Service of Process
`Transmittal
`02/25/2014
`CT Log Number 524466972
`
`TO: (cid:9)
`
`Chris Dzbanski
`Ford Motor Company
`One American Road, WHQ 421-E6
`Dearborn, MI 48126
`
`RE: (cid:9)
`
`Process Served in Maryland
`
`FOR:
`
`Ford Motor Company (Domestic State: DE)
`
`ENCLOSED ARE COPIES OF LEGAL PROCESS RECEIVED BY THE STATUTORY AGENT OF THE ABOVE COMPANY AS FOLLOWS:
`
`TITLE OF ACTION: (cid:9)
`
`Paice LLC and The Abell Foundation, Inc., Pltfs. vs. Ford Motor Company, Dft.
`
`DOCUMENT(S) SERVED: (cid:9)
`
`Summons, Proof of Service, Coversheet, Complaint, Exhibit(s), Attachment(s)
`
`COURT/AGENCY: (cid:9)
`
`District of Maryland - United States District Court, -
`Case # WDQ14492
`
`NATURE OF ACTION: (cid:9)
`
`Intellectual Property Litigation - Patent infringement - Patent No. 7237634B2
`
`ON WHOM PROCESS WAS SERVED: (cid:9)
`
`The Corporation Trust Incorporated, Baltimore, MD
`
`DATE AND HOUR OF SERVICE: (cid:9)
`
`By Process Server on 02/25/2014 at 09:07
`
`JURISDICTION SERVED : (cid:9)
`
`Maryland
`
`APPEARANCE OR ANSWER DUE: (cid:9)
`
`Within 21 days after service of this summons on you
`
`ATTORNEY(S) / SENDER(S): (cid:9)
`
`James P. Ulwick, Esq
`Kramon ft Graham, P.A.
`One South Street
`Suite 2600
`Baltimore, MD 21202
`410-752-6030
`
`ACTION ITEMS: (cid:9)
`
`SIGNED: (cid:9)
`PER: (cid:9)
`ADDRESS: (cid:9)
`
`TELEPHONE: (cid:9)
`
`SOP Papers with Transmittal, via Fed Ex 2 Day , 798036335182
`Image SOP
`Email Notification, Chris Dzbanski cdzbansk@ford.com
`
`The Corporation Trust Incorporated
`Stephanie Butterfield
`351 West Camden Street
`Baltimore, MD 21201
`410-539-2837
`
`Page 1 of 1 / HK
`
`Information displayed on this transmittal is for CT Corporation's
`record keeping purposes only and is provided to the recipient for
`quick reference. This information does not constitute a legal
`opinion as to the nature of action, the amount of damages, the
`answer date, or any information contained in the documents
`themselves. Recipient is responsible for interpreting said
`documents and for taking appropriate action. Signatures on
`certified mail receipts confirm receipt of package only, not
`contents.
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`Case 1:14-cv-00492-WDQ Document 1 Filed 02/19/14 Page 1 of 50
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF MARYLAND
`BALTIMORE DIVISION
`
`PAICE LLC and THE ABELL FOUNDATION,
`INC.,
`
`V.
`
`FORD MOTOR COMPANY,
`
`Plaintiffs,
`
`Defendant.
`
`C.A. No.
`
`JURY TRIAL DEMANDED
`
`COMPLAINT
`
`Plaintiffs Paice LLC ("Paice") and The Abell Foundation, Inc. ("Abell") (collectively
`
`referred to as the "Plaintiffs") file this Complaint for patent infringement against Defendant Ford
`
`Motor Company ("Ford") requesting damages and other relief based upon their personal
`
`knowledge as to their own facts and circumstances, and based upon information and belief as to
`
`the facts and circumstances of others.
`
`OVERVIEW
`
`1. (cid:9)
`
`This is an action by Paice, a small Maryland-based company that invented
`
`groundbreaking hybrid vehicle technology, and Abell, a Baltimore-based charitable organization
`
`dedicated to fighting urban poverty and finding solutions to intractable problems confronting
`
`Maryland residents. Consistent with its mission, Abell has invested millions of dollars to support
`
`Paice's efforts to develop and promote its innovative hybrid electric technology that improves
`
`fuel efficiency and lowers emissions, while maintaining superior driving performance. Paice and
`
`Abell are co-owners of multiple foundational patents related to hybrid technology -- patents
`
`recognized in an independent 2009 study as the most dominant hybrid vehicle patents in the
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`world. Paice and Abell are forced to bring this action against Ford, one of the largest automobile
`
`companies in the world, as a result of Ford's knowing and ongoing infringement of these patents.
