To protect its inventions, Paice filed a patent infringement lawsuit against Ford in February 2014 in the U.S. District Court in Baltimore, Maryland. That lawsuit has been stayed pending the resolution of 22 inter partes review proceedings filed by Ford before the U.S. Patent Office.Paice later filed a complaint with the U.S. International Trade Commission (ITC) seeking to bar Ford from importing infringing hybrid cars (including the Fusion and Lincoln MKZ models) into the United States. The ITC has launched a formal investigation into patent infringement claims against Ford and a hearing was held in November 2017.
U.S. International Trade Commission: Public Interest Letters
Summary of Ford Complaint
The following summarizes allegations made in Paice’s complaint against Ford:
When Paice showcased its hybrid vehicle technology to automakers in 1999, executives at Ford Motor Company were immediately interested. Within weeks, Paice met with Chairman Bill Ford, Jr., CEO Jacques Nasser and a host of other senior executives to discuss its technology.
Following those meetings, Ford began to evaluate Paice’s patented technology, leading to a five-year relationship between Paice and Ford that included 100+ meetings and interactions with more than a dozen Ford executives. At Ford’s request, Paice performed detailed modeling and component design work that illustrated how Paice’s technology could improve fuel efficiency for Ford’s best-selling SUVs.
Ford was under intense pressure at the time to improve the fuel economy of its vehicles, which ranked last among the top six automakers. Chairman Ford had specifically focused on its fleet of SUVs, pledging to improve the fuel economy of those vehicles by 25% by 2005. But it needed a “game changing” technology that could reduce fuel consumption without sacrificing vehicle performance.
Paice had the solution.
The head of Ford’s Advanced Powertrain Engineering openly acknowledged the value Ford saw in Paice’s technology. He indicated in April 2000 that Paice’s proposals “could result in significant increased fuel economy and are of great interest to Ford Motor Company. I can assure you that your present high-level concept, cost, performance and PAICE targets represent a major advance towards future vehicle commercialization.”
Paice was asked to develop a commercial concept on Ford’s behalf. Several months later, the Ford executive expressed his continued enthusiasm about the Paice technology: “The purpose of this memo is to advise you of our interest in the PAICE Corporation’s approach to hybrid drive and the system control concept associated with PAICE Drive. Accordingly, we will support the design phase outlined by your company with the necessary technical information for this phase. Upon completion of the design phase and confirmation that the deliverables have been met, we are prepared to join PAICE in the prototype phase which will provide drivable Excursion vehicles with PAICE Drive for evaluation and test by Ford Motor Company.”
For several years, Paice performed extensive engineering work that taught Ford everything it needed to know to implement its patented hybrid technology. But when it came time to formalize the business relationship and sign a licensing agreement, Ford balked. It wasn’t interested in actually paying Paice for its technology.
Several years later (after Paice filed an earlier lawsuit), Ford agreed to license Paice’s hybrid vehicle technology but did so on a limited scale. The automaker signed a licensing agreement in 2010 that covered only one aspect of Paice’s technology, and the two companies negotiated an “Arbitration Agreement” that deferred any litigation against Ford on other aspects until 2014 and created an arbitration mechanism to avoid lawsuits.
Paice met with Ford in late 2013 to discuss licensing Paice’s technology. Once again, Ford refused to license the technology it obtained from Paice and is using in its vehicles. Rather than engage in the arbitration mechanism Paice and Ford agreed to just a few years earlier, Ford reversed course and sent Paice to the courts to resolve the matter.
The facts set forth in the complaint present a classic case of a powerful corporation with deep pockets using the system to its advantage, squeezing a small company with limited resources in the hope that the small company will just fade away. But just like the innovative hybrid technology that Paice shared with Ford, Paice has staying power.
Ford has successfully delayed enforcement of Paice’s patents in the pending infringement lawsuit by asking the newly established Patent Trial and Appeal Board (PTAB) to review Paice’s patent claims based on what Ford claims is prior art. Rather than present focused and cogent arguments, Ford has resorted to a scattershot approach, filing 25 separate petitions between April 2014 and February 2015. This process, known as Inter Partes Review (or “IPR”) allows the Patent Office to review again the validity of Paice’s patents.
