Green Patent Blog®

After six years of legal wrangling in U.S. courts and the International Trade Commission (ITC) over hybrid vehicle patents, Paice and Toyota recently announced that they have settled their disputes.

Although the terms of the agreement are confidential, the reports and statements of people involved reveal two interesting elements of the deal.

First, a compromise statement reported in a PR Newswire article tactfully notes Toyota’s infringement of Paice’s U.S. Patent No. 5,343,970 (’970 Patent) on the one hand and its independent development of the technology on the other hand:

The parties agree that, although certain Toyota vehicles have been found to be equivalent to a Paice patent, Toyota invented, designed and developed the Prius and Toyota’s hybrid technology independent of any inventions of [Paice founder] Dr. Severinsky and Paice as part of Toyota’s long history of innovation. 

Second, and more significantly, Toyota took a license to Paice’s entire patent portfolio.  According to this Forbes.com piece, the chair of Paice’s Board, Frances M. Keenan, said that “Toyota had agreed to license all 23 of Paice’s patents, not just the one at issue in the ITC claim.” 

The court clashes date back to a patent infringement suit filed by Paice in 2004 in which Toyota was held liable for infringing the ‘970 Patent under the doctrine of equivalents.  After being awarded an ongoing royalty of $98 per infringing vehicle, Paice turned its attention to the ITC where it could obtain an exclusion order against Toyota.

Most recently, the adminstrative law judge (ALJ) presiding over the ITC case denied Toyota’s motion for summary determination that the ITC investigation was barred by claim preclusion. 

The ALJ held that Paice was not precluded from pursuing its case in the ITC because the exclusion order was not available to Paice in the district court action and is a materially different remedy from the injunctive relief offered by the courts.

As a result of the license agreement, Paice will receive a revenue stream from Toyota for a while: the last patent under license expires in 2019.

Bluecar is a small electric car designed by the French conglomerate Bollore Group (Bollore) and produced in cooperation with Pininfarina, an Italian car design company.

Bollore applied for a U.S. trademark registration for BLUECAR for a number of different goods in a few classes, including electrically powered vehicles such as scooters, motorcycles, bicycles, trucks, trolleys, forklifts, boats and electric motors and transmission assemblies for electrically powered vehicles, in Class 12.

The examining attorney rejected the Class 12 goods on the ground that the mark BLUECAR is “merely descriptive” because the goods could encompass blue colored electric cars.

Bollore appealed the examining attorney’s final rejection to the Trademark Trial and Appeal Board (Board).  

On appeal, Bollore argued that use of the mark in connection with its environmentally friendly vehicles creates a double entendre because the word “blue” in BLUECAR evokes an image of cleaner, bluer skies:

Driving applicant’s vehicles, therefore, is a way for consumers to “live green” by reducing their carbon emissions and helping to make the skies cleaner and bluer. . . . Consumers would easily recognize this second connotation or meaning through the use of the word “blue.”

In support of its argument, Bollore cited instances of environmental organizations and clean energy companies that use the word “blue” such as the Blue Planet Foundation and Blue Sky Energy.

The Board agreed with Bollore and reversed the final rejection, finding the mark not merely descriptive of the cars but either arbitrary or suggestive of environmentally friendly vehicles:

potential purchasers will perceive BLUECAR, not as merely describing the cars, even the cars which may be blue.  Rather potential purchasers will perceive BLUECAR either as an arbitrary mark, or perhaps as a mark suggesting a clean, blue sky, that is, that the electric powered vehicles are environmentally friendly, as applicant argues.

Is green losing its monopoly as the color of environmentally friendly products and services?  Perhaps blue is the new green.

Last month, Ford Motor Company (Ford) and hybrid vehicle technology company Paice LLC (Paice) each sued the other over allegations that Ford’s Fusion hybrid infringes Paice’s U.S. Patent No. 5,343,970 (’970 Patent).  The two lawsuits were filed the same day in different courts. 

Paice’s complaint (paice-ford_complaint.pdf), filed in the Eastern District of Texas, alleges that the Ford Fusion infringes at least claims 7-8, 25 and 39 of the ‘970 Patent. 

