Asian Steel Maker Can’t Delay ‘Armageddon’

(CN) - Nippon, the multitrillion-dollar Japanese steel company, can advance corporate espionage claims against a Korean competitor, a federal judge ruled, refusing to wait on patent re-examinations.

Nippon Steel & Sumito Metal claims it has invested decades of research and millions of dollars into innovating grain-oriented electrical steel (GOES) technology, which is used in the cores of power and distribution transformers.

In April 2012, Nippon filed patent infringement, false advertising and other claims against Posco and Posco America Corp. A large multidimensional company with $3 billion in annual revenue, Posco was once named Pohang Iron and Steel Co.

Nippon's amended complaint says Posco had been falling behind in the market in the late 1980s and could not get a license from Nippon to its GOES technology.

Posco then allegedly resorted to a "systematic and company-sanctioned program of using illicit means to build GOES business on the back of Nippon's proprietary technology." Nippon said this involved Posco bribing and paying off former Nippon employees to obtain documents describing its technology and implement them into Posco manufacturing.

Posco refused to take a position on whether it infringed on Nippon's patents in 2007, according to the complaint. Around this time, the Korean government convicted two former Posco employees for selling GOES-related trade secrets to a Chinese steel company. Nippon claims that its secrets, not those of Posco. had been the ones at issue. Its request for the case records is on appeal in a Korean District Court.

Nippon said Posco has enjoyed a quintuple increase in its GOES imports into the U.S. since 2010, whereas Nippon's market share has decreased substantially.

Posco also faces claims in Japan that it stole Nippon's trade secrets. Should Nippon obtain a judgment in Japan, Posco has a lawsuit pending in Korea to declare any such award unenforceable there.

The Korean company meanwhile asked the U.S. Patent and Trademark Office to re-examine the four patents that Nippon implicated in its New Jersey federal complaint.

It then asked the court to stay those proceedings until completion of that study.

U.S. District Judge Mark Falk refused last week, finding that the stay would prejudice Nippon, which has allegedly "lost more than 72 percent of its GOES market share, while Posco correspondingly has expanded its market presence by 412 percent."

"The court certainly does not find that POSCO has done anything wrong," Falk wrote. "But when parties are directly competing and the landscape of the relevant market is changing, it presents a circumstance where justice demands that the allegedly aggrieved party be given an opportunity to litigate its claims - and sooner rather than later. If Nippon is correct, it would be extremely prejudicial to force the company to the litigation sideline while its business market is subjected to a potentially permanent alteration. At the end of the day, Nippon may be incorrect about Posco and its conduct and the [United States Patent and Trademark Office] USPTO may ultimately reject its patents in full. But given the allegations involved and the parties' relationship, it seems unfair - and prejudicial to Nippon - to discontinue this litigation in order to allow the USPTO to weigh in on some, but not all, of the claims in this case."

A stay will not simplify or advance resolution of the feud, the 21-page opinion states.

"While the USPTO rejecting some claims could theoretically narrow the scope of the patents in dispute, the reality (based on what the court has seen thus far) is that this litigation [is] armageddon," Falk wrote (parentheses in original.) "The ever-present disputes, the parties' acrimonious relationship, the other lawsuits pending in foreign countries, and the court's personal experience with this case all suggest that this case will remain contentious, complex and unresolved regardless of what emerges from reexamination. Simply put, judicial finality appears to be the only solution."

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