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Licensing Agreements Stabilize Nitride Optoelectronics Field

After settling its patent disputes with Osram and Toyoda Gosei, Nichia has now reached agreements with Cree and Lumileds that should prevent further litigation, writes Tim Whitaker.
This has been a remarkable year for the nitride LED industry. Twelve months ago the leading manufacturers - Cree, Lumileds, Nichia, Osram Opto Semiconductors, Rohm and Toyoda Gosei - were embroiled in a series of legal disputes over patents that spread uncertainty among customers and cost millions in legal fees. Now, thanks largely to an about-face by Nichia, many of these disputes have been resolved.

In the course of 2002, Nichia has reached patent agreements with Osram, Toyoda Gosei, Lumileds and, most recently, Cree. According to Noboru Tazaki, senior managing director and division chief of Nichia s Optoelectronics Products division, the November 13 agreement with Cree was "almost the final step of our aggressive plan of licensing and settlement of patent issues for this year". If Nichia is going to sign another agreement this year, it could well be with Rohm, since the two companies have a number of outstanding lawsuits between them.

As the company that took the lead in commercializing nitride-based LEDs, Nichia established an extensive patent portfolio and took a firm stance against licensing. The company initiated a string of infringement lawsuits against its rivals, particularly Toyoda Gosei. However, over the course of the past two years a number of judgements were passed that significantly weakened Nichia s position (see Compound Semiconductor September 2002 p3).

The joint statement from Toyoda Gosei and Nichia announcing their settlement agreement acknowledged the key role played by the former company in developing blue LEDs. Although Nichia started work on blue LEDs in 1989 and was first to commercialize the devices in November 1993, Toyoda Gosei began to develop blue LEDs in 1986 and was responsible for a great deal of technology in this area. Some of this technology ended up in Nichia s patents, as the Japanese courts seem to have acknowledged.

Patent agreements

The individual agreements between Nichia and its four main rivals are very similar. Their main purpose is to end any existing lawsuits (although there weren t any in the case of Nichia and Lumileds) and to prevent future lawsuits from arising. Commenting on the Nichia-Lumileds agreement, Doug Silkwood, director of communications at Lumileds, said: "In essence, the two companies have agreed to use each other s intellectual property [IP] and not to sue one another." Similarly, Cree s president and CEO, Chuck Swoboda, said: "All litigation between Cree and Nichia is now completely ended. The agreement between our two companies is designed to let us work out disputes without litigation in the future."

Under each agreement, the participants are allowed to use each other s IP as described by certain patents; the agreements with Toyoda Gosei and Lumileds are quite broad, while the Osram agreement relates just to white LEDs. The Cree agreement relates to "nitride optoelectronic devices" thus including nitride LEDs and lasers but excluding, for example, any Cree IP related to SiC wafers or electronic devices.

Although some of the agreements include "cross-licenses", it is unlikely that royalty payments will be made. Both Lumileds and Cree were unable to comment on the issue of royalties. Nichia s agreement with Toyoda Gosei mentions that the companies will negotiate reasonable royalty payments in respect of future patents and products.

At present, the major financial implication of the deals is a reduction in legal expenses. Analysts at CIBC World Markets suggest that Cree currently has legal bills of around $2 million per quarter. According to Chuck Swoboda, Cree and Nichia had the most in-depth legal battle of all the combatants, which consumed not only financial resources but also a large amount of staff time. "People underestimate how much of a distraction it is to both companies when they are in the middle of one of these disputes," he said.

The agreement between Cree and Nichia brings to an end a three-year dispute involving at least six separate cases. These included two infringement cases in Japan, in which Nichia sued both Cree and its Japanese distributor Sumitomo (these were under appeal after verdicts in favor of Cree and Sumitomo). After Cree filed a lawsuit in the US over a patent relating to lateral epitaxial overgrowth, Nichia responded with a counterclaim alleging infringement of four patents as well as trade-secret theft, filed against Cree, NCSU and Shuji Nakamura. There was also a second infringement suit filed by Cree, and an antitrust claim filed by Nichia against Cree and Rohm. Cree is not involved in patent disputes with any other company.

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