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Nippon Steel & Sumito M Corporation v. Posco and Posco America Corporation

United States District Court, Third Circuit

May 2, 2013



MARK FALK, Magistrate Judge.


This action is part of a worldwide global intellectual property battle between Plaintiff, Nippon Steel & Sumito M Corporation ("Nippon"), and Defendants, POSCO and POSCO America Corporation, [1] related to grain-oriented electrical steel ("GOES"). GOES is specialized steel used in the cores of power and distribution transformers. The claims in the case are for patent infringement, false advertising and unfair competition. There are other proceedings involving the parties pending in foreign jurisdictions, including a theft of trade secrets case filed by Nippon in Japan, and two proceedings in Korea-a declaratory judgment action filed by POSCO, and an appeal pending in the Korean Supreme Court that involves access to evidence in certain Korean criminal proceedings. The overarching issue in all of these proceedings is Nippon's contention that POSCO has engaged in a multi-year program of corporate espionage, including theft and bribery, directed toward Nippon's GOES technology, and that POSCO has incorporated Nippon's GOES technology into its own GOES manufacturing process.

The original complaint in this case was filed on April 24, 2012. The operative pleading is the First Amended Complaint, filed on October 26, 2012, which contains claims for (i) willful infringement of four patents-U.S. Patent Nos. 5, 261, 972 ("the 972 patent"); 6, 613, 160 ("the 160 patent"); 7, 442, 260 ("the 260 patent"); and 7, 976, 644 ("the 644 patent"); (ii) false advertising arising under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (iii) unfair competition arising under common law; and (iv) violation of the New Jersey Fair Trade Act, N.J.S.A. § 56:4-1.

POSCO requested the United States Patent and Trademark Office ("USPTO") reexamine the four patents-in-suit, and the request was granted. Now pending before the Court is POSCO's motion to stay this case pending completion of the USPTO reexamination proceedings. [CM/ECF No. 63.] Full briefing has been submitted, including a sur-reply brief. Oral Argument was held on April 19, 2013. At oral argument, the parties submitted demonstrative slides in aide of their oral presentations, which have been considered and are referenced herein. After comprehensive review of all the briefing submitted and the transcript of oral argument, POSCO's motion is DENIED.


A. Factual[2]

Nippon is a long standing, worldwide leader in the industrial steel industry and has invested decades of research and millions of dollars into innovating GOES technology. (Compl., § 10.) POSCO is large multi-dimensional company with $3 billion in annual revenue and is a direct competitor of Nippon in the GOES industrial steel industry. (Compl., § 12.)

In the late 1980s, Nippon contends that it was leading the GOES market worldwide, and that POSCO was falling behind its competitors with respect to its GOES manufacturing capabilities. As a result, Nippon claims that POSCO was looking for ways to improve its GOES manufacturing and approached it about licensing Nippon's GOES technology, which Nippon declined to do. (Compl., § 12.) According to Nippon, this caused POSCO to resort to a "systematic, and company-sanctioned, program of using illicit means to build GOES business on the back of Nippon's proprietary technology." (Compl., § 12.) Nippon alleges that these illicit means included the use of "bribery and pay-offs" to former Nippon employees in order to obtain proprietary Nippon documents that described Nippon's technology, which POSCO then willfully copied and implemented.

In 2007, Nippon contends that suspicion about POSCO's improvements in the GOES market caused it to communicate with POSCO to determine whether POSCO was using Nippon's technology. (Compl., § 13; Declaration of Robert Vincent ("Vincent Decl.") Ex. 11, at 8-10.) Nippon contends that it notified POSCO that it owned patents covering the GOES manufacturing process, including a Korean counterpart to certain patents in this case. Nippon also alleges that it requested that POSCO explain how POSCO's low-temperature GOES manufacturing methods compared to those in Nippon's patents, and whether it believed it was authorized to use such technology. (Vincent Decl., Ex. 1.) According to Nippon, POSCO refused to take a position on whether it infringed Nippon's patents and only stated that its GOES manufacturing process differed from those used by Nippon. (Vincent Decl., Ex. 8.)

At a time Nippon describes as "contemporaneous" with the communications between the companies over the GOES process, the Korean government arrested, prosecuted, and convicted two former POSCO employees for selling GOES-related trade secrets to a Chinese steel company. (Declaration of Shinji Minobe ("Minobe Decl.") § 8.) According to translations of those proceedings, Nippon contends that the information that POSCO's employees sold were not POSCO's own trade secrets but actually those of Nippon, which the court concluded POSCO may have received from former Nippon engineers. (Id.) Nippon subsequently made requests to the Korean District Prosecutor's Office to inspect the case records, including the documents evidencing that POSCO possessed Nippon's GOES technology. The Prosecutor's Office, supported by POSCO, denied the request, which was appealed to a Korean District Court. That court partially reversed and found that Nippon's request to inspect and copy certain documents was reasonable because the prosecution record indicated that "POSCO made contract agreements with the retired engineers of Nippon Steel Corporation... while the company developed the manufacturing technology for the low temperature heating process for [GOES] and received various documents and information of Nippon Steel Corporation from these people... and that it is hard to believe that those records [contain] the trade secret of POSCO or that disclosure of those aforementioned records may infringe the trade secret of POSCO." (Id. Ex.1, at 27.) The Prosecutor's Office in Korea appealed the decision to the Korean Supreme Court, where the case remains pending. At this point, Nippon has not had access to those files.[3]

Nippon contends that while this was all going on, POSCO expanded its GOES market presence. According to Nippon, since 2010, POSCO has enjoyed a quintuple increase in its GOES imports into the United States. In contrast, Nippon's market share has decreased substantially.

In 2012, the parties filed a series of suits against each other. On April 24, Nippon filed two suits against POSCO-one in this Court, and one in Japan. In July, POSCO countered by suing Nippon in Korea seeking a declaratory judgment that any judgment Nippon obtains in Japan would not be enforceable in Korea.

B. Procedural

On August 21, 2012, the Court held an initial conference and issued a scheduling order, which provided for the close of discovery on May 13, 2013.[4]

On September 10, 2012, POSCO filed reexamination requests on all four patents in suit with the USPTO. (Declaration of William P. Deni, Esq. dated November 9, 2012 ("Deni Decl.") Exs. A-D; CM/ECF No. 49.) The requests covered all of the claims in all four patents. (Id.)[5]

On September 28, 2012, the PTO granted ex-parte reexamination of the 972 patent but has not issued an office action thereon. (Deni Decl., Ex. F.)

On October 26, 2012, Nippon filed an Amended Complaint, alleging, in addition to the patent claims in the original complaint, counts for false advertising, common law unfair competition, and violation of the New Jersey Fair Trade Act.

On October 26, 2012, the PTO granted inter partes reexamination of the 260 patent and issued a non-final office action, which rejected claims 1-5 of the 260 patent as unpatentable on obviousness grounds. (Declaration of Mara E. Zazzali-Hogan, Esq. dated December 11, 2012 ("Zazzali-Hogan Decl.") at Ex. C; CM/ECF No. 63-2.) The ...

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