Cree Inc is seeking to keep rival LED bulbs out of the US, as the growing popularity of the energy-efficient lighting generates increased competition in the market and in courts.
Cree on Monday filed complaints at the US International Trade Commission and in a federal court in Wisconsin, claiming that closely held Feit Electric Co and Taiwan-based Unity Opto Technology Co (東貝光電) are infringing its patents for the design and operation of LED chips, packaging and LED bulbs.
US consumers are buying more LED bulbs as local utilities and governments provide subsidies, lowering costs even as the US Congress continues to block rules to phase out the incandescent bulbs that date to inventor Thomas Edison’s era.
LED lighting sales increased about 60 percent last year and are expected to expand another 34 percent this year, Needham & Co analyst Edwin Mok wrote in a report on Dec. 30 last year.
“Consumers will buy them only if they look and operate the way they expect,” said Greg Merritt, vice president of marketing and public affairs at Cree. “It has to look like a lightbulb and operate like a lightbulb.”
Cree introduced the first lightbulb costing less than US$10 that was a good replacement for traditional 60 and 40-watt bulbs. Now, the company is struggling to maintain its market position amid competition from bigger established players like General Electric Co and Royal Philips NV, as well as newer companies such as Pico Rivera, California-based Feit. Unity makes the bulbs sold by Feit.
Cree’s sales in the year ended on June 29 last year grew 19 percent to US$1.6 billion for the Durham, North Carolina-based company.
LED lighting products have become its biggest source of revenue and sales have more than doubled over the past two years, according to the firm’s annual report. Even as sales rose, Cree’s stock fell 48 percent last year.
In the LED market, the volume of sales is set to rise, while prices will drop as more companies selling “good enough” lighting enter the market, Mok wrote.
The shift away from traditional bulbs to the longer-lasting LED bulbs has roiled the lighting industry, with Osram AG cutting jobs last year and analysts projecting that General Electric will sell its lighting unit.
In addition to the eight patent-infringement claims, Cree’s complaint with the commission also accuses Feit and Unity of false and misleading advertising.
The US Environmental Protection Agency requires that LED bulbs designed for general purposes like table lamps emit light in all directions, like an incandescent bulb, to qualify for the voluntary Energy Star certification program. Cree says the Feit lights do not meet that requirement, but that the company advertises that it does.
“There is a lot of competition in this market for consumer lightbulbs,” Merritt said. “We’re fine with that, but what we are very insistent upon is that the competition be fair. Otherwise it is damaging to consumer confidence and damaging to the companies who are playing fair.”
The Wisconsin case involves the same eight patents, plus two others and the false advertising claim.
Getting the Energy Star label is important for sales: LED bulbs with the designation often qualify for subsidies from local utilities to lower their cost so they are the same as a traditional lightbulb. For instance, an unsubsidized LED bulb in Alexandria, Virginia, costs US$9.97 while the same one across the Potomac River in Washington is just US$3.98, according to the complaint.
Cree has been aggressive in enforcing its rights to 4,000 patents. Cree and Honeywell International Inc sued each other last year in cases over backlighting used in thermostats and cockpit displays.
In September of that year, Cree sued rival LED component makers Harvatek Corp and Kingbright Corp. Those cases are pending.
In a Taiwan Stock Exchange filing yesterday, Unity denied the charges in Cree’s complaint and said it would make a formal response after it receives legal documents from the US court regarding the case.
The company’s shares ended 4.05 percent lower at NT$30.8 in Taipei trading.
Additional reporting by Kevin Chen
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