10202017Headline:

Wilmington, North Carolina

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Gary Shipman
Gary Shipman
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Toyota Locked in Intellectual Property Litigation Over Prius

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The International Trade Commission is the setting for a classic "David vs. Goliath" contest between Bonita Springs, Florida based Paice, LLC and Toyota over a patent related to a key component of Toyota’s "green car", the Prius. A federal court in Texas has already determined that this component belongs to Paice, setting the stage for what promises to be either a settlement (licensing deal) by Toyota of the claims made therein, or a trial that would expose Toyota to an injunction that would prohibit the continued utilization of the technology.

The intellectual property at issue is a microprocesser that combines and controls power used in hybrid cars, like Prius – electric motor; internal combustion engine; or both. Dr. Alex Severinsky obtained a patent for this technology, and founded Paice, which stands for Power Assistend Internal Combustion Engine. He presented this technology to a number of automakers, including Toyota, but no deal was made. Then along came the Prius, in 2004, using technology that Paice contends infringes upon its patent, and alleges infringement involving not only the Prius, but Toyota’s Highlander and the Lexus RX400h SUV.

In December, 2005, a jury found that Toyota had, indeed, infringed upon the patent, but awarded an amount ($4.3 million) that the trial judge referred to as "low." However, that set up the ultimate leverage, namely, an injunction that would bar Toyota from making, using or selling cars in the United States for the life of the patent. As the case was marching to trial, the United States Supreme Court issued its Ebay decision, setting forth a four-factor test for the granting of an injunction. Given that Paice doesn’t actually make any products, it could fall short of meeting the requisite standards set forth by the Supreme Court, and the strategy switched to a request for a royalty payment from Toyota, which the judge granted at the rate of $25 per car. An appellate court reversed, asking that the Judge justify the $25 rate, and in April, 2009, the judge issued a new ruling, setting the royalty at $98 per car. Toyota has appealled that ruling to the Federal Circuit.

Undaunted, Paice struck again, but this time in the International Trade Commission. While the ITC lacks the ability to award damages, it has the authority to grant the injunctive relief sought by Paice in the courts of the United States. Decisions by the courts (who have already concluded that Toyota infringed) are binding on the ITC. Toyota counters that, given that Paice doesn’t actively conduct any continued research and development, is not a "domestic industry" and is therefore, not entitled to any ITC protection. There are two other pending cases before the ITC, involving similar issues, and the resolution of those cases could have an impact on the Toyota case. Ultimately, there must be a resolution of the differing standards for the grant of injunctive relief in the Court versus the ITC.