In particular, the complaint notes that the car uses a “variable voltage booster” to raise the voltage the battery supplies to the vehicle’s electric motor.

Ford filed its suit in the Eastern District of Michigan seeking a declaratory judgment (DJ) that Ford does not infringe the ‘970 Patent and that the patent is invalid. 

According to Ford’s complaint (ford-paice_complaint.pdf), in addition to the allegations made against the Fusion, the hybrid version of its Escape vehicle is also at risk of being targeted for infringement by Paice. 

Ford brought a similar DJ action against Paice back in 2005, but the case was dismissed for lack of DJ jurisdiction.  

Ford’s complaint mentions that case and points out that the Supreme Court and the Federal Circuit have since lowered the bar for establishing DJ jurisdiction by eliminating the necessity that there be a “reasonable apprehension of imminent suit.”

Ford is not the first automaker to face Paice and the ‘970 Patent; Paice has been relatively successful in enforcing the ‘970 Patent against Toyota.

In the fall of 2007, the Federal Circuit affirmed a jury verdict that the Toyota Prius, Highlander and Lexus SUV infringed two claims of the ‘970 Patent under the doctrine of equivalents. 

In that case Paice was awarded about $4.3 million in past damages and an ongoing royalty of $98 per infringing vehicle sold.

Toyota also is fighting to avoid an exclusion order that would bar importation of the third generation Prius and other hybrid vehicles Paice has accused of infringement in an investigation currently pending before the U.S. International Trade Commission (see previous posts here, here, here and here).

The ‘970 Patent is directed to a hybrid electric vehicle in which the drive train uses a microprocessor and a controllable torque transfer unit (28) that accepts torque input from both the vehicle’s internal combustion engine (ICE) and its electric motor.

The microprocessor controls the amount of torque provided by the ICE and the electric motor by locking or releasing bevel gears (94, 96, 98, 100) and holding torque inputs constant.

In previous posts (here, here and here), I’ve discussed the patent litigation between hybrid vehicle technology company Paice and Japanese automaker Toyota in the U.S. International Trade Commission (ITC).

This case centers on Paice’s allegations 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). 

In a prior action 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, but the court denied Paice’s request for an injunction.

Last month in the ITC case, the ITC reversed an administrative law judge’s ruling 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 the prior federal district court and appeals court rulings against Toyota.

Claim preclusion prevents a succession of lawsuits on a common claim by precluding re-litigation of the same claim between the same parties in a second forum in the absence of certain exceptions.

The ITC opinion (itc_opinion.pdf) found the only “claim” presented in the investigation is Paice’s and “thus claim preclusion cannot be applied as a sword by Paice against Toyota.”

Significantly, the ITC opinion went on to say that “if this investigation is part of the same ‘claim’ as the district court action, and if no exception to claim preclusion applies, then this investigation is precluded altogether.”

Toyota subsequently filed a renewed motion for summary determination (toyota_motion.pdf) asking the presiding administrative law judge to dismiss the case on the ground that Paice’s claim is barred by the doctrine of claim preclusion.

According to Toyota’s motion, the ITC investigation is part of the same “claim” as the prior Texas district court action and none of the exceptions applies. 

The only “arguably relevant” exception - that the plaintiff was unable to seek a certain remedy or form of relief in the first action - does not apply, Toyota contends, because there is no meaningful difference between the injunction Paice sought in the district court and the limited exclusion order Paice has requested in the ITC.

In its opposition brief (paice_opp.pdf), Paice counters that claim preclusion should not apply because its ITC claim involves new products introduced by Toyota subsequent to the earlier district court action and therefore is based on acts of alleged infringement that occurred after that case.  Thus, Paice contends, the ITC case cannot be deemed the “same cause of action” as the first suit.

Paice also argues that some of the exceptions to claim preclusion apply here, including that it was unable to rely on certain theories in the district court action and unable to seek the exclusionary relief there that is only available in the ITC.

Much is riding on the determination of this motion:  Paice has requested a permanent limited exclusion order barring entry into the U.S. of the Accused Products.

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.