`
`2.
`
`As detailed below, between 1999 and 2004 Paice had over 100 meetings and
`
`interactions with Ford providing Ford's representatives with detailed information about the
`
`hybrid technology that Paice had developed. Through this process, Ford executives requested
`
`and Paice provided detailed modeling and component design work on hybrid versions of Ford's
`
`vehicles. For more than five years, Paice answered inquiries from multiple departments within
`
`Ford, believing in good faith that a business relationship between Paice and Ford would be
`
`mutually beneficial and advance the acceptance of Paice's technology.
`
`3.
`
`After years of Ford learning the details of Paice's hybrid drivetrain technology,
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`Ford elected not to enter into a business relationship with Paice. Instead, Ford took Paice's
`
`patented technology for itself without compensation to Paice and is using Paice's technology in
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`the Fusion Hybrid, Fusion Plug-in Hybrid, C-MAX Hybrid, C-MAX Plug-in Hybrid and Lincoln
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`MKZ Hybrid, in knowing disregard of Paice's patents. Paice believes that Ford has further used
`
`Paice's technology in its joint projects with Toyota Motor Company, another well-known
`
`manufacturer of hybrid vehicles that a jury has already determined infringed Paice's patent rights
`
`and that ultimately took a global license for all of Paice's patents. Ford itself took a license in
`
`2010 for one of Paice's early patents that has now expired. The parties, however, were not able
`
`to resolve Ford's infringement of the patents at issue in this suit, and instead entered into an
`
`arbitration agreement that gave Ford the unilateral right to select arbitration in lieu of litigation.
`
`Ford, however, has decided not to arbitrate, forcing Paice to litigate its patents against a large
`
`and powerful corporation.
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`4.
`
`Abell has provided financial support for Paice's work for over 15 years. Paice
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`pioneered the development of hybrid technology in this country and spent years teaching hybrid
`
`powertrain technology to Ford. Ford infringes Paice's patents and must compensate Paice for its
`
`use of Paice's technology in hybrid vehicles, and Ford should be enjoined from further use of
`
`Paice's technology.
`
`THE PARTIES
`
`5.
`
`Paice LLC is a Delaware limited liability company with a principal place of
`
`business at 111 South Calvert Street, Suite 2310, Baltimore, Maryland. Originally established in
`
`1992 by Paice inventor, Dr. Alex J. Severinsky, Paice has been developing and promoting
`
`innovative hybrid electric vehicle technology that improves fuel efficiency and lowers emissions,
`
`while maintaining superior driving performance. In 1992, Paice was accepted into the
`
`University of Maryland's incubator program, which was created to foster growth of promising
`
`start-up companies in the Maryland community.
`
`6.
`
`The Abell Foundation, Inc. is a Maryland corporation with a place of business at
`
`111 South Calvert Street, Suite 2300, Baltimore, Maryland. Abell is a non-profit charitable
`
`organization dedicated to fighting urban poverty and finding solutions to intractable problems
`
`confronting Maryland residents. Over the past 60 years, Abell has contributed more than $250
`
`million to support worthwhile causes across Maryland. It traditionally focuses on caring for the
`
`underserved and underprivileged through education, healthcare, and human services initiatives.
`
`In addition, Abell is dedicated to promoting national social objectives, such as increasing energy
`
`efficiency and producing alternative energy, and invests in companies with innovative
`
`technologies in these areas. Abell's charitable model is unique in that it occasionally invests in
`
`promising local companies—including those focused on environmental issues—with the goal of
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`creating jobs and reinvesting any earnings back into the communities it serves. In 1998, Abell
`
`was introduced to Paice through former U.S. Senator Joseph Tydings and the University of
`
`Maryland's Technology Advancement Program. The University of Maryland's Technology
`
`Advancement Program was modeled after highly successful programs at Stanford University,
`
`Harvard University, MIT, Caltech and other highly regarded institutions of higher learning.
`
`Senator Tydings served three terms on the Board of Regents of the University of Maryland and
`
`the University System of Maryland, where he was actively involved in the support of the
`
`University's incubator program from its start. Recognizing the future promise and benefits of
`
`Paice's technology, Abell has invested millions of dollars in support of Paice's innovative
`
`technology and is a partial equity owner of Paice.
