Archive for June, 2014

Clean Tech in Court: Green Patent Complaint Update, Part I

June 26th, 2014

A number of green patent complaints have been filed in the last several months in the areas of hybrid electric vehicles, ethanol production, LEDs, water treatment, and exhaust treatment catalysts.  This post covers new lawsuits filed from late 2013 to the end of March 2014.

 

Hybrid Electric Vehicles

Paice LLC v. Ford Motor Company

After major success asserting its patents against Toyota, the HEV development and licensing company Paice is at it again.  On February 19, 2014, Paice sued Ford Motor Company for patent infringement in federal court in Baltimore.

The rather lengthy complaint accuses Ford of infringing U.S. Patent Nos. 7,237,634, 7,104,347, 7,559,388, 8,214,097, and 7,455,134.  These patents are part of a large family tracing priority all the way back to 1999.  Each patent is entitled “Hybrid vehicles” and relates to hybrid vehicles and associated control systems.

In its complaint, Paice lays out the details of, among other things, its collaborative relationship with Ford and how it soured.  The accused products are Ford’s Fusion hybrid and plug-in hybrid, C-Max hybrid and plug-in hybrid, and Lincoln MKZ.

 

Biofuels (Ethanol Production)

GS Cleantech Corporation v. Pacific Ethanol Stockton LLC

GS Cleantech Corporation v. Pacific Ethanol Magic Valley, LLC et al.

GS recently initiated two new lawsuits involving its patented ethanol production processes.  A complaint filed March 17, 2014 in federal court in Sacramento, California accused Pacific Ethanol Stockton of infringing U.S. Patent No. 7,601,858, entitled “Method of processing ethanol byproducts and related subsystems” (’858 Patent).

The next day, GS sued Pacific Ethanol Magic Valley in the U.S. District Court for the District of Idaho.  The Idaho complaint asserted the ‘858 Patent as well as U.S. Patent Nos. 8,008,516 and8,283,484, each entitled “Method of processing ethanol byproducts and related subsystems,” and as U.S. Patent No. 8,008,517, entitled “Method of recovering oil from thin stillage.”

The patents relate to methods of recovering oil from byproducts of ethanol production using the process of dry milling, which creates a waste stream comprised of byproducts called whole stillage.

GS has been on an aggressive patent enforcement campaign over the last several years.  Multiple actions were consolidated in the Southern District of Indiana, where the asserted patents were construed and re-construed.

 

LEDs

Luminus Devices, Inc. v. LED Engin, Inc.

Making its first green patent litigation appearance (to my knowledge), Massachusetts based Luminus Devices sued LED Engin in the U.S. District Court for the Northern District of California.

Filed back in November 2013, the complaint accuses LED Engin of infringing U.S. Patent No. 7,170,100 (‘100 Patent).  Entitled “Packaging designs for LEDs,” the ‘100 Patent is directed to an array of LEDs and an LED package.

The package includes a layer configured so that at least about 75% of the light that that emerges from the LED and impinges on the layer passes through the layer. The layer is disposed such that a distance between the surface of the LED and a surface of the layer nearest to the surface of the LED is from about five microns to about 400 microns.

The accused products are several LED emitters allegedly made and sold by LED Engin.

 

Lighting Science Group Corporation v. Cooper Lighting, LLC

On February 6, 2014 Florida LED lighting company Lighting Science Group (LSG) sued rival Cooper Lighting for patent infringement in federal court in Orlando.

The complaint alleges that Cooper infringes U.S. Patent No. 8,201,968 (‘968 Patent) by its manufacture and sale of the Halo LED Recessed White Surface Disk Light products.

Entitled “Low profile light,” the ’968 Patent is directed to a luminaire including a heat spreader and a heat sink disposed outboard of the heat spreader, an outer optic securely retained relative to the heat spreader and/or the heat sink, and an LED light source.

 

Water Treatment

Envirogen Technologies, Inc. v. Maxim Construction Corporation

Envirogen Technologies, a Texas company that makes water purification systems, recently filed a lawsuit for breach of contract and patent infringement against Maxim Construction.