Not only is the overall number of petitions unusually large, Ford has filed multiple challenges to the same patent – and even the same claims within a given patent.
DELAYING THE COURT CASE: In October 2014, Ford successfully obtained a stay of Paice’s patent infringement lawsuit until the PTAB has resolved the issues raised by Ford. As a result, the case could be delayed for years. In fact, Ford has attempted to maximize this delay by waiting until the last permissible moment to file the majority of its IPR petitions.
PLACING A BURDEN ON PAICE: Each IPR petition filed by Ford requires Paice to file extensive briefing and present expert witnesses to respond to Ford’s attacks. This places a significant strain on the financial resources of a small technology company like Paice.
It is clear that Ford is taking advantage of this process to delay the case and place an immense burden on Paice. The burden imposed by Ford seems to be part of Ford’s familiar “out-wait and out-spend” strategy. When Paice and Ford entered into an agreement in 2010, it permitted Ford to submit this entire dispute to binding arbitration which would have efficiently disposed of all issues. Rather than take the low cost, low burden solution offered by the 2010 agreement, Ford has forced Paice to engage in costly litigation that will likely last for several years.
PTAB ISSUES FINAL DECISIONS ON FORD PETITIONS: The U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) has issued final decisions on 22 of the 25 petitions filed by Ford challenging the validity of Paice’s patents. Click here to read the rulings on the cases: IPR2014-00570, IPR2014-00571, IPR2014-00579, IPR2014-00875, IPR2014-00884,IPR2014-00904, IPR2014-01415, IPR2014-01416, IPR2015-00606, IPR2015-00722, IPR2015-00758, IPR2015-00784, IPR2015-00785, IPR2015-00787, IPR2015-00790, IPR2015-00791, IPR2015-00792, IPR2015-00794, IPR2015-00795, IPR2015-00799, IPR2015-00800, and IPR2015-00801.
The PTAB determined not to institute proceedings in 3 petitions. In IPR2014-884, the PTAB ruled that three of the six claims at issue were not patentable because of obviousness. Ford failed to meet its burden for 1 claim and was estopped for the other 2 claims. Ford was also estopped for several claims in IPR2015-00722, IPR2015-00758, IPR2015-00784, IPR2015-00785, IPR2015-00787, IPR2015-00790, IPR2015-00791, IPR2015-00792, IPR2015-00794, IPR2015-00795, IPR2015-00800, and IPR2015-00801. In all other decisions, the PTAB ruled that the claims at issue were not patentable because of obviousness. Paice believes that these matters were wrongly decided and is appealing the rulings.
COURT OF APPEALS DECISIONS: On March 7, 2017, the Court of Appeals for the Federal Circuit issued opinions affirming the unpatentability ruling of the PTAB for IPR2014-00571 and IPR2014-00579, but for IPR2014-00875 the Court vacated the PTAB’s invalidity determination for one claim and remanded the case for further consideration by the PTAB. The PTAB has subsequently found that remanded claim unpatentable. Paice is appealing the ruling. On April 21, 2017 the Court of Appeals for the Federal Circuit issued opinions affirming the invalidity findings of IPR2014-00904, IPR2014-01416, IPR2014-00570, and IPR2014-01415. As to the remaining 14 IPRs, the Federal Circuit conducted oral arguments on December 4, 2017 and is expected to issue decisions in the next few months.
PAICE FILES IN THE ITC: In February 2017, Paice filed a complaint in the U.S. International Trade Commission (ITC) requesting an investigation into the infringement of Paice’s patents by hybrid vehicles Ford imports into the United States. The ITC voted in March 2017 to launch a formal investigation into Paice’s claims. Paice is asking the ITC to permanently ban Ford from importing any infringing vehicles, including the Ford Fusion and Lincoln MKZ hybrids.
ITC HEARING: The U.S. International Trade Commission held a hearing before the Honorable David P. Shaw in November 2017 to review Paice’s patent infringement claims against Ford Motor Co. Judge Shaw is expected to issue his initial determination on the matter on or before March 9, 2018. Read more.