`
`7.
`
`On information and belief, Ford is a Delaware Corporation with a place of
`
`business at 1 American Road, Dearborn, MI 48126.
`
`JURISDICTION AND VENUE
`
`8.
`
`This is a civil action for patent infringement arising under the Patent Laws of the
`
`United States, Title 35 of the United States Code. Subject matter jurisdiction over the asserted
`
`causes of actions before this Court is proper and founded upon 28 U.S.C. §§ 1331 and 1338.
`
`9.
`
`This Court has personal jurisdiction over Ford because, among other things, Ford
`
`has infringed and caused infringement of Plaintiffs' patents in Maryland and within this judicial
`
`district.
`
`10. Venue is proper in this Court under 28 U.S.C. §§ 1391 and 1400(b) because acts of
`
`infringement have been committed in this judicial district, injuries complained of herein occurred
`
`in this judicial district, and Ford is subject to personal jurisdiction in this judicial district.
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`PATENTS IN SUIT
`
`11. Paice and Abell are co-owners by assignment of all right, title, and interest in and
`
`to United States Patent No. 7,237,634 ("the '634 patent"). The '634 patent is entitled "Hybrid
`
`Vehicles" and lists Alex J. Severinsky and Theodore Louckes as inventors. The U.S. Patent
`
`Office issued the '634 patent on July 3, 2007. A true and correct copy of the '634 patent is
`
`attached hereto as Exhibit A.
`
`12. Paice and Abell are co-owners by assignment of all right, title, and interest in and
`
`to United States Patent No. 7,104,347 ("the '347 patent"). The '347 patent is entitled "Hybrid
`
`Vehicles" and lists Alex J. Severinsky and Theodore Louckes as inventors. The U.S. Patent
`
`Office issued the '347 patent on September 12, 2006. A true and correct copy of the '347 patent
`
`is attached hereto as Exhibit B.
`
`13. Paice and Abell are co-owners by assignment of all right, title, and interest in and
`
`to United States Patent No. 7,559,388 ("the '388 patent"). The '388 patent is entitled "Hybrid
`
`Vehicles" and lists Alex J. Severinsky and Theodore Louckes as inventors. The U.S. Patent
`
`Office issued the '388 patent on July 14, 2009. A true and correct copy of the '388 patent is
`
`attached hereto as Exhibit C.
`
`14. Paice and Abell are co-owners by assignment of all right, title, and interest in and
`
`to United States Patent No. 8,214,097 ("the '097 patent"). The '097 patent is entitled "Hybrid
`
`Vehicles" and lists Alex J. Severinsky and Theodore Louckes as inventors. The U.S. Patent
`
`Office issued the '097 patent on July 3, 2012. A true and correct copy of the '097 patent is
`
`attached hereto as Exhibit D.
`
`15. Paice and Abell are co-owners by assignment of all right, title, and interest in and
`
`to United States Patent No. 7,455,134 ("the '134 patent"). The '134 patent is entitled "Hybrid
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`Vehicles" and lists Alex J. Severinsky and Theodore Louckes as inventors. The U.S. Patent
`
`Office issued the '134 patent on November 25, 2008. A true and correct copy of the '134 patent
`
`is attached hereto as Exhibit E. The '634, '347, '388, '097, and '134 patents are referred to
`
`collectively as the "Paice patents."
`
`PAICE BACKGROUND
`
`16. Paice is the brainchild of inventor Dr. Alex Severinsky, a Soviet immigrant who
`
`received a Ph.D. in electrical engineering in 1975. He came to the United States with his wife
`
`and young son in 1978, shortly before America struggled through the second oil embargo.
`
`Having escaped standing in long lines to buy food in the Soviet Union, Dr. Severinsky marveled
`
`that people in the U.S. were lining up for gasoline. He soon began looking for ways to reduce
`
`America's dependence on foreign oil. He studied a range of methods of vehicle propulsion and
`
`concluded that a powertrain utilizing both internal combustion engine and electric motor power
`
`had the greatest potential for reducing fuel consumption without sacrificing vehicle performance.
`
`In 1992, Dr. Severinsky formed Paice (Power Assisted Internal Combustion Engine), which was
`
`then accepted to the University of Maryland's technology incubator program.
`
`17. Since 1992, Paice has been engaged in developing and promoting innovative
`
`hybrid electric vehicle technology that improves fuel efficiency and lowers emissions while
`
`maintaining superior driving performance. As a result of its inventive endeavors, Paice holds a
`
`number of foundational patents related to hybrid vehicles.