Filed March 25, 2014 in the U.S. District Court for the Northern District of Illinois, the complaint lists three patents – U.S. Patent Nos. 7,309,436 (‘436 Patent), 6,878,286 (‘286 Patent) and 7,041,223 (‘223 Patent).

Entitled “High efficiency ion exchange system for removing contaminants from water,” the ‘286 and ‘223 Patents are related and are directed to a fixed bed ion exchange water purification system that combines features of single fixed bed ion exchange systems with those of a moving bed system.

The ‘436 Patent is entitled “Process for removing perchlorate ions from water streams” and directed to methods and systems for removing perchiorate from water.

According to the complaint, Maxim failed to make all payments under a contract to purchase an Envirogen water purification system, and therefore its use of the system is unlicensed and infringing.

 

Exhaust Treatment Catalysts

EmeraChem Holdings, LLC v. Volkswagen Group of America, Inc.

EmeraChem Holdings, a Tennessee-based company that creates catalysts for gas and liquid fuels, sued Volkswagen in federal court in Knoxville, Tennessee on March 31, 2014.

The complaint asserts infringement of U.S. Patent Nos.:

 5,451,558, entitled “Process for the reaction and absorption of gaseous air pollutants, apparatus therefor and method of making the same”;

5,599,758, entitled “Reduction of absorbed nitrogen oxides by reaction with gas flow containing hydrogen and/or carbon monoxide”;

5,953,911, entitled “Regeneration of catalyst/absorber”;

6,037,307 , entitled “Catalyst/sorber for treating sulfur compound containing effluent”: and

7,951,346, entitled “Methods and systems for reducing particulate matter in a gaseous stream”.

According to the complaint, Volkswagen’s diesel powered vehicles equipped with exhaust treatment systems, NOx storage catalyst, and other exhaust treatment catalysts infringe one or more of the patents.

In Defense of IPR: The Timing of the Tesla Move will Diminish The Company’s Value

June 19th, 2014

Guest post by Philip Totaro, Founder & CEO of Totaro & Associates

 

In the early stage of an industry, the long term may seem like it’s too far away.  Penetration of electric vehicles (EVs) has not yet reached levels where it is displacing significant market share from conventional gas-powered automobiles, in spite of the popularity of EVs in some regional markets around the world.

A recent move intended to inspire further EV adoption, announced in a blog post by Tesla CEO, Elon Musk, to “not initiate patent lawsuits against anyone who, in good faith, wants to use our technology,” seems to be quite popular so far.

While this is a noble and well-intentioned move, unfortunately, this thought process represents a widely held misconception about intellectual property: that it is only a legal matter, rather than a commercial one.

Patents are not just about hitting the ‘litigation lottery’ as Mr. Musk put it.  Patents are the codification of innovation and they represent the investment of time and effort from the innovative and creative people who have their names on them.  Making the investment in intellectual property protection in the first place presumes that you are willing and able to enforce your rights.

In any market there will be those who are driven by greed, and we have seen the exploitation of intellectual property by so-called “patent trolls.”  Mr. Musk appears to be frustrated with this exploitation of intellectual property, stating that:

…too often these days [patents] serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors.

I choose not to be so cynical about the process of protecting innovation and intellectual property rights (IPR).  While many things are inefficient about the patent and trademark protection process, we live in a time when IPR are more respected around the world than they have ever been, notwithstanding the specific cases of misuse which we have become aware of in recent years.

Simply put, IPR create jobs and shareholder value for the companies that invest in innovation.  The legal profession around protecting and litigating IPR has arisen because of the increase in innovation, not because of a desire or need to line their pockets at the expense of companies who misappropriate the IPR of a competitor.

“Open sourcing” one’s patent portfolio reduces the ability to obtain value in return for that investment in innovation.  There is also value in holding a portfolio of IP assets on a diverse set of technologies because IPR creates a mechanism by which you can cross-license your technology and that IPR in case litigation comes your way, even if you don’t intend to initiate it.

Perhaps the big carmakers aren’t fully embracing EVs yet, but they certainly have the resources at their disposal to overwhelm Tesla if they wanted to.  Interestingly, Tesla doesn’t seem to understand another important aspect of IPR, which is that IP litigation between practicing entities only typically arises when their market share is encroached upon.  I suppose that if Tesla were making more of a dent in the car market, they wouldn’t be forced into this type of public relations stunt.

