This feature article from Chinese-language Liberty Times gives a comprehensive overview of the struggles Taiwanese manufacturers face in LED patent wars.

As the global LED lighting demand kicks off, patent wars are becoming the inevitable. There are, however, tricks in patent applications. U.S. LED manufacturer Cree for example cast an encompassing network with its proposal of “my patents include all light emitting products.” In comparison, Taiwanese LED manufacturers have been too conservative in their approach, which can easily be avoided.

Taiwan’s LED technology trade deficit expected to reach US $10 billion in 2019

Similar to other technology industries, the LED industry competition involves costs, technology, yield rates and patent resources. According to The Industrial Technology Research Institute (ITRI), Taiwan’s technology trade deficit reached US $5.0 billion in 2011. In the next five years, the trade deficit will elevate to US $ 10 billion, projected Richard Thurston, Senior Vice President and General Counselor of TSMC. The “technology trade deficit” is defined as patent license fees and intellectual property right costs paid to foreign manufacturers.

Taiwan actually is a big global patent player. According to latest United States Patent and Trademark Office (USPTO) statistics, Taiwan’s patents reached 11,598 in 2013 and ranked in fifth place. The top four countries were U.S., Japan, Germany and South Korea. Technology manufacturers in Hsinchu have also largely invested in R&D to develop latest technologies, so why is the country still behind in patent wars?

From Taiwan’s LED industry perspective, package manufacturer Everlight has been engaged in patent wars with Japanese manufacturer Nichia for 10 years. Unity Opto was also sued by Nichia over a LED bulb launched in Japanese market. Harvatek has also signed a license agreement with Toyoda Gosei and is paying for phosphor powder patents.

Taiwan has been too conservative in patent applications

Taiwan’s large “technology trade deficit” and payment of patent fees is not the result of technology gaps, but because the country has been too conservative in patent applications, said ITRI EOL Manager Yu Yu-chen.

To illustrate, Yu presented a patent scenario. If Isaac Newton wanted to file a patent after being struck by an apple while sitting underneath the fruit tree, most Taiwanese manufacturers would be too honest in their application. They would focus on how much fertilizers and waters were used, when the apple became ripe, what was the wind resistance when it fell. Since too many details are offered, competitors often just have to change one to avoid the patent.

In comparison, “when European and American manufacturers apply for patents, they tend to be very bold,” said Yu. “They will say ‘my patents include all apples that fall,’ and will be able to convince the patent authentication organization to approve it.” The most classical case was U.S. LED manufacturer Cree. The company applied for a killer patent in 2006, which basically said: “My patent includes any luminaire plugged in a socket that has a single LED with a luminous efficacy over 60 lumens.” It basically just means “my patents cover any light emitting LED luminaire.” The application at the time was not accepted by USPTO and turned down. However, Cree gave a classical rebuttal: “There’s nothing intrinsically wrong with defining something with what it does rather than what it is in drafting patent claims.” To back up its claim, the company presented similar cases in 1971 and 1977 to USPTO.

Since U.S. is a country that implements case laws, it strongly values past rulings and approved the patent. A lot of times the patent examiners might have just accidentally entered the patent office, but do not always understand the actual industry conditions. There is a very high bar for overturning patents.

Cree spent seven years communicating with the patent approval office, and acquired the patent in 2013. In 2006, average LED manufacturer’s luminous efficacy was lower than 60 lumens/watt (lm/w), so not many manufacturers cared about the patent. Yet, today the average LED can reach 70 to 80 lm/w. In other words, Cree’s patent application falls within this range. This patent case teaches Taiwanese manufacturers two lessons, the first is to be bold when applying patents, and to avoid being too specific in patent descriptions. The second is patent applications should not only tackle technology, but also legal aspects, thus it is important for manufacturers to understand U.S. or continental law.