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Toyota v Tesla: eliminating patent trolls to save the hydrogen car

Crikey, 15 January 2015

There has been much concern about the rise of patent trolls, the expenses of patent litigation, and the costs of patent transactions in the United States. The scholar James Bessen has been concerned that aggressive patent litigation has undermined innovation and entrepreneurship. The Supreme Court of the United States has responded to the perceived problems in respect of patent law with a string of significant patent rulings. However, the patent law reform process has been stalled in the United States Congress. While in corporate America, things are heating up.

Last week in Las Vegas at the CES 2015 technology conference, Toyota made a
significant announcement in respect of intellectual property, clean
technologies, and open innovation. Toyota has long been an innovator in respect
of green vehicles and transportation — most notably, with the development of
hybrid vehicles, like the Toyota Prius. The company has assiduously developed a
large portfolio of patents in respect of clean technologies, across a wide range
of sectors.

As part of its research and development program, Toyota has been developing
the Toyota Mirai, a hydrogen fuel-cell vehicle. At CES 2015, Toyota announced
that it would make 5680 hydrogen fuel-cell patents held globally, available for
use royalty free. The portfolio of patents includes 1970 patents related to
fuel-cell stacks; 290 patents associated with hydrogen tanks, 3350 patents
related to fuel-cell system software control; and 70 patents related to hydrogen
production and supply.

As part of the press conference, the futurist and theoretical physicist Dr
Michio Kaku discussed
the possibilities of the hydrogen future for the
automobile industry.

"Usually hydrogen cars are priced at hundreds of thousands of dollars, way
beyond the pocketbook of the average person," Kaku observed. "But this car,
we’re talking about the neighborhood of $50,000."

"As mass production, competition, and economies of scale begin to kick in —
and as governments begin to subsidise the creation of refueling stations —
you’re going to see that cost drop even further."

Bob Carter, the senior president of Automotive Operations at Toyota USA, deployed
the rhetoric
of sharing in his speech: "At Toyota, we believe that when good
ideas are shared, great things can happen."

Carter stressed: "The first generation hydrogen fuel-cell vehicles, launched
between 2015 and 2020, will be critical, requiring a concerted effort and
unconventional collaboration between automakers, government regulators, academia
and energy providers."

"By eliminating traditional corporate boundaries, we can speed the
development of new technologies and move into the future of mobility more
quickly, effectively and economically …

" … traditionally intellectual properties are fiercely guarded because they
have great monetary value. But with … our patent announcement today it's obvious
that there can be a higher societal value in openly sharing
IP."

The announcement is striking — given that Toyota has previously had some
unhappy experiences in respect of patent litigation. In relation to the Toyota
Prius, Toyota was embroiled in patent litigation with Paice. After initially
accusing Paice of being a predatory patent troll, Toyota was unable to defeat
Paice in long-running litigation over patent validity and infringement. In the
end, Toyota settled with Paice, agreeing to pay royalties for the use of its
patents related to hybrid cars.

Toyota’s announcement echoes the 2014 announcement by Tesla Motors in respect
of open licensing of electric cars. In June 2014, the chief executive officer of
Tesla Motors Elon Musk dramatically announced on his blog that "all our patents
belong to you". Musk emphasised that the company was adopting an open source
philosophy in respect of intellectual property. While this announcement lacked
finer detail as to the exact nature of the open licensing, Elon Musk and Tesla
Motors were able to generate much popular interest and acclaim.

Through its response at CES 2015, Toyota perceives Tesla Motors as a genuine
threat and competitor in respect of the development of green vehicles and
transportation. The car manufacturer is perhaps more worried about Tesla Motors’
electric vehicles than its traditional Detroit Motown rivals. Toyota is keen to
ensure that the Toyota Prius and the Toyota Mirai are not left behind by Tesla
Motors’ Open Source Revolution.

Despite the grand rhetoric at CES 2015, Toyota’s announcement falls short of
truly open innovation. The company emphasised that licensing will be limited to
automakers, fuel-cell parts suppliers and energy companies who establish and
operate fuelling stations. Toyota will consider requests from parts suppliers
and companies outside of the transportation sector on a case by case basis.
Toyota has indicated, "Patents related to fuel cell vehicles will be available
for royalty-free licenses until the end of 2020". Moreover, "Patents for
hydrogen production and supply will remain open for an unlimited duration".
There also seems to be a quid pro quo: "As part of licensing agreements, Toyota
will request, but will not require, that other companies share their fuel
cell-related patents with Toyota for similar royalty-free use." It is
significant that Toyota retains the ownership of the key patents, which have
been offered in the deal.

The announcement by Toyota marks a significant shift in the company’s
approach to the management and exploitation of intellectual property. The
decision shows an engagement with intellectual property, the collaborative
common, and the sharing economy.

There have been a number of early experiments with open innovation in respect
of clean technologies. Notably, there were early collaborative endeavours, such
as the Eco-Patent Commons, the Green XChange, and open source projects focused
on clean technologies. At an international level, the UNFCCC Climate Technology
Centre and Network (CTCN) and WIPO GREEN have since been established to promote
the diffusion and dissemination of green technologies. Toyota and Tesla Motors
have shown that individual companies are willing to engage in patent-sharing in
order to boost the research, development, and adoption of emerging
technologies.

It remains to be seen whether such an approach to sharing intellectual
property in respect of green vehicles will be taken up in other fields of
renewable energy and clean technologies — particularly with the Paris 2015
conference on climate change on the horizon this year.

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