`
`18. Paice has been awarded a total of 28 U.S. and foreign patents. Paice's first patent,
`
`U.S. Patent No. 5,343,970 ("the '970 patent"), was issued in 1994, based on a filing date in 1992,
`
`and claims the use of high voltage (approximately 500V or greater) and low current in hybrid
`
`vehicles. The patents at issue in this suit come from a family of 12 U.S. patents directed to a
`
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`broad suite of hybrid vehicle technologies including methods of control to maximize vehicle
`
`performance, fuel economy, and emissions efficiency (sometimes collectively referred to herein
`
`as "method of control"). These patents stem from continuation and continuation-in-part
`
`applications that were originally filed in 1998.
`
`19. Dr. Severinsky surrounded himself with some of the auto industry's finest
`
`engineers. Robert Templin, a U.S. auto industry icon and chief engineer of Cadillac and
`
`technical director of General Motor's Research Laboratory, was among the first to recognize the
`
`profound impact that Paice's technology could have on the worldwide auto industry. Mr.
`
`Templin's endorsement of Paice's technology gave Abell the confidence to support Paice's
`
`technology. Mr. Templin was a member of the Paice Board of Directors for more than a decade
`
`until his death in 2009.
`
`20. Dr. Severinsky was assisted in developing the inventions of the patents in suit by
`
`the late Mr. Theodore Louckes, an automotive engineer who spent 40 years at General Motors.
`
`At General Motors, Mr. Louckes served as Chief Engineer of Oldsmobile and was instrumental
`
`in the introduction of the first high-volume twin overhead cam 4-valve engine for the U.S.
`
`industry (GM's Quad 4) and the first passenger car turbocharged engine in 1962. Mr. Louckes
`
`led the development of the Paice prototype and served as Paice's Chief Operating Officer from
`
`1998 through 2005.
`
`21.
`
`In October 1999, following a full year of work with Lockheed Martin, and with
`
`financial support from Abell, Paice successfully demonstrated the fundamental teachings of
`
`Paice's patented technology in a prototype at a Roush Industries engineering and testing facility
`
`in Michigan. Roush is considered one of the leading automotive testing companies in the world.
`
`In dynamometer (a test bed used to evaluate vehicles) tests of Paice's prototype modeling of a
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`Cadillac Coupe deVille, gas mileage improved from 24 miles per gallon with a V8 engine to 44
`
`miles per gallon with a Paice hybrid electric design utilizing a 4-cylinder engine. Paice made
`
`these improvements while maintaining all aspects of vehicle performance at consistent levels,
`
`and greatly reducing emissions.
`
`22. Between 1999 and 2004, Paice worked with multiple automobile companies and
`
`their suppliers to introduce the potential advantages associated with a hybrid system using
`
`Paice's patented technology and to persuade them to license its technology. During this period,
`
`Paice presented its hybrid vehicle teachings at conferences where it appeared on the same
`
`conference panels with Toyota and Ford, and also authored technical papers published by the
`
`Society of Automotive Engineers (SAE). In addition, as the U.S. Government placed added
`
`emphasis on reducing oil consumption and increasing energy security following the events of
`
`9/11, Paice twice testified at Congressional hearings alongside Ford and other auto companies in
`
`2001 and 2002.
`
`23.
`
`Paice's hybrid patents are the most important in the automotive industry. Griffith
`
`Hack, an Australian law firm specializing in intellectual property, conducted an independent
`
`study of the most dominant hybrid vehicle patents in the world. Griffith Hack analyzed more
`
`than 58,000 hybrid vehicle technology patents and their inter-relationships. It published a white
`
`paper in 2009 (updated in 2010), which concluded that the top hybrid vehicle patents were those
`
`held by Paice, ahead of those held by leading hybrid vehicle manufacturers such as Toyota, Ford
`
`and Honda. Griffith Hack performed its analysis independently; Paice had absolutely no
`
`knowledge of the Griffith Hack study until it was published in 2009. Acknowledging Paice's
`
`cutting-edge work, the Griffith Hack study concluded that Paice owns four of the world's ten
`
`most dominant hybrid vehicle patents — U.S. Patent No. 6,209,672 (ranked #1), U.S. Patent No.
