Ending a long-running legal battle, Ford Motor Co. agreed to pay a Baltimore-based technology firm and the Abell Foundation to use a hybrid engine technology.
The value of the licensing deal, announced Thursday, was not disclosed but likely runs into the millions of dollars over time.
Paice LLC, a pioneer in hybrid engine systems that grew out of a University of Maryland incubator, now licenses hybrid technology used in four of five gasoline-electric hybrid vehicles on U.S. roads. Some of the world’s biggest hybrid vehicle makers pay to use Paice technology, including Toyota, Hyundai/Kia and now Ford, which ranks second in U.S. hybrid car sales behind Toyota.
The Abell Foundation has invested millions of dollars over nearly two decades to support Paice's efforts to develop and protect its hybrid technology and it co-owns the firm’s 15 U.S. patents. Paice owns about 15 foreign patents as well.
Better known for initiatives in education, health care and human services to help the underprivileged, the Baltimore foundation invested in the company as part of its work to promote social goals such as increasing energy efficiency while sustaining its $350 million endowment. Abell offers community grants and invests in Baltimore-based startups that promote social objectives, create jobs and have the potential to be profitable and generate revenue for the foundation. Its portfolio of about 30 companies includes ThermoChem Recovery International, a Baltimore technology firm in biorefinery and renewable power generation.
Abell does not disclose its revenue from the Paice patents, said Frances Keenan, executive chairman of Paice and a senior vice president at Abell.
“The licenses have been very meaningful to the foundation,” Keenan said. “They in turn allow the foundation to give away more money.”
Other terms of the Ford agreement, including its length and whether it’s retroactive, also were not disclosed. Ford declined to comment on the license.
“This further validates our conviction that this technology, protected by many patents around the world, is technically important and economically valuable,” Keenan said.
Paice says it brought its technology to the biggest automakers and worked extensively with several of them on developing hybrids but was forced into litigation when the companies used but refused to license Paice inventions.
Keenan said Paice and Abell will continue pursuing licensing agreements with other automakers. Other manufacturers making hybrid vehicles include Honda, Chrysler, BMW, Nissan, Mercedes-Benz and General Motors.
Toyota had settled a Paice lawsuit over technology used in the Prius by agreeing to pay to license the related patents in 2010. Paice and Abell subsequently reached settlements with Hyundai Motor Co. and affiliate Kia in 2015 and Volkwagen AG, which also owns Audi and Porsche, in 2017.
The settlement with Hyundai came after Paice and Abell won a $28.9 million jury award in a patent infringement case that accused the Korean automaker of using Paice designs in the Hyundai Sonata Hybrid and the Kia Optima Hybrid.
The agreement with Ford resolves 14 years of litigation that wound its way through federal district and appellate courts, the U.S. International Trade Commission and the U.S. Patent and Trademark Office, starting with a complaint Ford filed against Paice in 2005.
On its website, Paice says it worked with Ford executives and engineers from 1999 to 2004, performing modeling and component design work it believed would result in a business agreement. But Ford licensed only a single patent, Paice said, leading it to file a patent infringement lawsuit against the automaker in U.S. District Court in 2014.
Paice filed a complaint with the International Trade Commission against Ford in February 2017, accusing the automaker of patent infringement in vehicles imported into the United States. Paice asked the commission to ban the company from importing vehicles such as the Ford Fusion and Lincoln MKZ hybrids. A bench trial was held the first week in November, and the settlement and licensing agreement, reached earlier this year, was finalized Monday by a trade commission judge.
Changes in patent laws over the past decade have forced smaller companies to go to court only over patents with a high perceived value, said Mike Pellegrino, president of Pellegrino & Associates LLC, based in Indianapolis and San Jose.
“There are not a lot of trivial lawsuits anymore,” said Pellegrino, an intellectual property valuation expert who has done work both for defendants and plaintiffs in patent cases. “Because the penalties for failure are much greater today than 10 years ago, the reality is when a company has what it perceives to be a very valuable patent, it is only going to sue a company that’s large and puts up a vigorous defense when it believes the value of that invention is well in excess of the millions of dollars they are going to spend to have their day in court.”
Paice’s patents involve improving hybrid vehicle performance, fuel economy and emissions efficiency.
One aspect of the technology involves a control algorithm that indicates when and under what conditions the vehicle should be powered only by the internal combustion engine, only by the electric motor or by both. The technology is used in both traditional hybrids, in which batteries are charged internally rather than via an electrical outlet, and plug-in hybrids, which use battery-powered electricity and gasoline.
Paice was started in 1992 by Alexander Severinsky, a Russian native who built a prototype hybrid-powered car and entered into discussions with major automakers but was turned away. Severinsky, an electrical engineer, started the company at the University of Maryland's small-company incubator program and was awarded a hybrid vehicle patent in 1994. He came up with the idea to make cars more fuel-efficient in 1979, a year after moving to the United States, while waiting in long gas lines.
While sales of hybrids such as the Toyota Prius, with gas engines and batteries, increased year-over-year, the number has dipped from several years ago as competition rises from plug-in hybrids, such as the Chevy Volt, with engines and larger batteries, and from battery-powered electric vehicles, such as the Nissan Leaf and Tesla, said Alan Baum, principal of Michigan-based market research firm Baum & Associates.
Sales last year totaled 364,174 hybrids, 89,992 plug-in hybrids and 104,487 battery-powered electric vehicles, according to Baum. Together the sales represented just over 3 percent of U.S. auto sales.
Plug-ins and electric vehicles have seen a significant uptick, Baum said. But even amid increasing sales of electric vehicles, the market remains strong for hybrids and plug-in hybrids, the type of vehicles that use Paice technology, he said.
“Automakers are using a variety of technologies, including improvements in regular combustion engines, but they are also expanding the use of hybrids and plug-in hybrids,” Baum said.
Paice and Abell aren’t worried that fully electric vehicles will replace demand for hybrids anytime soon.
The use of a purely electric vehicle might make more sense in some circumstances, such as for someone who drives mainly in a city rather than on highways, Keenan said. But hybrids might be more beneficial to the environment, depending on the power source used to keep an electric car charged.
At Paice, “we believe in the near future that hybrids will still be extremely important in the world of electrification,” Keenan said. “Hybrids are critical to the mix of electrification and will continue to be for years to come.”