Toyota is the acknowledged hybrid leader in the automotive industry and has sold more Priuses than all other hybrids combined. Last year, the Prius accounted for more than 40% of hybrid sales in the U.S. But it turns out this international icon of clean energy uses infringing drive train technology, and it looks like Toyota will be paying a royalty on every Prius sold in the U.S. through 2011.
In October, the U.S. Court of Appeals for the Federal Circuit (the appellate court that hears appeals of all lawsuits arising under the patent laws and final decisions from the U.S. Patent & Trademark Office) affirmed a jury verdict that three of Toyota’s hybrid vehicles – the Prius, the Highlander and the Lexus RX 400h – infringe a patent owned by Paice, a company that holds several patents relating to hybrid vehicle drive train technology. This case is interesting because Toyota’s drive train was found to infringe despite seemingly significant differences between its structure and the patented system and because the court imposed an ongoing royalty on Toyota’s infringing vehicles.
In conventional cars, the wheels are driven by torque (rotational force) supplied only by an internal combustion engine (ICE). In hybrid vehicles, torque is supplied by an internal combustion engine (ICE), an electric motor, or a combination of the two. A hybrid drive train must be able to combine and control the relative torque contributions of an ICE and an electric motor. One of Paice’s patents, 5,343,970, claims a hybrid electric vehicle in which the drive train uses a microprocessor and a controllable torque transfer unit (CTTU) that accepts torque input from both the ICE and the electric motor. The microprocessor controls the amount of torque provided by the ICE and the electric motor by locking or releasing a bevel gear assembly and holding torque inputs constant.
The Toyota drive train also combines torque from an ICE with torque from an electric motor but instead of bevel gears the Toyota system has a “planetary” gear unit having a central “sun” gear that meshes with several planetary gears, which in turn mesh with a peripheral ring gear. The output shaft from the ICE is connected to the planetary gears, but the output shaft from the electric motor is connected to the ring gear, instead of both output shafts being connected to the same structure. The transfer of torque through Toyota’s planetary gear system can’t be varied; 72% of the torque provided by the ICE is always transferred to the ring gear and is combined with 100% of the torque provided by the electric motor.
The Federal Circuit upheld the jury verdict of no literal infringement because Toyota lacks the literal elements of Paice’s CTTU. But despite the distinctions between the systems, the Federal Circuit found there was enough evidence that Toyota has infringing equivalent structure because it accepts inputs from multiple sources, i.e., input at the planetary gears from the ICE output shaft and input at the ring gear from the electric motor output shaft, and it is controlled to transfer variable amounts of torque, i.e., the microprocessor dictates the amount of torque sent from each input, and ultimately the amount of torque output to the drive shaft.
The district court denied Paice’s motion for a permanent injunction, but imposed an “ongoing royalty” of $25 per infringing vehicle sold during the remaining term of the patent. The Federal Circuit vacated the royalty and instructed the district court to reevaluate the rate because the district court’s decision provided no reasoning as to how it arrived at that sum. (The royalty rate does seem low considering the importance of the drive train to the vehicles and the vehicles’ sticker prices).