The Japan That Can Say: "See You In Court"

To protect valuable intellectual property, high-tech companies are filing lawsuits

The Japanese have traditionally been much less inclined than Americans to solve their problems in court. When disputes arise over some civil matter, they are more likely to be sorted out in quiet negotiations than a flurry of lawsuits. That's one reason the corporate world took notice in October and November when Japanese electronics companies suddenly got highly litigious. Matsushita (MC ), NEC, (NIPNY ), and Toshiba (TOSBF ) have all been in court recently defending their patents. And those lawsuits came on top of a series of other legal actions in earlier months.

What's going on? In the 1990s, innovations by Japanese companies in DRAM chips, displays, and other areas were widely copied. Now, companies are determined to defend their turf against low-cost competitors they allege are infringing on their patents. "For a long time, Japanese companies did a lot of applying for patents but not much about enforcing them," says Andrew Cobden, a patent attorney at law firm Lovells in Tokyo.

That has changed. In the most recent legal action, the Tokyo Customs Office on Nov. 11 upheld a patent-infringement action by Matsushita Electric Industrial Co. against LG Electronics Inc. of South Korea, temporarily banning the import of LG's plasma display panels into Japan. LG denies any patent violation.

The Matsushita court action came just two days after Toshiba Corp. filed suit in Japan and the U.S. against South Korea's Hynix Semiconductor Inc., charging patent violations in the manufacture of so-called NAND flash-memory chips that Hynix began selling in February. Toshiba is seeking a ban on imports of Hynix chips into Japan and money damages in the U.S. The company has a lot to protect. With 37% of the global market, Toshiba ranks second only to Samsung in flash memory and holds more than 1,000 NAND-related patents. The chips are used in digital cameras, MP3 players, and other equipment. "We are prepared to take action against any infringement of our patents," says Shozo Saito, a vice-president in Toshiba's semiconductor division. Hynix vigorously denies any wrongdoing.

Other cases have unfolded along similar lines. In mid-October chipmaker Renesas Technology Corp. -- a joint venture between Hitachi and Mitsubishi Electric -- asked for a preliminary injunction against Nanya Technology Corp. Japan, a subsidiary of Taiwan's Nanya Technology Corp., in a bid to keep Nanya's memory products out of Japan. And at the beginning of November, NEC Corp. filed lawsuits in the U.S. and Canada against Harris Corp., claiming the Melbourne (Fla.) company is abusing its digital microwave radio (DMR) equipment patents. "We must protect our interest," says Botaro Hirosaki, NEC's associate senior vice-president for intellectual property. Harris denies any patent infringement. Nanya couldn't be reached for comment.


Japan's government has stepped in to help. In late 2002, Parliament passed a law that has cut the time it takes to try a patent-infringement case to around a year, down from two to three years. And in April, 2003, a bill was passed enabling companies to block the import of products they allege infringe patents if court hearings are pending -- the law Matsushita just invoked against LG.

Critics of the legal deluge charge that Japan is just trying to erect protectionist import barriers. And the litigation isn't without risks. LG, for instance, has filed its own suit against Matsushita in Korea that seeks to cut off imports of its Panasonic products. And Hynix is threatening "aggressive countermeasures." Even if these suits result in settlements and cross-licensing agreements -- as often happens -- the litigation genie is out of the bottle.

By Ian Rowley in Tokyo

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