In the wake of Tesla’s move to make its entire patent portfolio available via a blog post / covenant not to sue, Toyota made big news recently with a similar though more limited green patent proclamation of its own.
The automaker announced that its patents related to hydrogen fuel cell technology would be available for use without any royalties.
Toyota’s press release provides a general overview of the number and nature of the patents on offer:
Toyota will invite royalty-free use of approximately 5,680 fuel cell related patents held globally, including critical technologies developed for the new Toyota Mirai. The list includes approximately 1,970 patents related to fuel cell stacks, 290 associated with high-pressure hydrogen tanks, 3,350 related to fuel cell system software control and 70 patents related to hydrogen production and supply.
While there appear to be no restrictions on hydrogen production and supply technologies (“patents for hydrogen production and supply will remain open for an unlimited duration”), the fuel cell patents are subject to an important caveat:
Patents related to fuel cell vehicles will be available for royalty-free licenses until the end of 2020.
This is a significant limitation for putative car makers that might elect to manufacture fuel cell vehicles based on Toyota’s patented technologies. They would get six years of free use, but come January 1, 2021 it seems these automakers would become licensees obligated to pay royalties to Toyota.
And it’s difficult, if not impossible, to determine in advance the amount of royalties that would be owed at that time. The royalty figure presumably would be negotiated between Toyota and each licensee and would vary depending on a number of factors including how many and which patents cover the licensee’s vehicles and the territories in which the licensor is making and selling the vehicles.
Furthermore, the licensee would be in a terrible negotiating position because it would have already invested substantial resources in developing, manufacturing, and marketing the licensed vehicles and might now be facing a patent infringement lawsuit if it doesn’t reach a deal with Toyota. With this leverage, Toyota might be able to impose a higher royalty rate than would otherwise be justified.
This uncertainty around the eventual royalty rate could make even a putative royalty-free (for now) licensee think twice about using the patented technologies on offer. It might actually make more long-term economic and business sense for a car company to independently develop its own fuel cell vehicle technology than to pay royalties to Toyota for the life of the offered patents.
Of course, this concern doesn’t apply to potential licensees of Toyota’s patented hydrogen production and supply technologies, which are royalty-free in perpetuity, and thus truly constitute a Toyota Hydrogen-Patent Commons.
But with respect to the fuel cell vehicle patents, you might get a free trial now, but you’ll eventually have to pay the piper.