George S. May Business Blog

Toyota Prius under fire in patent-infringement case

Could Americans see a ban of Toyota hybrids? As insane as it sounds, it could become a reality should a small company out of Florida make their case in court. Paice LLC maintains they hold the patent for a specific way to apply force to a car’s wheels from the electric motor or the internal combustion engine and that a selection of Toyota vehicles are currently using it unauthorized.

From Bloomberg:

“Oct. 6 (Bloomberg) — Toyota Motor Corp., the world’s largest maker of hybrid vehicles, faces a potential U.S. import ban on Prius and other hybrid models as trade officials begin a patent-infringement investigation.

The U.S. International Trade Commission will start a probe into a claim by closely held Paice LLC that some Toyota vehicles infringe a patent for a way of supplying torque, or force, to a car’s wheels from both an electric motor and internal combustion engine, the agency said yesterday.

The ITC has the power to block imports of products that infringe U.S. patents, potentially disrupting Toyota’s sales in the world’s biggest auto market. Paice won a 2005 civil patent suit against Toyota, which was upheld on appeal. In that case, a federal judge rejected Paice’s request to halt sales of the cars and instead ordered royalty payments.

The earlier Paice verdict related to the Prius, hybrid Highlander and Lexus RX400h sport-utility vehicles. The new ITC complaint claims the hybrid Camry, third-generation Prius, Lexus HS250h sedan and Lexus RX450h SUV infringe the same patent.

Since 2000, when Toyota introduced the Prius in the U.S., the Toyota City, Japan-based company has sold more than 1.1 million hybrids in the market, including more than 750,000 Prius cars.

‘Materially the Same’

In the complaint, Paice said Toyota is precluded from arguing that the additional vehicles don’t infringe the patent or challenging its validity because of the 2005 verdict. The hybrid drivetrains of the vehicles in the ITC case “are materially the same” as those in the Lexus and Toyota models in the civil case, Paice said in the complaint.

Paice claims in lawsuits in federal court in Marshall, Texas, that the Camry infringes the patent. That case may go to trial in January. A second case involves claims of infringement of another patent by the Highlander and Lexus models.

To be able to win at the ITC, Paice must show that it has a market to protect. In the complaint, Paice says it has made “substantial investments” in vendors and suppliers and in research and licensing.

The company is based in Bonita Springs, Florida, and has offices in Maryland, Michigan and Virginia, according to the complaint.

The ITC, in an unrelated case, is currently considering the standard that must be met before patent owners who don’t make products can file complaints.

Toyota “has many patents on the hybrid technology and believes it has strong defenses against all of Paice’s claims and that it will prevail in the ITC proceeding,” said Celeste Migliore, a spokeswoman for the carmaker’s U.S. sales unit in Torrance, California, restating comments made last month.

Damages Awarded

In the earlier case, the jury awarded $4.3 million in damages and the verdict was upheld on appeal. U.S. District Judge David Folsom in Marshall rejected Paice’s request to issue a court order to halt sales of the Toyota vehicles.

Instead, in April he ordered Toyota to pay royalties based on the wholesale prices equal to 0.48 percent for a second- generation Prius, 0.32 percent for each Highlander and 0.26 percent for each Lexus RX400h. Toyota is appealing that order.”

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