Recent patent disputes between Japanese LED manufacturer Nichia and Taiwanese counterpart Everlight has raged on, with new disputes every now and then. Will the two sides ever reach a settlement? And how will these patent issues affect the LED industry as a whole? Below is LEDinside’s observation and analyses.

There are several patent development scenarios in the technology industry. The first scenario is where the infringer is caught red-handed and pays the patent holder a large compensation. In another scenario, judges ban patent infringing products from being sold to certain global markets. Another outcome is where the two sides arrive to a settlement and withdraw their lawsuits, which should not be interpreted as no patent infringements. When manufacturers prefer a legal settlement, they are just withdrawing patent lawsuits. More peaceful forms of settlements also include cross-licensing patents, where the two companies can ship patent protected products to their respective clients. There is also the possibility that the infringer pays the patent holding company patent royalties or license fees. There are many different types of outcomes, which all depend on the market conditions, negotiations and discussions. One point that can be agreed on is the more preparations manufacturers make, the higher chances their patent deployment strategies will be competitive and successful in the international market.

Patent competitions can be classified into basic patents and improvement patents. Basic patents are very important and have a key market position in the patent industry, many core patent wars belong to this class of disputes. These patents are also manufacturers key technology results and end products. Improvement patents cover a much larger scope, and can disrupt market sales and deter competitors.

LED patent wars heat up

Nichia and Everlight’s rising LED patent wars is the result of years of disputes between the two companies. Everlight announced its important LED patent lawsuit developments in the U.S., and requested for the invalidation of Nichia patents. At the time, Everlight’s LED patent deployment strategy triggered many discussions in the international market. Some large LED manufacturers became more aggressive in patent licensing, or sold their patents to avoid potential patent price plunges in the future. Nichia listed many LED patent lawsuits it had won in the past, to boost the market’s confidence in its products. Most of the patents involved European Patent Office (EPO) approved white LED patents, or German courts YAG related phosphor technology regarding Everlight’s patent infringement. Everlight’s white LED products can be classified into two types of products, respectively EP2 197 053 and EP 2 276 080 in the EU, said a source from Nichia. The related YAG lawsuit is still pending and entering the second trial process in the Düsseldorf Higher Regional Court in Germany.

According to Nichia, the German court’s granting of YAG phosphor patent EP 2 276 080 on July 27, 2015 belong to the same family of patents EP 936 682 and U.S. patent No. 5,998,925. Yet, the validation of the patents is independent, and has no impact on other patents from the same family (the other two patents have been judged invalid). Nichia emphasized EU’s approval of two new YAG related patents has become more effective and valid.

Everlight responded saying Nichia’s EP 936682 (DE 69702929) YAG patent has been declared by the German Federal Patent Court as of September 2014 during the first trial. Hence, the infringement action on this patent has been stayed by the German Düsseldorf appellate court. Nichia’s further requests of the court to add new allegations to Everlight’s products and preliminary injunctions of preventing the company of making misleading statements on the status of its YAG patents is not the German court’s final decision.

Opposing YAG phosphors

Although, YAG phosphor patents are very important, many LED products are able to avoid YAG phosphor patents. Yet, Nichia’s products and strong core competitiveness, has made these patents extremely important. For Nichia solidifying its product sales is a necessity. On the other hand, Everlight’s product portfolio is different from Nichia’s, but it is still possible for its patents to infringe Nichia’s products.

What is the impact from these patent wars?

In reality, besides Everlight and Nichia’s LED patent wars, Taiwanese LED manufacturer Harvatek has also sued American LED manufacturer Cree over LED patent infringement in U.S.

Many international LED manufacturers have been selling or collaborating on LED chip and package technology. Some companies have even been merged or acquired by others. Companies that possess LED technology often license their patents to other new manufacturers, or those without LED patents. These trends meet LEDinside’s previous estimations that LED patents will be quickly sold onto the market when prices are high. Manufacturers that hold key technologies will also rapidly sell related technology, patents or transform their company business model when the opportunity arises. For instance, China’s Jufei Opto signed an agreement with Toyoda Gosei and the two companies completed a strategic supply chain partnership. U.S. lighting manufacturer GE has also licensed its Mn4⁺ phosphors to Asian manufacturers, excluding Japanese manufacturers though.

In several important markets, Chinese LED manufacturers and Taiwanese LED manufacturers have been actively expanding their oversea markets. The trend of large manufacturers becoming larger, and SMEs being merged, shutdown, or waiting for the right opportunities has rised. In mature LED markets, LED patent competitions have settled, but many new market applications have emerged following LED lighting market’s commercial applications. Emerging market demands have become larger, and past production capacity wars are now transforming into patent wars. Patent wars has become the new competitive market for manufacturers of all sizes, and requires further attention.

It is expected from 2016-2018, major LED patents will be licensed, and manufacturers will reach a consensus on lawsuits and deals. There might be an opportunity for manufacturers to create new market opportunities.