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`5,343,970 (ranked #2), U.S. Patent No. 6,338,391 (ranked #4), and U.S. Patent No. 6,554,088
`
`(ranked #7) — more than Toyota, Ford and Honda combined. The asserted patents in this
`
`complaint all issued from applications in the '672 patent family.
`
`24. (cid:9)
`
`Dr. Severinsky has received widespread recognition for his hybrid innovation. He
`
`was awarded the prestigious Thomas A. Edison Patent Award from the American Society of
`
`Mechanical Engineers in 2009. The award recognizes the significance of Paice's hybrid vehicle
`
`inventions. It is one of the highest honors an engineer can receive. In addition, Dr. Severinsky
`
`was inducted into the University of Maryland Clark School of Engineering's Innovation Hall of
`
`Fame in 2008 for his pioneering work in developing hybrid vehicle technology.
`
`HISTORY OF PAICE'S EFFORTS TO PROTECT ITS PATENTED
`INTELLECTUAL PROPERTY
`
`25.
`
`Between 1999 and 2004, while Paice was endeavoring to market and license its
`
`new patented hybrid vehicle technology to Ford and other major automobile companies, Ford
`
`was also collaborating with Toyota on hybrid vehicle technology.
`
`26. When Toyota introduced its second generation Prius hybrid vehicle in 2004
`
`without permission or license from Paice, Paice became convinced that Toyota had employed its
`
`patented technology.
`
`27.
`
`In June 2004, Paice filed a complaint against Toyota alleging that the second
`
`generation Prius (introduced in January 2004) infringed Paice's high-voltage (`970) and method
`
`of control ('672/'088) patents. That case went to trial in December 2005, resulting in a jury
`
`verdict in Paice's favor on December 20, 2005, finding infringement of the '970 patent by
`
`certain Toyota products. The 2005 verdict was affirmed by the trial court and the court of
`
`appeals. Paice then filed additional lawsuits alleging infringement of the Paice patents by
`
`additional Toyota products.
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`28.
`
`In July 2010, Toyota and Paice resolved their infringement disputes when Toyota
`
`agreed to a global license of all Paice U.S. and foreign patents. Although the terms of the license
`
`are confidential, Paice believes the license to be fair and reflective of the value of its patented
`
`technology.
`
`THE PAICE AND FORD RELATIONSHIP
`
`29.
`
`Paice and Ford had an extensive relationship that spanned more than a decade. The
`
`two companies first began discussing Paice's patented hybrid vehicle technology in 1999.
`
`Within a span of a couple of weeks in August 1999, Paice had a series of meetings with Chief
`
`Executive Officer Jacques Nasser, Chief Technology Officer Neil Ressler, Chairman Bill Ford
`
`Jr., Board member Bill Ford Sr. and Head of North American Truck Gurminder Bedi. The
`
`swiftness of these meetings with high-level Ford executives shows Ford's intense interest in
`
`Paice's hybrid technology. Other top Ford executives who met with Paice include Executive
`
`Director of Alternative Propulsion Division John Wallace and Head of Advanced Powertrain
`
`Engineering Jim Clarke.
`
`30.
`
`In October 1999, Paice successfully demonstrated its groundbreaking technology
`
`through extensive testing of a Paice prototype at Roush Industries. When Ford learned the
`
`details of the testing and the Paice prototype, Ford was eager to move forward with Paice. The
`
`parties in November 1999 entered into a now-expired nondisclosure agreement enabling Ford to
`
`evaluate Paice's proprietary technology. Ford representatives identified in the agreement
`
`included CTO Neil Ressler and Chief Engineer of the Ford Escape Hybrid, Dr. Prabhakar Patil.
`
`This agreement was promptly executed and launched a period of extensive work whereby Paice
`
`taught Ford all aspects of Paice's patented technology.
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`3 1 . (cid:9) At the same time, Paice also presented Ford executives (including Chairman Ford,
`
`CEO Nasser and CTO Ressler) with a comprehensive proposal for a pre-production development
`
`and licensing program. In its proposal to Ford, Paice stated that it was willing to license its
`
`technology for a royalty of $150 per vehicle.
`
`32. On December 2, 1999, Chairman Bill Ford acknowledged Paice's licensing
`
`proposal in a personal letter to Paice:
`
`Thank you for sending the packet of material on PA ICE. Your vote of
`confidence in this project is appreciated, and so are your warm feelings
`for Ford. Jam looking forward to getting a report on PA ICE from Neil
`Ressler. The door is always open to new ideas, and I want to thank you for
`keeping Ford in mind
`
`33.
