NdFeB magnet patents: Update 2021

NdFeB magnet patents: Update 2021

by Dr John Ormerod

NdFeB magnets, compositions and processing technologies have been the subject of controversy ever since its announcement and the key inventive claims were filed over 40 years ago. Both General Motors Corporation (GMC) and Sumitomo Special Metals Corporation (SSMC) made claims of being first to discover magnets based on the Nd2Fe14B tetragonal compound.  In addition to GMC and SSMC, researchers at the Naval Research Labs and several academic groups publicly claimed the discovery of similar hard magnet compositions at the 1983 Magnetism and Magnetic Materials conference in Pittsburgh.

Inevitably, the larger corporations won these initial legal skirmishes. However, competing patents were filed by SSMC and GMC in different jurisdictions, which ultimately led to the two companies entering into a cross-license agreement. Magnequench (MQ) which was formed by GMC in 1985 to develop this business was granted the rights to make and market rapidly solidified REFeB powders and magnets produced from such powder, included in which was a license under the SSMC patents.

During the second half of the 1980s and early 1990s, several magnet companies reached licensing agreements with SSMC to manufacture and sell sintered NdFeB magnets in specific markets and regions. For a time, this did create some order and stability in the industry. However, this was to change with the growth of the Chinese magnet industry and the desire of the patent holders (and licensees) to protect the US market from disruption by unlicensed product.

What followed was a series of complaints being filed requesting Section 337 investigations to be conducted by the U.S. International Trade Commission (USITC). Section 337 investigations most often involve claims regarding intellectual property rights, including allegations of patent infringement and trademark infringement by imported goods. The first complaint was filed by Crucible Materials Corporation in February 1995, resulting in the USITC investigation 337-TA-372. The respondents included San Huan, Ningbo Konit, Tridus, and five other companies. The main Crucible patent cited was U.S. Patent No. 4,588,439 (which expired in May 2005). The 4,588,439 patent claimed a range of oxygen content in NdFeB magnets which was a composition common in sintered magnets at that time. The San Huan entities entered into a consent order with subsequent enforcement proceeding in 1996 by Crucible against the San Huan entities when San Huan was found in violation of the consent order.

Next, in July 1998, SSMC and MQ filed a complaint against several U.S., Chinese and Taiwanese companies. The cited patent was U.S. Patent No. 5,645,651, which itself was controversial within the industry as it was considered to be a repackaging of the original 1982 (priority date) composition patents of SSMC. The USITC initiated investigation 337-TA-413 which resulted in a general exclusion order being issued. However, the Chinese respondents Jing Ma and Xin Huan defaulted.

Litigation took a back seat for a while until 2012 when Hitachi Metals Limited (HML), the successor of SSMC, began flexing its legal muscles. It is instructive to see how patent application activity and patent enforcement is a key strategic element of Hitachi’s corporate business planning, as detailed in this 2014 Hitachi corporate presentation.

At the beginning of this decade, the magnet industry was eagerly anticipating the expiration of the 5,645,651patent, as it was the last remaining basic NdFe(Co)B compositional patent. Both magnet users and suppliers were expecting significantly increased competition in the US market with the expiration of this patent. Then, in August 2012, out of the blue HML filed a complaint with the USITC (a few months after announcing their plans to build an NdFeB plant in the US) against 29 manufacturers and importers of RE magnets and products containing RE magnets. Respondents were not only Chinese magnet manufacturers and magnet distributors, but device manufacturers including major headphones, motors, speakers, electric tools and golf equipment OEMs. 4 US patents were cited in the complaint: 6,461,565; 6,491,765; 6,527,874; and 6,537,385. In September 2012, the USITC instituted a section 337 investigation (337-TA-855) where multiple law firms and dozens of attorneys were involved. The key claims of the 4 cited patents are as follows:

6,461,565 – Temperature and humidity control in the press room
6,527,‘874 – Effect of Nb.
6,491,‘765 and 6,461,‘565 – Particle removal during jet milling

During the ensuing months the 5 original licensed Chinese manufacturers (plus 3 others) agreed to new terms under the cited patents. A matter of days before the scheduled July 2013 trial, HML announced that settlement agreements had been reached with all parties and withdrew the petition to the USITC. Therefore, there was no day in court to determine validity of the cited patents. Many in the industry felt that both the prior art was very compelling and the novelty of the invention was overstated, and were disappointed that the validity of the patents would not be argued at trial.

