ArcelorMittal's U.S. Patent Confirmation For High Strength Steel Boosts Auto Division Prospects

| About: ArcelorMittal (MT)

Last month, the United States Court of Appeals for the Federal Circuit in Washington reaffirmed ArcelorMittal‘s (NYSE:MT) patent for its Usibor automotive steel product. The patent broadly covers aluminum pre-coated hot-rolled or cold-rolled steel for hot stamping, a product sold worldwide as Usibor. We expect the patent confirmation to help the company’s competitive advantage in the automotive business segment for which Usibor is designed. Also, ArcelorMittal may now sue rival steelmakers for patent infringement again after being rebuffed previously by a lower court which had invalidated part of the patent.

As interpreted by the Court, ArcelorMittal’s U.S. patent covers most of the steel which the country’s automobile manufacturers specify for hot-stamped parts. The court’s decision came after the decision on February 19, 2013 by the United States Patent and Trademark Office allowing re-issue of the ArcelorMittal patent. The decision confirmed the patent’s full validity and scope as applying in particular to cold-rolled steel for hot stamping with a final Ultimate Tensile Strength (UTS) of more than 1,000 megapascal (MPa). UTS is the maximum stress that a material can withstand while being stretched or pulled before failing or breaking.

Why Was A Reaffirmation Needed?

ArcelorMittal sued AK Steel, Severstal Dearborn Inc. and Wheeling-Nisshin Inc. in January 2010, claiming that the firms had violated its U.S. patent. However, the jury’s verdict in a federal district court found that AK Steel and other defendants had not infringed on the patent and that the patent itself was not valid.

The U.S. Court of Appeals for the Federal Circuit in Washington said that the federal district court made an error in determining the standard the jury used to judge whether products made by rival steel companies violated ArcelorMittal’s intellectual property claims.

The appellate court remanded the district court to hold a new trial to analyze whether a broader range of products would violate the patent and whether ArcelorMittal had obtained commercial success in the automotive market with the steel made using the unique production process.

Armed with the appeals court’s affirmation of its patent, ArcelorMittal now intends to enforce its rights against any infringement of the patent, according to the company’s external relations manager. We interpret this to mean that the company will once again judicially challenge rival steelmakers it accuses of violating its patent.

How Important Is Usibor For ArcelorMittal?

Regulations in the automotive industry are evolving. There is increasing focus on fuel efficiency and enhancement of passenger safety. This poses the contrasting challenge of using strong material for the body of the vehicle while making it lighter. With the advent of electric and hybrid vehicles, the requirement for lighter materials is expected to increase all the more.

ArcelorMittal’s Usibor steel meets these requirements. It is a high strength steel and provides a cost effective solution for reducing a vehicle’s weight. Automakers are using Usibor to replace aluminum and carbon fiber in cars since the thinner, lighter weight, high-strength material reduces a vehicle’s weight at a much lower cost.

The advanced and specialized grades of steel such as Usibor also allow ArcelorMittal to charge premium prices. With the court’s latest decision, the company is now expected to go after rivals selling similar products to automakers. Indeed, it has already tried to sue AK Steel over its competing product Ultralume which has been accepted for use by a number of manufacturers. However, in this case, the court has ruled that there was no infringement on AK Steel’s part.

Regardless, ArcelorMittal may decide to go after other rivals over patent infringement to seek damages and permission to charge licensing fees from those wishing to use its technology. The ability to charge licensing fee could make its Usibor steel more cost-competitive in the market.

We have a price estimate for ArcelorMittal of $15.