Filed under: Articles | Tags: clean and sustainable technolgies, hybrid vehicle, intellectual property, patent, technology
The technology in the Toyota Prius is protected by 2,000 patent applications, a third of which are for the new third generation Prius(Have a look at this more recent blog entry for more details on hybrid vehicle patents) . The Prius, a petrol-electric hybrid vehicle, is the most fuel efficient car of any size on, for example, US roads. It has a reported fuel efficiency of 3.9L per 100km. Being an early mover in hybrid technology, Toyota has secured a lot of protected IP to significant commercial advantage
Leading technologies, like the Prius, warrant comprehensive patent protection
Toyota’s strategy has made it far too risky to copy the Prius without Toyota’s blessing. Having this many patents makes it very difficult for another manufacturer to copy the Prius and escape liability. To illustrate this point, we can consider an example product protected by a mere 20 patent applications in a particular country. For a 50% chance of a competitor being found not the infringe all 20 patents, the competitor has to be confident that it has more than a 96% chance of a court finding no infringement in each of the 20 patents – a very tall order! The Prius has many more patent applications than 20, and thus it is exponentially harder to fight Toyota’s patents. And this assumes that the other manufacturer can even cover the legal costs to contest multiple patents in court – patent cases costing more than a million dollars are not infrequent.
Given the poor odds, Toyota’s competitors are far more likely to seek licenses for Toyota’s patents rather than risk going to court, placing Toyota at a very significant commercial advantage. Toyota could, for example, simply deny the technology to the competitors stopping them in their tracks. Alternatively, Toyota could license the technology for money or some other consideration. Another possibility is that Toyota cross licenses the technology, giving the competitor access to the technology in return for access to a valuable and patented technology of the competitor. Cross licensing has been a very successful strategy in the computer hardware industry, for example, which greatly accelerated the diffusion of personal computer technologies through the industry. Patents are known to provide legal clarity and certainty for technology transfer, such as cross licensing deals, promoting technology diffusion.
The Prius is a complicated machine comprising thousands of components, and many technologies are required to put it together. This probably explains the large number of patent applications, at least in part. Complicated technologies, like the Prius, are unlikely to be covered by a single ‘killer patent’. Traditionally, this situation is good for industry because no single player is likely to dominate; technology transfer deals are common. It will be interesting, however, to see what happens in this extreme case where Toyota has accumulated such a massive treasure chest of patents early on in the development of the technology.
Clearly the hybrid vehicle patent landscape is filling fast. Toyota’s competitors (most notably Honda, who produce the Insight) are going to have to move quickly if they want to prevent being locked out of the market. If I was Honda’s patent attorney I would be pushing hard for, amongst other things:
- regular patent watches to identify infringement risks;
- an aggressive patent filing strategy to build up a war chest to counter Toyota’s patent portfolio; and
- patent landscaping to identify strategic technology areas that Toyota has not covered, and target these areas for aggressive patent filings to gain strategic advantage.