The timing of this also affords us the opportunity to discuss another widely held misconception about intellectual property, which is that there is more to IPR than just patents.  Typically, being first to market with a product in a new niche market matters more than having the most patents on that technology.

The inevitable action of competition that has the resources to invest in competing with an early market leader will be to duplicate their technology with improvements of their own in an effort to replicate the market leader’s commercial success.

A comment on the Tesla blog which first announced the intention not to litigate on their patents highlights some of the main concerns with this plan:

TeslaFan2014

4:42AM | JUN 14, 2014

Mr. Musk:

Great News for those interested in your company’s technology!  Can you please back up this press release with actual details/procedures?

Can you please direct those that are interested in practicing your company’s patented technology a contact where they can receive a royalty-free, perpetual license to practice your company’s technology, as the release suggests? No company will start [to] willfully practice another company’s technology without assurances they will not be sued (a press release does not cut it).

Can you have your IT folks upload a perpetual, royalty free license like the one above, signed by you, so that it can be easily downloaded and signed by companies that want to practice your patented technology?

Can you specify which patents you are actually talking about? Does this mean all of Tesla’s patents? In any country?

The spirit behind this press release is great. Now, we need details.  

Thank you again for such a generous thing that you are doing.

 I, and others, look forward to seeing how you are actually going to get this done.

In Tesla’s case, this move will hurt them in two ways longer-term:

 

Undercutting the future commercial value of the company

IPR precludes duplication of one’s technology by competitors.  Even if I don’t have Tesla’s drawings, if I have engineering and financial resources, I can still reverse engineer what they’ve done and improve upon it at a potentially faster rate than Tesla can innovate.

If Tesla is informing their competitors they will not enforce their IPR, how do they expect to effectively deter competition from penetrating the market with potentially better technology than theirs in the future?

Savvy companies tend to study the IPR of their competitors and spend time and resources designing around or improving upon the current state of the art.  Tesla’s move does address one of Mr. Musk’s pain points in that it will lower the commercial barriers to competition in the EV market, rather than using proprietary rights to “stifle progress” in the industry.

However, giving away key aspects of your technology without a license fee inherently diminishes your investment and makes it easier for your competition to leapfrog you.  So, when the EV market does take off, Tesla’s competitors will be in a better position to gain commercial advantage and more market share than Tesla.

Tesla will still be a takeover target, given their entrenched position commercially and technologically, but with a significantly lowered valuation resulting from this move.

 

Spares Sourcing

Tesla has been involved in several lawsuits and state legislative efforts to enable the company to have direct sales of their cars to consumers.  The car dealers in many states are of course unhappy because it undercuts their ability to generate sales revenue since they are bypassed by Tesla.

Providing a royalty-free license in their patents will exclude Tesla from preventing their sub-component suppliers to directly sell spare parts to consumers or independent repair shops.  This will bypass Tesla and curtail its ability to generate aftermarket and services revenue.

Since the EV market is immature and Tesla’s fleet of cars is relatively new, one can presume that this consequence was simply a strategic oversight on behalf of the company.

The move may garner some good PR value and potentially achieve greater market penetration of EVs and Tesla EVs, but it lacks foresight.  Tesla is a company beyond Elon Musk, and the passion and dedication of hundreds of employees and investors who made the commitment to work with the company in the early days deserves recognition and reward resulting from the commercial success of the company.

This noble attempt at changing the paradigm of technology development in a key industry of the future is ultimately short-sighted for Tesla, unless it has commitment from its competitors that they will follow suit and open their portfolio of IPR to the industry as well.

The open source software industry has been successful over the past 25 years because there was a community of companies who all agreed to play by the same rules.  So far, only Tesla is playing by these open source rules, and it appears unlikely that other major automakers would be willing to follow their lead.

Unfortunately, we don’t all live in the world of Gene Roddenberry’s Star Trek where money has been abolished and people want for nothing because nobody wants more than what they really need.  But until we achieve that utopian paradise, if I were a Tesla employee, I’d be furious right now that my company will be less valuable in the future than it could have been.

