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Toyota's Patent Sharing May Fuel Innovation

April 8, 2015

Toyota recently announced that for the first time, it is offering to share its hydrogen fuel cell patents at no cost. Interested parties must individually negotiate a contract with Toyota in order to take advantage of the company’s hydrogen fuel patents. The offer covers only patents solely owned by Toyota Motor Corporation. Patents for hydrogen production and supply will remain open for an unlimited duration, while the license for fuel cell systems patents is through 2020.

The patents will be made available to certain companies including: automakers who will seek and produce fuel cell vehicles; fuel cell parts suppliers and energy companies who establish and operate fueling stations; and companies that make fuel cell buses and industrial equipment (such as forklifts). For companies outside of the transportation sector, requests from part suppliers and companies looking to adapt fuel cell technology will be evaluated on a case-by-case basis. Additionally, Toyota will provide indefinitely royalty-free use of approximately 70 hydrogen-station related patents.

Toyota’s offer provides access to approximately 5,680 fuel cell-related patents throughout the world, including innovations in fuel cell stacks, hydrogen tanks, operating software and hydrogen production. This offer comes just before Toyota is expected to deliver the Mirai hydrogen car in the United States in October. The four-door sedan will be powered entirely by hydrogen, generate no emissions, and will travel approximately 300 miles before refueling.

Toyota is also addressing the largest obstacle currently facing hydrogen fuel cell vehicles - a lacking infrastructure. There are very few hydrogen fueling stations in the United States, with the exception perhaps being California, which has the highest concentration of any state. This Toyota initiative builds on previous commitments relating to hydrogen fueling infrastructure. In May 2014, Toyota announced a $7.3 million loan to FirstElement Fuels to support the operations and maintenance of 19 hydrogen fueling stations across California. In November 2014, Toyota announced a collaboration with Air Liquide to develop and supply a phased network of 12 state-of-the-art hydrogen stations in New York, New Jersey, Massachusetts, Connecticut and Rhode Island.

Toyota’s offer is driven by an economic concept commonly referred to as the “network effect,” which is the effect that one user has on the value of any given product to other people. The more people that use hydrogen technology, the more of a network effect there is since with more users, the technology becomes more valuable. Toyota’s Bob Carter, a Senior VP with Toyota’s U.S. office, explains their rationale behind the move: “Today’s announcement on patents has less to do with the hydrogen fuel cell car than it does about the cultural growth of a hydrogen society.”  Carter also predicts that by 2020, the company’s fueling infrastructure will reach sustainable growth.

As stated above, companies interested in Toyota’s fuel cell-related patents will negotiate individual contracts with Toyota. Licensing terms and additional information on the application process is available upon request. Toyota asks, but does not require, that companies licensing its technologies agree to share their own library of patents on similar terms. Companies considering entering into such an arrangement should be attuned to antitrust and international law issues. Cross licensing and patent pooling arrangements among competitors can raise antitrust concerns. Combining the patent rights of different companies may be necessary to commercialize a product but may have an unintended effect of price fixing, foreclosing innovation, and coordinating output restrictions among competitors. A licensee's grant to the licensor of rights to use the licensee's improvements to the licensed technology may be anti-competitive when a broad exclusive grant back to the licensor could deter innovation because the licensee does not receive the benefits of its improvements.

International law issues will arise becauseeach country has its own laws governing patents and technology licensing. Interested parties should seek advice from local counsel if the patent license agreement includes non-U.S. jurisdictions to ensure that the license complies with local laws and regulations.