Green Patent Blog®

In two previous posts (here and here) I discussed the patent infringement case between hybrid drivetrain technology company Paice LLC (Paice) and Toyota in the U.S. International Trade Commission (ITC).

In September of last year, Paice filed a complaint in the ITC asking the agency to investigate whether Toyota’s importation of the third generation Prius, the Camry hybrid and two Lexus models (Accused Products) infringed U.S. Patent No. 5,343,970 (’970 Patent).

After the ITC agreed to open an investigation, Paice moved for summary determination of infringement, validity and enforceability of the ‘970 Patent. 

Specifically, Paice contended that Toyota was barred from asserting a defense of non-infringement of the ‘970 patent and from challenging the validity or enforceability of the ‘970 patent under the principles of claim preclusion and issue preclusion because of a prior federal district court and appeals court ruling against Toyota.

In a response issued in December and made public earlier this month, the ITC staff agreed with Paice and supported its motion.   The response noted that, although the Accused Products are different from those at issue in the federal court case, Toyota admitted that the hybrid drivetrains are materially the same as the vehicles found to infringe in that lawsuit.

Compounding Toyota’s troubles was a ruling last week in the same case in which the ITC staff opposed the automaker’s cross-motion for summary judgment that claim preclusion should bar Paice from obtaining any remedy in the investigation. 

The response rejected Toyota’s argument because claim preclusion applies only to the cause of action and does not include the ensuing remedies.

Assuming the administrative law judge follows the recommendations of the ITC staff, the only remaining issue would be whether Paice meets the “domestic industry” requirement. 

19 U.S.C. 1337 requires that there be an industry in the U.S. relating to the products at issue, which includes both an economic prong (demonstrated investment in plant/equipment, labor/capital, research and development or licensing) and a technical prong (demonstrated practice of the asserted intellectual property right).

Now the big question is whether Toyota will continue to fight or decide to fold and pay royalties to Paice.  If the case moves forward, it will be interesting to see whether the ITC finds Paice’s engineering, R&D and licensing activities in the U.S. suffice to meet the domestic industry requirement.

Considering what is at stake in this case - Paice has requested a permanent exclusion order barring entry into the U.S. of the Prius, Camry hybrid and the two accused Lexus models - I wonder if and when the mainstream media will start to pay attention.

In a previous post, I wrote about patent attorney-inventor Conrad O. Gardner’s patent infringement suit against Toyota Motor Corp. (Toyota). 

In April 2008, Gardner sued Toyota in federal court in Seattle, accusing the automaker of infringing U.S. Patent No. 7,290,627 (’627 patent), entitled “Extended Range Motor Vehicle Having Ambient Pollutant Processing” by making and selling the second generation Prius, the Camry and the Highlander.

According to the second amended complaint (gardnercomplaint.pdf), the ‘627 patent’s early priority date (based on a parent patent application filed back in April 1992) was more than two years before Toyota began investigating the development of a commercial hybrid automobile.

Last month Toyota succeeded in knocking independent claim 6 out of the case when the court granted Toyota’s motion for partial summary judgment that the claim was invalid for indefiniteness under Section 112, paragraph 2 of the Patent Act.  This provision provides that patent claims must “particularly point[] out and distinctly claim[]” the subject matter of the invention.

The problematic language of claim 6 is “said speed demands.”  The claim reads:

6.  A hybrid motor vehicle comprising in combination:

an engine;

an electric motor;

a storage device;

said electric motor power said hybrid motor at lower speeds;

said engine powering said vehicle at high speeds; and said engine operative connected through a charging path for charging said battery at lower speeds

wherein said speed demands do not drop below 40 mph for predetermined time periods of 45 seconds.

The court held claim 6 indefinite because it is unclear what “said speed demands” refers to (gardner_order.pdf).  The claim recites both high speeds and lower speeds, however:

Nothing in claim 6 directs one of ordinary skill in the art as to which of the two earlier recited speeds provides the antecedent basis for “said speed demands.”

This is a significant win for Toyota because claim 6 was the broader of the two independent claims of the ‘627 patent.

Thanks to Stu Soffer, who brought this decision to my attention.

In a previous post, I discussed the complaint filed by hybrid drivetrain technology company Paice LLC (Paice) against Toyota in the U.S. International Trade Commission (ITC). 

In the complaint (paice_itc_complaint.pdf), Paice alleged that Toyota’s importation of the third generation Prius, the Camry Hybrid, the Lexus HS250h and RX450h (Accused Products) infringe U.S. Patent No. 5,343,970 (’970 Patent).

Earlier this month the ITC issued a Notice of Investigation announcing its decision to conduct an investigation into Paice’s allegations.

In a prior case in the Eastern District of Texas Paice won a jury verdict that the second generation Prius, the Highlander and the Lexus RX 400h infringed two claims of the ‘970 Patent under the doctrine of equivalents, and the verdict was affirmed on appeal (see my previous post about the verdict and appeal here). 

The court awarded Paice an ongoing royalty of $25 per infringing vehicle, which was later increased to $98.

In this ITC action, Paice asserts that Toyota is precluded from challenging the infringement, validity and enforceability of the ‘970 Patent because those issues were previously adjudicated. 

Paice also contends that the Accused Products infringe the ‘970 Patent because of alleged judicial admissions by Toyota that the drivetrains of the Accused Products are materially the same as those that were found to infringe the ‘970 Patent.

According to Paice, that leaves only issues relating to “domestic industry,” i.e., whether Paice has significantly invested in the patented technology in the U.S.  

This issue could be dispositive here.  Although licensing activity can suffice for domestic industry, it remains to be seen whether Paice’s court-imposed royalty arrangement with Toyota will be enough to meet this requirement.

