Korean material patents face mounting challenges from Japan

After the Japanese government tightened restrictions on exports of chip and display materials to Korea in July 2019, Seoul launched an initiative to support local production and end the heavy dependence on Japanese imports.

In the past year, the initiative has seen some positive outcomes: Some Korean companies succeeded in replacing Japanese suppliers for chip and display production, while top Japanese suppliers saw revenues drop on year.

As Korea’s drive to localize supply continues, there are signs that Japanese companies are preparing to fight back — this time through lawsuits claiming infringement on intellectual property.

According to Datz-IP and Keywert — both international databases for intellectual property (IP) cases — six suits have already been filed in Japan against Korean companies this year. Last year, there were only four for the entire year.

“Considering there’s about 50 IP-related disputes occurring in Korea each year, these figures are not small at all," said Park Seung-kwan, a researcher at the Korea Patent Attorneys Association.

In July, an individual started opposition proceedings in a Japanese court against a patent held by LG Chem, Korea’s largest battery maker. The patent regards active materials for rechargeable batteries and their manufacturing method.

Posco and Samsung SDI have faced similar opposition proceedings from individuals in Japan regarding patents related to battery technology. Last year, Kolon’s patent on a polycarbonate material was also challenged in a Japanese court.

It’s not only big companies that have been targeted. Koh Young Technology, a mid-sized Korean manufacturer of chip production equipment, is also facing opposition proceedings in a Japanese court over patent on semiconductor test equipment and testing methods.

What’s notable is that all of the suits filed in Japan are opposition proceedings. This form of legal challenge asks for the patent to be re-examined, challenging its validity. Opposition proceedings are often filed ahead of intellectual property infringement lawsuits, as a successful case can support later lawsuits.

“Oppositions can be filed not only by corporations, but even individuals that don’t have a direct interest. It’s a tactic used by companies ahead of embarking on a full-fledged IP suit,” said Park.

In other words, the suits currently filed by individuals suggest that a corporate legal battle could follow.

“Regarding lawsuits filed from Japan in the field of materials and components, there’s been a particular increase of IP suits targeting Korean companies for rechargeable battery technology,” said Yun Jung-ho, Keywert CEO.

“A lot of Korea’s key export items, including semiconductors, still employ a lot of Japanese materials, parts and equipment, which is why legal battles are not visible in this segment. But if the localization drive continues, it’s likely that we’ll be seeing more legal battles in fields like rechargeable batteries.”

This is why some experts are against the government aggressively pushing for production to be localized.

According to government data, 72 patents were registered in regards to industrial materials, parts and equipment. As for hydrogen fluoride, photoresists and polyimide — the three materials that Japan first tightened export restrictions on in July 2019 — some companies have already seen progress in localizing production.

But Japan has traditionally been a technology leader in the segment, which is why Korea’s top IT and electronics makers have had such a high dependence on Japanese suppliers.

This hasn't really changed. According to the Korea International Trade Association’s data for the January to May period this year, nearly 95 percent of petrochemical materials imported to Korea were from Japan. Eighty-seven percent of semiconductor manufacturing equipment imports and 78.1 percent of fine chemistry ingredients came from Japan as well.

“There’s been widespread sentiment that Korea won and Japan lost in the battle since Japan tightened export regulations, but the reality is different. Japan still holds a lot of patents,” said an anonymous senior executive working in the electronics industry.

Hong Jang-won, chairman of the Korea Patent Attorneys Association, pointed out that the tendency with registered patents in Japan is to use broader terms to refer to the core technology to widen the scope of the rights. The more specific a patent is, the harder it is to violate it.

“Hasty patent registrations have a higher possibility to be caught on Japan’s radar,” he said. “Korea should work hard to build a strong patent portfolio and come up with a strategy ahead of Japan’s IP attack.”

BY KIM TAE-YOON [song.kyoungson@joongang.co.kr]