If Mr. Musk would be willing to redistribute his wealth to the employees and investors who made the commitment to create value for the company in the first place, then this move to open source their patents during the formative stages of the EV industry might make more sense.

 

*Philip Totaro is the Founder & CEO of Totaro & Associates, a consulting firm focused on innovation strategy, competitive intelligence, product development and patent search.  To find out more, or get in touch please visit www.totaro-associates.com.

Elon Musk Launches the Tesla-Patent Commons

June 14th, 2014

About six years ago, a handful of tech companies launched the Eco-Patent Commons.  This initiative to share environmentally friendly patented technologies is administered by the World Business Council for Sustainable Development (WBCSD), a Geneva-based organization that promotes sustainability in business.

Last week, of course, Elon Musk, CEO of Tesla Motors, made quite a splash by announcing on the company blog that the EV maker would “donate” its entire patent portfolio.  To be precise, what Musk said was “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

Although Musk’s move is very much in the tradition of the Eco-Patent Commons, it is more significant and likely to have a greater impact.  The significance of the brand new Tesla-Patent Commons is best understood by comparing and contrasting it with the Eco-Patent Commons before it.  This comparative analysis reveals both major relative strengths and some flaws.

The greatest distinction between the two is in the nature, quality, and breadth of the available patents.  The Eco-Patent Commons is comprised of tiny random slices of technologies developed by an eclectic mix of donating companies.  An entity that wishes to commercially exploit technology in the Eco-Patent Commons would have to locate a donated patent directed to an important innovation, and any business opportunity would have to logically flow from that patented innovation.

Commercial success in this way seems unlikely for two reasons.  First, aside from patent “troll” activity and similar secondary market business models, businesses do not flow from patents.  It works much better the other way round:  innovate, start a business around the innovation, and then, if possible, patent the innovation.

Second, the patents in the Eco-Patent Commons are those which the donating companies had little interest in exploiting themselves (or licensing to others) so the odds are slim that they are directed to important innovations that will be worthwhile for others.

Tesla’s patent portfolio, on the other hand, is large in scope, holistic in its breadth (i.e., supporting established commercial products) and presumably includes the crown jewels of the company.  Everyone knows the technology areas, product areas, and business ventures Tesla’s patents can support.  One can easily envision a number of well-defined businesses successfully selling electric vehicles, advanced batteries, and charging systems based on the freedom to operate provided by the Tesla-Patent Commons.

Keep in mind, though, that no commons can provide 100% freedom to operate.  True, if you manufacture and sell EVs, batteries, or charging systems employing innovations that are entirely coextensive with the claims of Tesla’s patents you won’t be sued by Musk.  However, these are complex technologies.  What if your EV includes Tesla-patented innovations along side other technical features patented by another less commons-y patentee with enforcement proclivities?

Perhaps the possibilities are not so limited.  Maybe instead of the need to match the features of their products to the donated patent claims, budding Tesla-tech businesses could copy the EV maker’s actual products, e.g., manufacture the Tesla Model S under another name.  After all,  the company has been around for a while and, to my knowledge, hasn’t been sued for patent infringement.  So it seems Tesla has the freedom to operate for its existing product lines.

Then the question becomes whether there are any mechanisms besides its patents that confer upon Tesla this freedom to operate.  For example, does Tesla license any of the technologies in its vehicles from other patentees?  If so, a budding Tesla-tech business might need to ask Musk if he would consider assigning the rights under any relevant license agreements to which Tesla is a party.

So the Tesla-Patent Commons is very significant, and unlike any prior (small “e”) eco-patent commons, but the commercial and legal realities of dealing with patents and positioning technological businesses to be free to operate are always extremely complex.

Ultimately, the impact of Musk’s decision may turn on to what extent other such players will be motivated to invest in manufacturing vehicles, batteries, etc. using Tesla’s patented and patent-pending technology with the obvious upside being the proven innovation that technology brings and the down side being no exclusivity, instead of investing in their own R&D and patent protection where the upside may be exclusivity and the down side may be inferior or unproven technologies.

Only time will tell, and I’m sure this author and many other commentators will be watching this closely.