• Recent patent litigations launched by major LED companies aim straight at latecomers in Chinese and Taiwanese LED industry, who have insufficient patent portfolio.
• The LED market will be restructured to focus on major LED companies with extensive patent portfolio and technological strengths.

1. LED industry enters patent wars

One of the biggest issues in the global LED industry in 2014 was patent disputes between established major LED companies and newcomers. LED patent litigations filed in U.S. from 2014 to early 2015 show volatile patent litigations in the industry, in contrast to the peaceful scenario in recent years.

A typical example would be the patent suit filed by Japanese LED manufacturer Nichia against Everlight of Taiwan in U.S. courts in 2012, which is still in progress in 2015. The pending case is still awaiting juried trial in the first half of this year. Another case was Korean LED manufacturer Seoul Semiconductor patent lawsuits against two North Amercian electric appliance companies in U.S. in July 2014, the range of patent infringements included seven patents covering LED epiwafer, fab, packaging, lens and backlight system processes.

In November 2014, U.S. LED manufacturer Cree filed patent lawsuits against Taiwanese LED manufacturers Harvatek and Kingbright, through the Western District Court of Wisconsin, U.S. The company filed another patent litigation lawsuit through the same court against Taiwanese LED manufacturer Unity Opto and luminaire manufacturer Feit Electric in January 2015, while requesting United States International Trade Commission to ban imports of patent infringed products.

What these litigations share in common is they are not necessarily between large companies, but are often lawsuits launched by major LED manufacturers against late comers, who have limited patent portfolio.

2. Changing patent litigation characteristics

Recent global patent litigations are targeting new LED manufacturers that have expanded business without developing a sufficient patent portfolio. Companies that experienced various patent disputes in the last few years in the LED industry such as Seoul Semiconductor, Nichia, Philips, Osram, and Cree have already established cross-license agreements or strategic tie-ups, protecting them from potential patent disputes.

Hence, major LED companies are directly aiming patent lawsuits against companies that have mass-produced cheap imitations of their products, and have failed to develop their own patent portfolio. Many Chinese and Taiwanese companies have faced intensive lawsuits recently.

Patent litigation methods have also become more aggressive in order to strongly deter and warn companies that may have crossed the line. Cree filed its patent lawsuit petition to United States International Trade Commission against lamp products that used allegedly unpatented LED components, and even requested banning these product imports. Nowadays, the target of patent litigation has expanded from directly targeting LED component manufacturers, such as LED chips and packages to encompass LED end products, such as TV, smartphone, tablets, PC, monitors and others that might use unpatented LED light source components. In other words, the manufacturers of LED end products must strengthen monitoring protocols and related standards to ensure component suppliers have secured required patent portfolios.

Future outlook on LED industry patent disputes

The LED market is looking at a compound annual growth rate of 15% to reach 100 trillion won (US $91.46 billion) by 2020. Globalization has intensified competition in the LED industry, making it difficult for a single manufacturer to become an industry hegemon. As a result, large LED companies will continue to intensify their aggressive crackdown on patent infringements. Chinese and Taiwanese LED manufacturers that have quickly expanded their LED business rely on Chinese market consumption, and do not have strong patent portfolio. When these companies try to venture into oversea markets, it can be foreseen that global LED companies will launch a full range of patent infringement assaults against them.

“The LED industry is flooded with companies all over the world, but it will be restructured in a manner similar to the memory semiconductor market a few years ago, where only a few major LED companies with strong patent portfolio and technology strengths will remain,” a Korean official familiar with the LED industry forecasted.

This year late movers in the industry are expected to pay the harsh price for shaking the market foundations with mass production and low-price strategies, and ignoring patent regulations.

(Editor’s Note: This article was submitted by a source from the Korean LED industry, who has declined to be identified. Additional edits were made to the article by LEDinside editorial staff. Corrections were made on Feb. 2, 2015. Feit Electric company is not a Taiwanese LED manufacturer, but an American company. )