By on May 28, 2010

The long-simmering dispute over hybrid technology patents between Toyota and the Florida engineering firm Paice is rolling on, as Bloomberg BusinessWeek reports that a judge from the U.S. International Trade Commission refused to dismiss the Paice suit. That suit builds on an earlier ruling requiring Toyota to pay Paice royalties on its Prius, Highlander Hybrid and RX400h sales (Toyota is challenging the amount of these royalties, ordered by a federal judge in Texas).

Paice is also seeking an ITC ban on US sales of these vehicles, and by refusing to dismiss Paice’s case, the ITC leaves the door open for such a ban. A hearing before the ITC is scheduled for July 19th. Needless to say, a US-market ban on sales of Toyota hybrids would be a huge setback for the Japanese automaker, eliminating its major technological advantage from the marketplace. Paice is also seeking a patent ruling against Ford for its use of hybrid technology.

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15 Comments on “Toyota Loses Bid To Dismiss Hybrid Patent Lawsuit...”


  • avatar
    Mailbox20

    Can you buy stock in podiatry? I imagine a surge in that field in the near future from all of the “kicking while down” that is happening to Toyota.

  • avatar
    tedj101

    This isn’t kicking Toyota while it was down. The main case (the one in the Eastern District of Texas) started years ago. Toyota thumbed their noses at Paice. It went to trial and Toyota lost. The ITC action just happens to be coming to a head while Toyota has had other troubles. Actually, from Paice’s point of view, it is better for them if Toyota is flush — Toyota is more likely to pay up as the Court has ordered it to do.

  • avatar
    John Horner

    The US’ patent system has become absurd from beginning to end. It is doing far more harm to the country than are any number of more popular hot-button issues.

    The list of US patent system absurdities is endless, but start by asking: Why was this case was brought in a certain court in East Texas of all places? Do the research and you will find very interesting answers.

    Paice is but one of many companies seeking not to actually develop and bring to market innovative technologies, but rather to see where the train might be heading and to then lay down a a set of paperwork which will let them make a killing once the train gets there.

  • avatar
    Mr Carpenter

    Very well said John Horner.

    In many ways, the United States is far more like China than it likes to admit.

    Except that China is on the ASCENT while the Untied Status of Amerika is on the probably terminal DESCENT.

    Paice, like the people in the District of Kontrol, should consider what might happen as a case of unintended consequences with their respective actions against Toyota. And Ford, in the case of Paice.

    But of course, they will not because for the one, power and control are everything, and for the other, money and greed are everything.

    • 0 avatar
      psarhjinian

      I know it’s fashionable to throw in references to Kommunism, but the abuse of the patent system is about as far from socialised economic princples as it gets.

      On-topic: Paice isn’t quite the blatant patent troll that, say, NTP or the grand-daddy troll that is Acacia. It’s sort-of founder actually did do the design an engineering (though never produced a product) but it is telling that they didn’t bring a suit back in 1999 but instead waited until the Prius was well-established and HSD committed to. That’s classic submarine behavior; that they’re filing in East Texas is icing on the cake.

      There’s interesting reading on this topic, if one cares to look. Paice’s patents actually reference earlier patents held by, among other people, Toyota itself going back to the 1970s. It’s certainly far more complex than the usual “Evil Jap Toyota dun stoled from an honest American inventor!” jingoism that one normally sees.

    • 0 avatar
      Robert.Walter

      + 1 Psar. I agree with the exception that the requirement of referencing Prior Art in a patent app. intended to advance the state of the art is not a bad thing, it is required by the process, and if the application isn’t practical and doesn’t display sufficient novelty then it will be rejected.

      I’m not sure why an inventor that looks at prior and SoTA and then finds a novel way to advance it (whether in one or multiple directions) and seeking to protect it should be considered to be a bad thing either. The right to a patent and the right to benefit from it financially (whether directly by manufacture or indirectly by license fees) is the incentive designed to leverage all the minds out there to continually push the state of the art forward.

      Whether it be a singular inventor, an invention/patent firm, or an industrial firm, each has just as much incentive to be creative and protective of any new ideas and they have ample disincentive against frivolous applications because they also bear the risk of spending money on IP that does not become the “mainstream or is not competitive against better or cheaper concepts”.

    • 0 avatar
      psarhjinian

      I’m not saying there’s anything at all wrong with prior-art for significant derivative works. What I had meant to illustrate is that Severin didn’t invent the concept of the parallel hybrid, as I’ve seen said in very simplistic discussions of this case.

      There’s also a distinction between frivolous applications, strategic applications (IBM is famous, but far from alone, for that) and submarining. Severin should be within his rights to file a patent for whatever he wants. He’s free to defend it. What he ought not be allowed to do is file, sit on the file for a while, and then sue not when someone else develops something similar, but when they’ve spent years developing the technology and associated strategies and have invested too much to turn back.

      That, in my opinion, is a mockery of what the system is for. It’s bad enough to see patents gathered as a kind of intellectual nuclear arsenal/mutually-assured destruction tactic. It’s worse to see them used as a bank machine.

    • 0 avatar
      Robert.Walter

      But isn’t that the whole purpose of IP, to be a money machine, or a block against a competitor?

      It is incumbent on the developer of a product to avoid infringment in their steps to design and industrialize a technology. The costs to do the patent search to avoid infringement are relatively small in comparison to those related to engineering, designing, testing, tooling, etc. And a large industrial company like Toyota, developing a new technology is always well advised to understand how existing IP will impact their efforts.

