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Toyota Settles Hybrid Patent Case

As we reported a few weeks ago, Toyota has been embroiled in a patent dispute with Paice LLC concerning its hybrid vehicle technology that threatened to halt hybrid imports in the United States.  As it turns out, after six years of litigation, Toyota has finally reached a settlement in the case. Terms of the settlement were not disclosed.

Paice founder Alex Severinsky, who had claimed that Toyota infringed on his 1994 patent, was pleased with the result.

“Finally people understand the merits of what I invented and give it the proper value,” Severinsky said.

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“Toyota is the leading technology company and finally appreciates the value of the invention.”

Toyota had insisted that, while its technology was similar to Paice patent, its hyrib vehicles were the result of its own independent research. Evidently, both parties were in agreement.

“The parties agree that, although certain Toyota vehicles have been found to be equivalent to a Paice patent, Toyota invented, designed and developed the Prius and Toyota’s hybrid technology independent of any inventions of Dr. Severinsky and Paice as part of Toyota’s long history of innovation,” both companies said in separate statements.

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With this issue out of the way, Toyota can now concentrate on its latest round of subpeonas. This time, a federal grand jury in New York is investigating whether or not Toyota notified the NHTSA in a timely fashion about faulty steering rods.

For Toyota, a bad year just keeps getting worse.

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No Rest for Toyota

As Toyota continues to plagued by safety recalls (this week, the automaker recalled 17,000 Lexus hybrids for faulty gas tanks), the company is facing legal trouble of another matter, this time over a patent controversy that could result in a ban of Toyota hybrids altogether.

This patent fight originally began in 2004, when Paice LLC, a Florida-based hybrid technology company, sued Toyota for using its patented technology in second-generation Prius vehicles. The court ruled that Toyota had infringed on Paice’s patent and Toyota filed multiple appeals, losing each time. According to Forbes, Toyota has paid $5 million in damages and a small fraction of the court-ordered license fee of $98 a car while it challenges future royalties. In the latest case, Paice is claiming that Toyota’s third-generation hybrids are also infringing on its patents and that Toyota is not paying enough in royalties. Paice is ultimately hoping to get the International Trade Commission to ban Toyota hybrids altogether. Toyota has fought to get the case dismissed but to no avail.

According to one expert, who commented on the case last year, a ban is unlikely. But if it does happen, Toyota would be looking at production delays, the inability to sell hybrid vehicles in the United States and millions of dollars in lost revenue while it inevitably tries to work out a licensing agreement.

When taken with the ongoing recall fiasco, this patent infringement mess is further evidence of the difference a year can make in business. This time last year, Toyota was seen as the industry gold standard.

But their ongoing troubles paint a picture of a car company that seems to have gotten caught up in believing its own press and lost sight of key details, like safety and technology, that helped make it great. A company that once was the model for quality is quickly becoming a textbook example of the dangers of complacency.

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