January 13, 2015 7:00 am JST
Technological largesse

Toyota cagey about when fuel cell royalties will kick in

ATSUSHI NAKAYAMA, Nikkei senior staff writer

TOKYO -- The birth of the auto industry in the West was an era of boisterous disputes over intellectual property. A century later, as the industry looks to make the jump from gasoline to hydrogen, Toyota Motor is doing what would have been unthinkable back then: letting rivals use patented technology for free.

     Toyota says it will waive royalties for about 5,680 patents on fuel cell vehicle technology, an area where it leads rivals, until the end of 2020. The patents cover areas vital to the development and production of hydrogen-powered cars, including fuel cell stacks, hydrogen tanks and system software control.

     Back when horse-drawn carriages still plied the streets and intellectual property law was young, an American who had never actually built an automobile obtained a design patent so broad that it threatened to encompass all road vehicles not reliant on equestrian power.

     His name was George Baldwin Selden, and he managed to extract royalty payments with his 1895 patent from many of the automakers of his day. But he eventually ran into a stubborn holdout. Soon after founding Ford Motor in 1903, Henry Ford got embroiled in a legal battle with Selden that Ford would narrowly win in 1911. The Model T, the world's first mass-produced car, went on sale three years earlier; more than 15 million would be sold in its 19-year run. A consensus was established that the patents on the automobile's basic workings belonged to everyone.

     Automakers' dominance in the 20th century rested in no small part on the legacy of Ford's production and sales methods and the healthy competition they engendered. Toyota's management must surely have been channeling Ford. The strategy behind its patent giveaway seems to put popularizing fuel cell cars ahead of guarding its own technology.

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But the initiative may be more businesslike than it appears. Say a company takes the next five years to analyze Toyota fuel cell patents, develop a vehicle and production technology, and set up a factory. Just when it is ready to begin mass production, Toyota may decide to start charging royalties. The automaker has kept mum about what happens after 2020.

     Indeed, patents are already free to use for research. Only when a technology goes into production and starts generating income do royalty payments begin.

     Toyota may be willing to let others succeed in developing fuel cell cars but seems to want to assert a degree of control over the market as an innovator. At its strictest, this control may entail vetoing market entry.

     Patents must already be made public, and Toyota is simply working within the system, not breaking new ground, some experts say. Even so, it has chosen an intriguing route in hopes of advancing the dawn of the auto industry's hydrogen age. The biggest patent battles of the 21st century may yet be fought over fuel cell cars. How much Toyota contributes to the peace remains to be seen.

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