Toyota Builds Thicket of Patents Around Hybrid To Block Competitors

By JOHN MURPHY

The Obama administration's tough new fuel-efficiency standards could pose problems for some car makers, but Toyota Motor Corp. is hoping to benefit.
The Japanese company is betting the rules will give an advantage to its expanding lineup of hybrid vehicles, and it also aims to boost revenue by licensing to other car makers the patents that protect its fuel-saving technologies.
Since it started developing the gas-electric Prius more than a decade ago, Toyota has kept its attorneys just as busy as its engineers, meticulously filing for patents on more than 2,000 systems and components for its best-selling hybrid. Its third-generation Prius, which hit showrooms in May, accounts for about half of those patents alone.
Toyota's goal: to make it difficult for other auto makers to develop their own hybrids without seeking licensing from Toyota, as Ford Motor Co. already did to make its Escape hybrid and Nissan Motor Co. has for its Altima hybrid.
"Our system is the best technology for hybrids to get the best carbon dioxide emissions and best fuel economy. [Rivals] will not be able to compete," said Gouichiro Kuriyama, a manager in Toyota's product planning division.
Whether Toyota's strategy will pay off is unclear. While the Prius has won a strong following among environmental-minded consumers, it will face stiffer competition to win mass-market appeal.
Almost all car companies are working on more fuel-efficient gasoline engines that could boost miles-per-gallon ratings enough to damp interest in hybrids.
Makers also have diesel vehicles coming to the U.S. that deliver nearly the same fuel economy as the Prius.

Car makers for decades have sought patents on their innovations, and Toyota's strategy to seek revenue from its technology is hardly new. But its early work on hybrids may give it a leg up in the current rush to create more fuel-efficient vehicles.
The Obama administration plans to require fuel economy of cars be 35.5 miles per gallon by 2016. To hit these new targets, many car makers need to quickly develop highly fuel-efficient vehicles and technologies.
"Toyota's patent-filing strategy has made it far too risky to copy the Prius without Toyota's blessing," said Justin Blows, a patent attorney with Griffith Hack Patent and Trade Mark Attorneys in Australia.
In a recent study of intellectual property for hybrid vehicles, Mr. Blows found that Toyota has about 2,100 patents, nearly double that of its closest rival, Honda Motor Co. It is a fact that Toyota hasn't been shy about promoting, as it did in its launch of the new Prius at the Detroit auto show in January.
Toyota, which isn't known as a particularly litigious company, declined to say how many attorneys it uses to file and defend its hybrid patents. No lawsuits involving the patents have become public. Toyota also won't say how much revenue it has received from licensing its patents, if any. Patent cross-licensing may involve no exchange of money.
Once ridiculed as impractical and a gimmick, Toyota's hybrid system, which the car maker plans to make available in all of its vehicles by 2020, has slowly won industry acceptance. "Clearly in the arena of the hybrid Toyota is far ahead of the others. Their years of endeavor are now being rewarded," said Tatsuo Yoshida, an analyst at UBS Investment Research in Tokyo.
To be sure, there are other ways to design hybrids without infringing on Toyota's patents, as Honda proved.

Toyota's "full hybrid" system weds battery-powered electric motors with a gasoline engine, allowing it to shift seamlessly between either electric or gas power as driving conditions and battery charging require.
Honda's simpler, lower-cost system, called a "mild hybrid," relies mainly on a highly efficient, lightweight gasoline engine to move the vehicle, but it is assisted by battery-powered motors.
The new Prius gets 51 mpg in the city and 48 mpg on the highway, according to the Environmental Protection Agency. The Insight is rated at 40 mpg city, 43 mpg highway.
A Honda spokeswoman said that while Honda's current hybrid technology doesn't conflict with Toyota's patents, Honda may encounter the issue as it develops new technologies, such as hybrid systems for larger vehicles.
"Patent conflicts happen in every development as auto manufacturers compete with each other for a new technology," she said.
Instead of trying to catch up to Toyota in hybrid vehicles, Nissan has chosen to pour its resources into developing a mass-produced electric car starting in 2010. "
That's what competition is about. Everybody makes a bet on a different technology and then let the consumer choose," said Nissan Chief Executive Carlos Ghosn.
Ford, meantime, said it developed its own hybrid technology but agreed to cross-license patents with Toyota to prevent any legal issues. No money changed hands, Ford said.
"Our hybrids are 100% Ford-developed and engineered," said spokeswoman Jennifer Moore by e-mail. Although conceptually the Ford Fusion Hybrid and Toyota Camry Hybrid are described in similar ways, Ford officials said the execution and architecture are different.—Matthew Dolan contributed to this article.
Write to John Murphy at john.murphy@wsj.com