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SONY, DELL, WAL-MART ACCUSED OF PATENT INFRINGEMENT

Claiming intellectual property abuse in Asia, specifically in China, Korea and Taiwan, Magnequench International Inc, the patent holder and a world leader in the manufacturing of specialized magnetic powders and magnets, filed suit in the United States District Court for the District of Delaware and a second suit in Indianapolis against 13 major electronic, office products and computer firms in the United States and Asia, as well as Wal-Mart.

Accused of patent infringement were some of the world's leading computer and electronics companies, including Sony Corp, Eastman Kodak, Dell Corp, Acer Inc, ASUS Computer International, Iomega Corp, LG Electronics, Lite-On Technology Corp, Memorex Products Inc and TEAC Corp. Wal-Mart also was charged as a retailer selling infringing products.

Magnequench asks the court for an injunction to prohibit the importation of further infringing materials as well as treble damages.

The subject matter of the lawsuits involves neodymium-iron-boron (Nd-Fe-B) magnets and magnetic materials used in most popular consumer electronic products, as well as in automotive and industrial applications.

In this instance, the alleged patent infringement centers on computer and media memory systems such as CD-ROMs and DVDs.

"At a time when the rule of law is so crucial on a global scale and we need an even playing field, these companies have competed in a way that, if permitted to continue, destroys the idea of fairness and open competition," said Archibald Cox, Jr., president and chief executive officer of Magnequench, which holds the patents to Nd-Fe-B magnets which were developed by General Motors in the early 1980s.

"We believe that particularly given the overarching importance of intellectual property to the electronics industry, major players need to police their own supply chains better to assure that intellectual property is protected or this problem will continue to grow," Cox said.

"If they are unwilling or can't do it, we are now going to have the courts help them," he added.

The global permanent magnet market is about $6 billion. Nd-Fe-B magnets and magnetic materials, the materials involved in the present suit, account for about $2 billion of the dollar share of the industry. Magnequench estimates that as much as 15-20 percent of Nd-Fe-B powders and magnets are being made with patent infringing material.

Magnequench used the services of an independent testing laboratory to verify that products produced and sold by those named in the complaint used infringing material.

Other companies named in the suit include Micro-Star International Company Ltd, Mitsumi Electric Company Ltd and I/OMagic Corp.

The suits charge that the named companies have infringed on three patents covering Nd-Fe-B magnets and magnetic materials.

Magnequench had initially filed suit against a number of manufacturers and retailers in 2001, but then developed a manufacturer certification program to assist them in removing unlicensed material. The program, however, has not been successful in preventing the increased use of this material and is being terminated.

While it is possible manufacturers and retailers may not be aware they are selling products with illicit materials, "they have a legal obligation not to do so and need to police their supply chains better," Cox pointed out.

Since their invention in 1982 and subsequent introduction, Nd-Fe-B magnets are recognized as representing a significant advance over prior materials because of their strength and flexibility in manufacturing.

The high magnetic strength of the Nd-Fe-B magnets permits the miniaturization of many products that use permanent magnets. Indeed, the magnetic properties of Nd-Fe-B magnets have contributed to the development of new electronic devices that would have been impossible or impractical to make using other types of magnets.

Cox noted: "Our patents extend to 2007 and beyond. But we are not hiding behind our patents. We understand how important costs are to our customers. We have delivered price reductions of more than 7.5 percent a year for the past six years and we plan to continue on the same path through at least 2005."