David vs Golliath

Small German Tech Firm Takes on China in Patent Dispute

LPKF Laser
A LPKF scientist works on a laser experiment.
  • Why it matters

    Why it matters

    LPKF Laser & Electronics AG lost its patent in China for a proprietary technology used in smartphones and tablets, but the company is taking the battle to the Chinese Supreme Court.

  • Facts

    Facts

    • LPKF spent 10 years developing a miniaturization process that allows the installation of up to six separate antennas in mobile radio units, which helps keep smartphones and tablets slim and lightweight.
    • A private lawsuit filed in China, which may be connected to the nation’s technology sector, was successful in revoking the Chinese patent last year.
    • Even if the German company loses the high court case, the future looks bright because the process can be used in many forms of technology.
  • Audio

    Audio

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It’s the eternal David-versus-Goliath story of the small defending itself against the big, only in this case, the small one is very tiny and the big one virtually all-powerful.

The battle is being waged in the Supreme Court of China over a patent for a basic, but critical technology that helps make modern smartphones and tablets much thinner.

The combatants are LPKF Laser & Electronics AG, which is located in Garbsen in Lower Saxony, versus the Republic of China, which in 2013 declared the company’s manufacturing patent invalid after private individuals filed a lawsuit. LPKF generated about €140 million ($184 million) in revenues last year compared with China’s gross domestic product of €6.3 trillion.

“When you have a patent, you also have to fight for it,” a defiant Ingo Bretthauer, chief executive officer of LPKF, told Handelsblatt.

At issue is a manufacturing process created by LPKF several years ago allowing antennas to virtually disappear inside mobile radio units. Lasers scratch recesses into a special synthetic material filled with microfine metal balls that can be filled with a conductive metal solution. This allows the company to place as many as six different mini-antennas in a high quality smartphone, covering the whole range of frequencies, while accommodating new wireless standards such as Bluetooth or near field communications.

The process is used worldwide. Producers such as Apple and South Korea-based Samsung have placed their bets on the laser-direct-structuring technology. The manufacturing process has enjoyed patent protection in all major markets except China, where an application for annulment cruised through the lower courts and voided LPKF’s patent.

Simultaneously, the first imitation laser direct structuring or LDS products began to emerge from China. Observers of the country’s industries say it’s not unusual for a Chinese technology company to hide behind a private lawsuit such as the one filed against LPKF. The case has fallen to the Supreme Court of China to examine whether the patent will be renewed or denied.

“When you have a patent, you also have to fight for it.”

Ingo Bretthauer, LPKF chief executive officer

Meanwhile, Mr. Bretthauer has opened up a second legal front. In mid-July, the Mannheim Regional Court found Chicago-based Motorola Mobility guilty of selling mobile phones with counterfeit LDS components in Germany. The court ordered Motorola Deutschland and Motorola Mobility to stop selling phones using that technology in Germany and to recall all phones already sold. It’s unknown if Motorola will be selling those phones in China with the LPKF case still pending.

Although the LDS patent is enormously important for his company, Mr. Bretthauser says the firm is braced for the future. “It is annoying, when a patent is taken away from you, but it is not absolutely critical for us,” he said.

The technological competence remains. LPKF spent 10 years developing the manufacturing process before introducing it to the market. Competitors will be hard-pressed to catch up quickly, Mr. Bretthauer said, noting the first attempts at duplicating the process showed how difficult it is to achieve the same results. Meanwhile, analysts don’t see disaster ahead, even if the highest court in China upholds the patent loss, because manufacturers of smartphones and tablets will be wary of replacing their technology providers with cheaply made imitations.

“If there were then quality problems that would arise, the harm to a company’s image would be great,” said Stephen Bauer, a financial analyst at Bankhaus Metzler.

It’s no surprise that Chinese companies are after the laser-controlled process developed by the German firm, but in the final analysis, there remains an abundance of applications in which the miniaturization of structural components play an important role, such as medical technology, automotive electronics or the outfitting of LED lights.

“The smaller and finer the structures become, the more strongly the laser comes into play,” said Mr. Bretthauer, who has led the company for five years. Mr. Bauer of Bankhaus Metzler said there are many opportunities for LPFK to grow its business including LED lights “that could develop very quickly and it is a market with considerable potential.”

Even if the Chinese Goliath is victorious over the Lower Saxony David in court, LPKF looks capable of standing tall for a very long time.

This article was translated by Anna Park Kim. To contact the author: wocher@handelsblatt.com

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