The Griffith Hack law firm in Australia recently published a report that analyzes hybrid car patent filings and how those filings affect innovation and success in the hybrid car market.

The report, entitled “Who holds the power? Lessons from hybrid car innovation for clean technologies”, was written by Justin Blows and Mike Lloyd, both members of the firm’s Clean & Sustainable Technologies Group.

Dr. Blows and his colleague used patent analytics tools to compile a list of all hybrid car patents filed internationally since 1980, group those patents into families, and rate the quality or “dominance” of those patents. 

Their analysis found that Toyota is the world leader in hybrid car patent families with 43% of the total, or more than 4,000 families. 

Interestingly, the study also found that a small U.S. hybrid drivetrain developer called Paice, which has been aggressively litigating its patents against Toyota with some success, holds four of the ten most dominant patents.

The implications of Toyota’s patent dominance is discussed at length in the report.  Dr. Blows’s blog post summarizes as follows:

the market leader in hybrid technology has filed so many patents ahead of its rivals, that other major manufacturers are now being forced to use the technology ‘under license’ or develop very different types of vehicles

According to the report, there is an apparent correlation between the number of hybrid cars sold by Toyota and the number of patents filed.

Moreover, and perhaps most important, the report posits that Toyota’s agressive patent filings have helped the automaker build its hybrid brand and set “the standard for the hybrid power train” by creating early and lasting exclusivity in its vehicles’ dual-mode capability, i.e., the ability to drive using one or both of an electric motor and a conventional motor.

More broadly, in his comments about the report, Dr. Blows echoes Green Patent Blog’s raison d’etre:

“Our report shows that clean technology innovators are massively investing in IP, to ensure they remain competitive as the world moves into a new age of clean technology.”

A U.S. patent historically has provided its owner with an almost absolute right to exclude others from making, using, selling and offering to sell the patented product.  That all changed with the U.S. Supreme Court’s eBay v. MercExchange decision in 2006.

In eBay the Supreme Court reversed the U.S. courts’ long-standing practice of automatically issuing an injunction upon a finding of patent infringement and instead held that the traditional four-factor equitable test for injunctive relief must be analyzed in each case.

The timing of the eBay decision couldn’t have been worse for hybrid technology company Paice, LLC (Paice).  Back in 2005, Paice sued Toyota in the Eastern District of Texas alleging that the second generation Prius, the Highlander and the Lexus RX400h sport utility vehicle infringed U.S. Patent Nos. 5,343,970 (’970 Patent), 6,209,672 and 6,554,088. 

In December of 2005, a jury found that the accused vehicles did not literally infringe Paice’s patents but did infringe two claims of the ‘970 Patent under the doctrine of equivalents.  The jury awarded about $4.3 million in past damages.

Having succeeded on infringement, Paice moved for a permanent injunction.  Less than a month after the hearing on the injunction motion, but before the district court ruled on it, the Supreme Court handed down the eBay decision.

The court was now bound to analyze the four injunction factors.  As a result, the court refused to grant an injunction, instead awarding Paice an ongoing royalty of $25 per infringing vehicle (a figure that was later raised to $98 per vehicle).

As of the date of this writing, two other district court cases between Paice and Toyota over hybrid vehicle technology remain pending in the U.S. district courts.

Denied an injunction by the district court, the court-imposed ongoing royalty affirmed in principle by the Federal Circuit, Paice has pursued Toyota but hasn’t gotten any exclusion satisfaction out of its hybrid vehicle patents. 

That may be about to change.

Earlier this month, Paice filed a complaint in the U.S. International Trade Commisson (ITC) asking the ITC to investigate whether Toyota’s importation of the third generation Prius, the Camry Hybrid, the Lexus HS250h and RX450h (Accused Products) infringe the ‘970 Patent.

The ITC is a federal agency that investigates trade and importation issues, including conducting quasi-judicial proceedings involving alleged infringement of intellectual property rights by importation of accused products pursuant to 19 U.S.C. § 1337.  It is a popular forum for patentees (though only injunctive relief is available, not monetary damages) because the proceedings progress much faster than those in the federal courts.

According to the complaint (paice_itc_complaint.pdf), Toyota has made judicial admissions in the form of discovery responses and stipulations in the prior district court actions that the drivetrains of the Accused Products are materially the same as those that were found to infringe the ‘970 Patent.

Moreover, Paice asserts, Toyota is precluded from challenging the infringement, validity and enforceability of the ‘970 Patent because those issues were “fully and finally litigated against Toyota” in the district court, giving rise to collateral estoppel. 

Paice further asserts that res judicata also precludes Toyota from challenging infringement of the ‘970 Patent because the Accused Products are materially identical to the vehicles found to be infringing in the district court case.

According to Paice, that leaves only issues relating to “domestic industry,” which all ITC complainants must prove.  Section 337 requires there be an industry in the U.S. relating to the products at issue.  This includes an economic prong (demonstrated investment in plant/equipment, labor/capital, research and development or licensing) and a technical prong (demonstrated practice of the asserted intellectual property right).

Paice alleges it meets the domestic industry requirement because of its engineering, research and development activities and its licensing activities in the U.S.

Paice is requesting a permanent limited exclusion order barring entry into the U.S. of the Prius, Camry hybrid and the two accused Lexus models.  With this ITC action, Paice is ratcheting up the pressure on Toyota to pay a large sum in settlement and/or licensing fees. 

Considering what’s at stake here, I’m surprised the Paice complaint hasn’t gotten more media attention.  I don’t think it’s an exaggeration to say this could be the Blackberry case of clean tech and one of the biggest green patent stories we’ve seen so far.