October, 2017

Hitachi Metals alleges that Chinese firms stole its trade secrets

Original article: Bloomberg

Japan's Hitachi Metals Ltd. has accused Chinese manufacturers of pilfering secret processes for producing amorphous metal ribbon in a lawsuit filed with the U.S. International Trade Commission in Washington, D.C. Amorphous metal ribbon is both stronger and lighter than typical steel. 

“In order to protect our advanced technologies as a source of global competitiveness for Hitachi Metals, we will continue to take decisive action against unfair competition in the future." 

According to Hitachi Metals, China’s Advanced Technology & Materials Co. and "related companies" have been able to accelerate production of amorphous metal because a retired Hitachi Metal employee and his assistant stole information about secret manufacturing processes and provided it to the Chinese firms. Hitachi Metals and its U.S. unit are requesting that Chinese imports of the product be prevented from entering the U.S. market. 


Almost overnight, Chinese firms have begun directly competing with Hitachi Metals' American subsidiary Metglas in the U.S. amorphous steel market with products designed for the electricity grid. Hitachi purchased Metglas from Honeywell International in 2003. 

In its complaint, Hitachi alleges that surging output growth of China-made amorphous steel from 2012-2015 "could only have happened by receiving knowledge" of its secret manufacturing processes. The rapid output growth occurred despite no demonstrable rise in production capacity, Hitachi adds. 

The Financial Times points out that cases in which U.S. firms allege IP violations by counterparts based in China are common. However, cases involving industrial espionage are few and far between. It can be difficult to gather sufficient evidence to win such a case. Last year, U.S. Steel failed to convince a U.S. court to order a ban on steel imports from China for reasons of alleged industrial espionage. U.S. Steel said that state-backed Chinese hackers had stolen its formula for special high-grade steel used in vehicles. But it couldn't establish a viable link between the hackers and the product made by Chinese firms. 

In the broader campaign to improve China's IP environment, it would make sense for the U.S. to enlist the support of other nations concerned about the issue. For Beijing to see that the issue is not simply the U.S. "picking quarrels," (a term often used by Chinese officialdom), and a broader problem relevant for the many Chinese firms with valuable IP, it will be helpful for more non-US companies to come forward. Of course, if the Trump administration wants to cooperate with Japan, it should probably refrain from lambasting Tokyo's trade practices. During the presidential campaign last year, Trump criticized Japan as a nation where the U.S. "is getting absolutely crushed on trade."