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Nippon Steel is suing Posco, its South Korean partner and competitor, for $1.2bn for allegedly stealing trade secrets in a move that highlights the pressure on Japanese companies to protect intellectual property amid intensifying global competition.
The Japanese steelmaker claims that Posco used illicit means to obtain highly specialised technology developed by Nippon Steel to manufacture grain-oriented electrical steel sheets, used in generators in power plants.
Nippon Steel, which is seeking an injunction to stop the manufacture and sale of the sheets by Posco, is also suing a former employee whom it claims was involved in Posco’s alleged trade theft.
Nippon Steel’s decision to sue Posco, despite the companies’ strategic alliance, highlights intensifying friction as a high yen erodes the competitiveness of Japanese manufacturers compared with their Korean competitors.
The two companies have a strategic alliance through which they supply each other with semi-steel products and have established joint ventures in Vietnam and South Korea. The alliance does not, however, cover downstream products such as grain-oriented electrical steel sheets.
Japanese companies have traditionally been reluctant to resort to litigation, but Kenneth Siegel, managing partner at law firm Morrison & Foerster in Tokyo, said: “This is what has been happening more and more between Japanese companies and Korean companies in particular, because of the larger competitive circumstances of Korean companies having a huge cost advantage and Japanese companies having intellectual property and wanting to protect it.
“We’ll see more of it over time.”
His firm has worked on five or six cases involving Japanese companies suing Korean groups although the majority has been for patent infringement. Trade secret claims, such as the one being made by Nippon Steel, are less common, Mr Siegel said.
Nippon Steel said that while the market for the sheets was not large – at about 1m tonnes a year – the technology is highly specialised and cannot be developed easily.
The group said it was the only company that had developed the technology to make the sheets and that while it had licensed the technology to other steelmakers, including ThyssenKrupp, it had not licensed it to Posco.
Demand for the sheets from emerging economies is expected to grow as they build their electricity infrastructure, Nippon Steel said.
Posco strongly denied Nippon Steel’s claim that it violated the Japanese company’s patents.
“We have never infringed their technology and we will actively respond to the lawsuit,” Posco said.
It added that the lawsuit was filed to “guard against Posco’s rapid growth” in the global steel sector.
Posco said there had been several cases of Japanese lawsuits against Posco over technology patents in the past but that the amount of damages Nippon Steel was seeking this time appeared huge.