`
`Shortly thereafter on December 8, 1999, at Ford's request, Paice repeated the
`
`demonstration of its proof of concept prototype for Ford's engineers at Roush Industries' testing
`
`facilities in Livonia, Michigan. Observing the tests were key Ford engineers including Dr.
`
`Prabhakar Patil (Chief Engineer for the Ford Escape Hybrid) and Dr. Michael Tamor (Manager
`
`of Hybrid Systems Design), among others.
`
`34.
`
`Shortly after the demonstration, Dr. Tamor requested additional details about
`
`Paice's hybrid vehicle technology. In a letter to Dr. Tamor dated December 16, 1999, Ted
`
`Louckes (C00 of Paice) noted that Paice had provided the following technical documents
`
`teaching Ford key aspects of Paice's technology:
`
`Assumptions for our lump sum parameter model of the parallel-serial
`version of the PA ICE drive in a benchmark vehicle
`
`A breakdown of assumptions for the accessories load
`
`Dynamometer set-up diagram and load data imposed by the dynamometer,
`both the road load, and the inertia weight
`
`Functional diagrams of the Paice drive and its components and
`accessories being tested on the dynamometer, and the wiring diagram
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`Underwriters Laboratories Report on safety of use of the high-voltage
`battery system.
`
`Mr. Louckes also emphasized that Paice gave Ford copies of Paice's patent filings:
`
`I realize the patent filings given to you at the meeting are very general.
`One suggestion I would like to make is we assist ... in proving your inputs
`into our lump sum model to obtain technical results for torque, speed and
`current along with any other data at any point in the drive function.
`
`35. At that time, Mr. Louckes also made clear that the Paice patented technology did
`
`not require a specific type of high voltage battery system. Although Paice believed that a lead-
`
`acid system was the most cost-effective, any other type of battery chemistry could be used (e.g.
`
`nickel-metal hydride or lithium-ion).
`
`36.
`
`Shortly thereafter, Paice and Ford entered into a second confidentiality agreement,
`
`whereby Ford acknowledged that Paice held patents and Ford said it would respect those rights,
`
`but Ford said it would not be liable for additional claims relating to theft of trade secrets. Ford
`
`acknowledged that it was not free to infringe Paice's patents, but Ford would be free to share
`
`Paice's unpatented teachings with others. Unbeknownst to Paice, Ford was actually
`
`collaborating with Toyota in this timeframe, and it now appears that Ford demanded this "no
`
`trade secret liability" agreement so that it could share Paice's technology teachings with Toyota
`
`and component suppliers.
`
`37.
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`As a result of the meetings between Ford's senior management and Paice in 1999,
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`Paice embarked on two years (2000 — 2001) of extensive modeling and component design work
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`on hybrid versions of Ford vehicles. In addition to numerous meetings between Paice and Ford
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`engineers, executives and engineers from multiple departments within Ford communicated
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`regularly and met internally to review Paice's proprietary technologies, including its fundamental
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`methods of control to maximize performance, fuel economy, and emission efficiency.
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`Notwithstanding Paice's protracted efforts to teach Ford the details of Paice proprietary
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`technology, Ford ultimately refused to enter into a license agreement and instead simply took
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`Paice's technology for itself This first became apparent in April 2003, when Dr. Severinsky
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`was stunned to see at the New York Auto Show the Escape Hybrid prototype, which he
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`concluded was using Paice's technology. (A more detailed account of the Paice and Ford hybrid
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`effort is presented in the section "PAICE AND FORD HYBRID EFFORTS" below.)
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`EARLY COLLABORATIVE EFFORT BETWEEN FORD AND TOYOTA ON
`HYBRIDS
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`38. When Toyota introduced its first hybrid vehicle in the U.S. in the year 2000, Ford
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`was dealing with challenges relating to fuel economy. Driven by the success of the Ford
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`Explorer and Expedition SUVs and the F-150 pick-up truck, Ford was selling more trucks than
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`cars, but the EPA ranked its fleet worst in fuel economy among the top six automakers. Ford
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`was under pressure to develop a high mileage vehicle and the brewing crisis around its SUVs
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`prompted Bill Ford to announce in April 2000 that Ford had a plan to address the excessive fuel
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`consumption of standard SUVs. Mr. Ford promised that by 2003 Ford would start selling a no-
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`compromise, hybrid version of a high-volume SUV. He also set a goal for Ford to improve SUV
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`fuel economy by 25 percent by 2005.
