general in Japan

• According to Tachibana, it sold colored LED products only while the Nichia paten at issue is directed to white LED

• Question: Tachibana apparently offered to sell infringing products?

Osaka District Court

• Competitive relationship exists• Element (1) in the PR is not a falsehood• By saying that Nichia had sued another company and it stopped sale in the PR, Nichia

implied that Tachibana did the same thing (elements (5) and (6)). This caused injuries to the business reputation.

• Element (2) is a falsehood because Tachibana did not import, sell, or offer to sell allegedly infringing products made by Everlight

• Mere mention of Everlight and a link to it is not offer to sell• Tachibana is not a sale agent for Everlight, the court emphasized

• Awarded damages: JPY 1,100,000 or US$9,000

Case 2: One-Blue FRAND Case

• Decided on February 18, 2015 by 29th Division of the Tokyo District Ct.• Plaintiff: Imation Corporation Japan

• a manufacturer of removable data storage products spun off from 3M

• Defendant: One-Blue LLC• One-Blue LLC is a company set up with investments from Cyberlink, Hitachi,

Panasonic, Philips, Samsung, Sony, et al. and has a collection of patents on Blue-ray Disc (BD) products – a patent pool management company

• The patent pool agreement had a FRAND declaration

• Negotiations between Imation and One-Blue stall• Negotiations started June 2012, and May 2013, One-Blue sued Imation in

Delaware

What Parties Did?

• June 2013, One-Blue sent warning letters to three major retailer chains suggesting the possibility of lawsuits for injunctions against them (no damages claim was mentioned)• In the warning letter, TDK and Verbatim (Mitsubishi Chem) were named, and

Imation was not named, but Imation provided BD recordable disks to TDK for sale under the TDK brand• In fact, Imation bought a recording media sales division of TDK in 2007

• Imation brought this lawsuit • In August 2013• Asking for an injunction over the claim of having power to obtain an

injunction and an award of about 0.92 million US dollars in damages

TDC Decision of February 2015

• Three conditions met:• Competitive relationship: yes, the patent pool has patents of competitors• Injuries: yes, while Imation was not named in the WL, TDK was mentioned. The WLs were

injurious to the business of Imation as a supplier• Falsehood: On the basis of the IP High Court grand panel decision in Apple v. Samsung case

of May 16, 2014 involving a FRAND declaration, the court recognized that no injunction is available to One-Blue, so to say that it can obtain an injunction is a false statement

• Tokyo District Court issued an injunction, as demanded, to prohibit One-Blue from announcing or disseminating the statement that One-Blue can obtain an injunction• No damages were awarded because One-Blue had no fault for damages because it was not

clear whether patents under a FRAND declaration were enforceable for injunctions when it sent the warning letters

Take Away

• Be careful when you publicly announce the lawsuit against patent infringement• Be careful when you send warning letters to retailers or users

Toshiba v. SK Hynix – Theft of Trade Secrets• Toshiba Settled with Hynix for a payment of JPY 30 billion or US$250 million

• Settlement• On December 19, 2014, Toshiba announced that it had reached a settlement with South Korea’s SK Hynix Inc. in a

US$920 million civil lawsuit filed by Toshiba at the Tokyo District Court on March 13, 2014, for the theft of trade secrets for NAND flash memory.

• Toshiba also said that the two companies agreed to broaden their relationship by extending existing supply agreements for DRAM and patent cross licensing, and to begin collaboration in the development of new technology.

• Criminal case• In March 2014, a former SanDisk engineer was arrested on suspicion of having provided NAND flash memory

technical data to Hynix in 2008. • The engineer had worked at a joint-venture manufacturing plant with Toshiba, left SanDisk, and then went to

work for Hynix.

• On March 9, 2015, the Tokyo District Court handed down a prison sentence of five years and a fine of JPY 3 million (about US$25,000). August 2015, the Tokyo High Court confirmed it. A civil lawsuit is also pending against the engineer for damages.

• A lawsuit against SK Hynix filed by SanDisk in California is reportedly still pending.

Nippon Steel & Sumitomo Metal v. Posco• Nippon Steel learned that its technology on oriented magnetic steel sheets

used for transformers had been stolen by Posco• The technology was developed around 1968 by Nippon Steel after many years of

research based on American technology under licenses• Posco started selling similar products around 2004• Posco sued its ex-employee for the sale of trade secrets to a Chinese company, and

the ex-employee testified that the technology had been stolen from Nippon Steel producing a lot of evidence (a high court decision in Oct. 2008)

• April 2012, Nippon Steel sued Posco in Japan for TS violations and also in the U.S. for patent infringement, and sued an ex-employee of Nippon Steel• Apparently, the technology was stolen around 1980

• Nippon Steel asked for more than US$ 800 million in damages and an injunction before the Tokyo District Court

Settlement

• September 30, 2015, Nippon Steel announced that it had reached a settlement with Posco for a payment of JPY 30 billion or US$250 million plus running royalty for exported products• A lawsuit against the ex-employee is still pending

• Complications:• Nippon Steel initially taught Posco how to make steel • Nippon Steel owns 5% of Posco

Important Points

• Trade Secret protection is becoming more important in Japan• The government or METI is trying to support small and large

corporations for effective TS protection in many different ways• One is the amendment to the UCPA this year