Ford Sued Over Use of Company’s Hybrid Vehicle Inventions

Ford Motor Co. (F), the second-biggest U.S. automaker, is accused of developing its hybrid vehicles using technology from a Baltimore company that won a patent-infringement case against Toyota Motor Corp. (7203), maker of the Prius.

Paice LLC, in a lawsuit filed yesterday, says that hybrid and plug-in versions of Ford’s C-Max, Fusion and Lincoln MKZ all infringe its patents covering ways to control electric motors and internal combustion engines so they have increased fuel efficiency and reduced emissions without any loss of performance.

Ford had licensed one of Paice’s patents under a deal struck in 2010. The two companies agreed not to litigate over other patents until Jan. 1, 2014, to give them time to reach a broader settlement. The negotiations, according to Paice’s complaint, were “short and one-sided.”

“The truth is that Ford built its new hybrid system by relying heavily on the hybrid vehicle inventions it learned from Paice,” the company said in the suit, filed in federal court in Baltimore. The Abell Foundation, a non-profit group that invests in Baltimore-area companies including Paice, also joined the suit against Ford.

Alex Severinsky, a Soviet emigrant and engineer, created Paice to commercialize his work on a high-voltage method to power gas-electric hybrid motors. From 1999 to 2004, Severinsky and other Paice officials held more than 100 meetings and interactions with Ford to help the automaker develop a hybrid engine that would increase gasoline mileage without losing performance, according to the 50-page complaint.

Prius Maker

At the same time, Dearborn, Michigan-based Ford was working with Toyota to develop a hybrid vehicle using Toyota’s Prius as a template. Paice says that Ford was sharing its technology with the Japanese automaker.

Paice won a patent-infringement trial against Toyota in 2005 and the two companies reached a global settlement in 2010 on the eve of another trial that might have resulted in an import ban on Toyota vehicles had Paice won.

Ford sought to pre-empt the latest lawsuit. It filed a complaint in December in Delaware Chancery Court seeking a court ruling that Paice couldn’t file a complaint under the terms of their 2010 agreement.

The Paice lawsuit doesn’t seek a specific dollar amount from Ford. According to the complaint, Paice offered to license the technology to Ford for $150 per vehicle in 1999.

Ford’s U.S. hybrid and electrified vehicle sales in 2013 climbed to 85,919, more than double the 33,476 a year earlier. By May last year, the automaker had beaten its previous annual best for hybrid and electrified U.S. vehicle sales, achieved in 2010.

Ford and Toyota last year ended their collaboration on gasoline-electric systems for pickups and sport-utility vehicles.

Paice also has pending infringement complaints against Hyundai Motor Co. (005380) and Kia Motors Corp. (000270) over the same patents.

The new case is Paice LLC v. The Ford Motor Co., 14-492, U.S. District Court for the District of Maryland (Baltimore).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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