According to a Japanese report published late yesterday, the Tokyo District Court heard the first arguments in Shimano Manufacturing Co.'s lawsuit against Apple. The Tokyo-based electronics component maker is demanding compensation from Apple to the tune of US$8.5 million over alleged infringements of Shimano's patent for a precision component embedded in the joint of the power adapter for Apple's laptops. Apple's response in court was to deny they infringed Shimano's patent. They additionally denied that they were using their market dominance to bully Shimano, arguing that the Japanese subcontractor was the one being unreasonable in their business partnership. Yet in light of Apple's very public case with GTAT where Apple was painted as a bully and noted as being oppressive and burdensome as a business partner, some would argue that Apple has a history of bullying suppliers and that playing nice guy in court isn't going to play very well in this or any future case brought against them.
The Japanese report further noted that Shimano is seeking an undisclosed amount for possible violations of antitrust laws. Shimano said Apple used its dominant position to demand discounts and rebates for the precision component.
Apple's lawyer argued they worked with Shimano since 2005 to develop the pin component. But Shimano started moving away from the partnership in 2011 and acquired the patent without Apple's permission.
To get around the patent, the report notes that Apple began cutting its orders to Shimano in 2012 while directly outsourcing foreign part makers to produce the same component, according to the lawsuit. Shimano said those foreign parts makers were its own subcontractors.
When Shimano protested to Apple, the U.S. Apple demanded that Shimano provide a steep discount for parts supplied to Apple if it wanted to continue the business partnership, the lawsuit said.
Apple also urged Shimano to return the excess amount it paid at pre-discount prices for the components. Shimano said it was forced to comply with Apple's demand and paid the "rebate" of $1.59 million. But Apple's orders to Shimano remained stagnant because they continued using parts manufactured by the foreign subcontractors.
Shimano filed the lawsuit against Apple in August, saying its demand for discounts violated antitrust laws that prohibit companies from abusing their dominant market positions. Shimano also said Apple committed patent infringement by directly commissioning the foreign companies to manufacture components for which Shimano held the patent.
At a time when Japanese electronics giants are struggling, many Japanese components makers depend heavily on their business ties with Apple. But if the Japanese companies cannot maintain their technological edge, Apple can turn to Taiwanese and Chinese companies to obtain electronics components at cheaper prices.
A senior official of a Japanese parts manufacturer stated that "We need a high level of determination when we forge a business partnership with Apple." Apple makes bulk purchases from Japanese parts makers for use in such hit products as the iPhone.
This kind of patent infringement lawsuit could hurt Apple's reputation in Japan if they're found to be guilty. Considering that Apple's iPhone 6 is number one in Japan, they'll have to play a very skillful PR game here or possibly risk public backlash.