Patent War Heats Up

After what one legal expert in fuel-cell patents calls an extended period of “patent passivity” in the auto industry, the number of patent filings is skyrocketing — fueled by auto makers and suppliers scrambling to protect advances in hydrogen fuel-cell technology.

Robert Fieseler, a registered patent attorney and shareholder at Chicago-based intellectual property and technology law firm McAndrews, Held & Malloy, has been studying trends in applications filed under the Patent Cooperation Treaty related to fuel-cell developments.

He says the number of PCT filings began growing almost exponentially about seven years ago, with the leading filers between 2000 and 2002 being suppliers such as Siemens AG and Ballard Power Systems Inc.

By 2003, however, the majority of PCT applications shifted to OEMs, with Toyota Motor Corp. leading the way after barely being on the map in the 2000-2002 period.

PCT applications, Fieseler tells Ward's, can be barometers of serious, active research in a certain area of technical innovation.

“PCT applications,” he says, “do not themselves issue as patents; they are meant to preserve the option to seek patents in a large number of countries by filing one application and then deferring, up to 30 months, the decision on whether and in which countries to pursue patent protection.

“When the PCT application expires after 30 months,” he continues, “the application can be carried into one or more countries designated in the PCT application, where they are then examined by the national patent offices of each of the countries selected.”

Each of the national patent offices applies its own rules to determine whether the national application should be granted and an enforceable patent issued.

“I used PCT applications as the basis for illustrating patenting trends,” Fieseler says, “because they are, in my experience, the most reliable indicators of which technologies companies are investing their research and development dollars.”

Fieseler, who represented Ballard as its principal patent counsel for 15 years, says in terms of fuel-cell development, the auto industry is to some degree replicating the pharmaceutical industry's business model, with larger companies acquiring the rights to make a product based on discoveries and developments of smaller organizations.

He says there are five areas of hydrogen fuel-cell development that are crucial to eventual mass-production deployment in fuel-cell vehicles (FCVs):

“The people who find these solutions,” he says, “are going to be the ones who spent a lot of money and a lot of brain power.”

Then, those innovators will need to amortize their R&D costs over the development curve that eventually sees FCVs in mass production, Fieseler adds.

“The ones who solve (the above problems) are going to need patents to recoup their investment,” he says, adding somewhat ominously: “It will not be share and share alike.”

The problem, Fieseler says, is that FCVs for public consumption are not likely to hit the road until 2015 or even 2020 — a horizon too far to keep conventional patents from expiring.

That means there is “a big change in the way patents are going to be used to deploy these clean-energy technologies.”

He says for decades in the auto industry, patents had become “showpieces,” because most auto makers and suppliers believed — with a few exceptions — it was not worth the effort and expense to vigorously assert their patents by bringing lawsuits against infringers that are using their patented technology.

And all patents expire in 20 years.

Now, however, because of the distinctly new nature of fuel-cell technology, patents must be used to “encircle the technology” and incorporate a predictive aspect that helps protect the innovator until revenue, in the form of sales, can be generated.

Fieseler says the trend in patents now is shifting away from the patent passivity of the earlier decades and toward a “patent-active” approach as FCV development accelerates and auto makers and suppliers try to “keep their powder dry” with clean-energy patents.

“The pendulum is going to swing, he says, “and auto makers will view their patents as important tools for squeezing value out of their innovations.”

Fieseler says the last time auto makers sued one another over patents was during the 1920s.

Over the decades, the model has evolved to filing patents for defensive reasons, which in turn led to the licensing arrangements that today are the common method to non-combatively “share” innovations.

But with the costs — and rewards — involved in the potential auto-industry shift to a new form of propulsion, FCV-related patent activity is coming at a pace not seen since the early decades of the auto industry.

“I think we've got some patent wars heating up in the clean-energy field,” Fieseler says.