Then, in August 2013, it was announced that “a dozen Chinese rare earth magnet companies have formed an industrial alliance to sue Japan’s Hitachi Metals for holding invalid patents and infringing patent rights of Chinese companies”. This led to the filing of a petition for Inter Partes Review (IPR) of certain claims of 6,491,‘765 and 6,537,385 with the USPTO on August 11, 2014. IPR is a relatively new and streamlined process to challenge the claims of issued patents, and is intended to be a fast track process (at least on a geological timescale). The IPRs were granted by Patent Trial and Appeal Board (PTAB) on February 2015, and once again the battle began between the attorneys. Finally, in February 2016, the PTAB ruled that the challenged claim was unpatentable (or invalid). 

So, case closed? Well, not so fast. Like much of our legal system, the patent holder has the right to appeal. Sure enough, just before the deadline, HML filed an appeal to the Federal Circuit Court. So, in April 2017, the appeals court announced their decision. The court affirmed most of the conclusions that lower courts had previously ruled in the “Hitachi Metals, Ltd. v. Alliance of Rare-Earth Industry” case. In a 22-page opinion, the three-judge panel said that the PTAB was correct in finding that three claims of one of Hitachi Metals Ltd.’s patents would have been obvious over prior art.

On every issue, the federal court upheld the PTAB’s decision of invalidity of the challenged claims, except claims 3 and 4 of the 6,491,‘765 patent. The Federal Circuit says the PTAB has to reconsider whether those claims requiring some amount of oxygen in the high-speed gas in the jet mill are obvious. The reasons are complicated, but basically, they are saying they interpreted that claim too broadly to include the particle separation stage, and it should be limited to the actual milling stage. So, now back down to the PTAB for them to rethink Claims 3 and 4. All in all, a good result for the Alliance.
On April 24, 2017, three Chinese companies (DMEGC, Zhejiang Innuovo and Zhejiang Dongyang East Magnetic Rare Earth) filed IPR petitions challenging HML’s US patents 6,461,565 and 6,527,‘874. A ruling by the PTAB to allow a review is expected before the end of the year.

I do want to mention a patent challenge that has not received much publicity, but illustrates the difficulty and frustration of challenging an issued patent. In December 2009, the PTAB ruled that several claims of the 5,645,651 patent (the last basic compositional and structural patent) were invalid because of double patenting, i.e. prior art of the patent holder. So, HML sensibly took all the legal appeal steps to run the clock out up to appealing at the Federal circuit court. 

So, first the good news: the appeals court ruled “For the reasons stated above, we affirm the judgment of the Patent Trial and Appeal Board rejecting claims 1, 2, 6, 7, and 15-24 of Hitachi’s U.S. Patent No. 5,645,651 in ex parte reexamination Control No. 90/010,759 for obviousness-type double patenting over claims 1, 3, 13, 16, 29 and 34 of U.S. Patent No. 4,792,368.” The bad news is that the ruling was dated March 2015, and the patent had elapsed on July 2014.

So, what to expect next? Well, the recent rulings by PTAB and the Federal appeals court have definitely weakened the legitimacy of HML’s challenged patents, and arguably cast doubt on their entire portfolio. However, it’s an open secret that unlicensed NdFeB product is entering the US market as magnets, devices, or finished product, and it’s hard to believe that the current HML licensees ae not pressuring HML to take some action. Ultimately, we will see what happens. 

What’s the next big challenge? We are seeing an increase in RE prices that will benefit the Dy-diffusion processes developed by the major suppliers to reduce the Dy content in high temperature magnet grades. So, it’s likely these companies will be active in protecting their IP and competitive advantage against anyone perceived as infringing.

At this time (2021), all the HML patents cited during the 2012 USITC action are anticipated to expire as follows:

US 6,461,565 August 3, 2021
US 6,527,874 July 1, 2021
US 6,491,765 May 9, 2021
US 6,537,385 May 9, 2021

A search of the USPTO database on issued US patents related to NdFeB technologies assigned to HML over the last 5 years reveals the following US patents issued in theses broad categories:

Composition/ Process – 13
Recycling REEs – 9
Dy- diffusion – 11

So, about 1 US patent every 2 months, which, if extrapolated for 15 years is about 100 US patents. This is a potentially formidable patent portfolio of which to protect their IP.

So, what to conclude? Well, the legal profession have profited from both the challenges and defense of NdFeB IP coupled with the complexity of our patent system. It is obvious that patents are being issued that do not meet the hurdle of the novelty requirement that is the foundation of the patent system. This is not a criticism of the quality and dedication of the patent examiners at the USPTO; the issues are there are not enough examiners to handle the flood of applications and perhaps clearer guidelines and higher hurdles need to be written for what constitutes novelty and invention. Our current system places the responsibility for critical and timely review and the challenge of claimed inventions at the application stage by the magnet industry and other stakeholders. This will take a dedicated and knowledgeable resource to implement.