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`39. Ford had begun working on a hybrid version of Ford's Escape SUV in early 1999
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`— more than one year before Bill Ford's announcement. In late 1998, Dr. Patil was tapped to
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`head the Ford Escape Hybrid program, Ford's first effort to build a commercial hybrid vehicle.
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`Having previously failed to develop a high mileage vehicle, Ford turned to Toyota for its hybrid
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`technology. Dr. Patil went for a test drive in the first generation Toyota Prius with the then-
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`Chairman of Ford, Alex Trotman. As the two had suspected, the Prius sacrificed too much in
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`performance. Although Mr. Trotman insisted that Ford's hybrid do better than Toyota's, Ford
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`had made the decision by the start of engineering work in 1999 to adopt the Toyota Prius
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`topology' and technology for the Ford Escape Hybrid. This was a number of months before
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`Ford began its collaboration with Paice. Ford's initial intention was to simply purchase all or
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`substantially all of the Toyota Prius first generation hybrid powertrain to be rebranded as the
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`Ford Escape Hybrid system.
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`40. By the time Ford began discussions with Paice, Ford's engineers recognized that
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`the first generation Toyota Prius sacrificed too much performance, including acceleration,
`
`drivability and hill-climbing. Ford's engineers also had growing concerns that the Toyota Prius
`
`topology had limitations related to the scalability of the Toyota Prius design and the significant
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`cost premium (projected to be $5,500) of the Escape Hybrid over the non-hybrid Escape. These
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`concerns led to Ford's desire to work closely with Paice in 2000 and 2001 and learn all it could
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`from Paice.
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`41. (cid:9)
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`Notwithstanding their concerns, Ford worked With Toyota in integrating Toyota's
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`first generation hybrid technology into the Escape Hybrid. Also during this time Ford was
`
`working to establish a joint venture with Toyota for a new hybrid vehicle. In November 2001,
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`Ford announced that Ford and Toyota had selected the type of hybrid and technology for its first
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`jointly-developed hybrid vehicle. Ford and Toyota envisioned that this jointly-developed system
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`would not be applied to existing models, but would be used in an upcoming new hybrid model.
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`Toyota, at the same time, also had hundreds of engineers in Japan working on a complete
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`overhaul of its first generation Prius, because the first generation Prius design was not
`
`commercially viable.
`
`I In the automotive industry, the selection, arrangement and interconnection of the physical components (such as
`electric motors, power inverters, internal combustion engine and gear assemblies) of a hybrid vehicle design is often
`referred to as the hybrid vehicle's "topology" or "architecture."
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`PAICE AND FORD HYBRID EFFORTS
`
`42.
`
`In April 2000, Ford CEO Jacques Nasser and Executive Director of Ford's
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`Alternative Propulsion Division John Wallace met with Paice after Dr. Tamor, Ford's Manager
`
`of Hybrid Systems Design, wrote a favorable report on the Paice technology.2 Shortly thereafter,
`
`Mr. Clarke, Ford's head of Advanced Powertrain Engineering, wrote a letter to Paice on April
`
`27, 2000 acknowledging the value Ford saw in Paice's technology, and asked that Paice develop
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`a commercial concept on Ford's behalf, and at Paice's expense:
`
`[Paice] proposals and stated deliverable objectives could result in
`significant increased fuel economy and are of great interest to Ford Motor
`Company.
`
`I can assure you that your present high-level concept, cost, performance
`and PA ICE targets represent a major advance towards future vehicle
`commercialization.
`
`Paice must be developed to at least a pre-production prove-out level to be
`considered for production application.... As much as I would like to
`commit resources to assist you in your worthwhile endeavor, the demands
`of our current multi-national product developments efforts plus current
`budget constraints do not make that an option at this time.
`
`43. The patents at issue in this suit describe a hybrid system, which enables the vehicle
`
`to be powered by one or more electric motors, the internal combustion engine or a combination
`
`of these — referred to as modes of operation. These patents teach the fundamental method of
`
`control for a hybrid vehicle, including: (I) a method of mode control using road load and (2) a
`
`method of engine control under which engine torque is above a setpoint. These patents teach
`
`how to control and operate electric motor(s) and the internal combustion engine to deliver a
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`combination of increased fuel economy, reduced emissions and improved driving performance.
`
`Ford ul