      I’m not sure what purpose is served by making it incumbent on the holder of the IP to, within any given time period, to try and see, and then challenge, any seeming infringement (it is just not practical to do it that way.)

    • 0 avatar
      psarhjinian

      But isn’t that the whole purpose of IP, to be a money machine, or a block against a competitor?

      There is a difference between making money from an invention, licensing a patent up-front, using them strategically as a defense against your competition versus submarining.

      I don’t think Toyota would have minded particularly much if Paice/Severin had offered RAND licensing in 1999. Waiting until Toyota’s use of HSD became synonymous with their brand is dirty pool.

      Patents are meant to incubate innovation. Submarining does the opposite: it stifles innovation. Small inventors are discouraged from moving forward because they can’t get capital (the legal risk is too great). Large companies won’t try patentable works because of the risk and will fall back to copyrightable or trademarkable work because it’s easier.

      I’ll make a small allowance for the likes of, say, IBM, who do patent all sorts of material, much which they might not ever produce on the grounds that they do produce a lot anyways. They’re a world away from Paice, NTP or Acacia, who produce nothing.

      It is incumbent on the developer of a product to avoid infringment in their steps to design and industrialize a technology

      That’s a nice idea, but it’s just not practical, not given the sheer volume of patents applied for an issued. Even someone like Toyota is going to have a tough time sifting through reams of prior patents to find one that just might torpedo them. If nothing else, they’d end up delaying useful work for years.

      The costs to do the patent search to avoid infringement are relatively small in comparison to those related to engineering, designing, testing, tooling, etc. And a large industrial company like Toyota, developing a new technology is always well advised to understand how existing IP will impact their efforts.

      I’m not sure what purpose is served by making it incumbent on the holder of the IP to, within any given time period, to try and see, and then challenge, any seeming infringement (it is just not practical to do it that way.)

      Why not? It’s exactly how trademarks work: as soon as you become aware of infringement, you take steps to secure your rights. Paice and Severin can’t reasonably say they weren’t aware of their own patent portfolio (not when they claim to be “experts in the field”) or aware of Toyota’s massive, half-decade efforts to push hybrids.

  • avatar
    Telegraph Road

    Paice is seeking a patent ruling against Ford? Good luck with that.

    In Paice vs Toyota, Judge Folsom ruled: “The Ford license covers the early Prius I technology, which has been abandoned by Toyota in favor of the technology covered by Paice’s patent.”

    (In case anyone has forgotten, my OEM employer in Dearborn and my views don’t necessarily agree.)

  • avatar

    I am just happy Paice’s is an American company. For once we can hold our heads high instead of being ashamed of lack of innovation at GM, Ford, and Chrysler.

  • avatar
    John Horner

    The IP system is supposed to provide sufficient incentive to keep technology moving forward whilst ALSO in so doing providing for the greatest common good over time. Like most things, it is a balancing act when done well. In modern times the US’ version of the system has become more of a lottery and a bludgeon than it has been a tool for advancing technology in the broadest sense.

    In any case, my view is that one of the reforms needed for patent and copyright law is a “use it or loose it” requirement similar to that which exists for trademarks. No one should be able to use a patent for the primary purpose of keeping a technology OFF the market, but that is in fact often done under the current system. Furthermore, the value of an invention is more in the putting it into production and getting people to like it enough to buy it than it is in the mere idea. Novel ideas are much more easy to come up with than is the commercialization of them.

    Imagine a world where someone had managed to get a patent on the idea of using one website to find information on other websites. Would we be better off if company XYZ controlled the patent to internet searches?

    • 0 avatar
      Daanii2

      Even though I’m a patent attorney, I agree with John Horner’s comment here and above. In the United States at least, the patent system hurts innovation, rather than help it.

      Better a system like Japan, where any company can use another company’s technology as long as it pays a “reasonable royalty.” In many ways, Japan’s patent system is better than ours. Ours is a disaster.

  • avatar
    xyzzy

    Submarining should be in decline because of two patent reforms implemented a few years ago:

    1. Instead of being good for 17 years from issue patents are now good for 20 years from filing, which lessens the incentive to keep a patent in prosecution for years while waiting to see which way trends are going (Jerome Lemelson, the pioneer of patent trolling was famous for this)

    2. Patent applications now published 1 year from filing so you can’t keep your submarine patent hidden while waiting for the right time to pounce.

  • avatar

    John Horner and psarhjinian are absolutely correct here. The patent system wasn’t designed for the use it sees today. The noble idea of of promoting progress has been twisted and now harbors companies like Paice, whose actions only hurt the public and the industry. Just take a look at their company website and you will find that, with the exception of two items, the only thing they have to post in their news section are their various IP lawsuits. They are practically advertising their misuse of the patent system!

    The case of hybrid patents is especially frustrating when you consider that the first patent on a hybrid drive system was granted to Henri Pieper in 1909 (US No. 288,181). Even if we are to say that the ’181 patent is too old to be considered relevant prior art (which I wouldn’t) there are many more recently patented parallel systems which are prior to any of Paice’s patents. This report from M-CAM, Inc. gives some visibility into the world around Paice’s patent No. 5,343,970, which Paice cites in it’s recent suit against Ford.

    Until the abuses of the system become more widely known, redundant patents will continue to be granted and non-operating entities like Paice will be allowed to continue their harmful, greedy practices.


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