U.S. trade panel opens patent probe into Volkswagen hybrid vehicles

WASHINGTON (Reuters) - The U.S. International Trade Commission on Wednesday said it launched an investigation into whether Volkswagen AG VOWG_p.DE and its subsidiaries infringed hybrid electric vehicle patents owned by Baltimore-based Paice LLC.

Volkswagen's logo is seen at its dealer shop in Beijing, China, October 1, 2015. REUTERS/Kim Kyung-Hoon

The commission said it has not made any decisions on the merits of the case. But a ruling against Volkswagen could be a significant setback to the automaker’s strategy to shift towards hybrid vehicles after a crushing emissions fraud scandal halted sales of its diesel vehicles in the United States last year.

Paice is seeking an ITC order that would block the import and sale of Volkswagen, Audi and Porsche brand hybrid vehicles in the U.S. market. It filed its initial request on April 15.

After a similar ITC complaint and federal lawsuits against Toyota Motor Corp, 7203.T Paice struck a licensing deal in 2010 with Toyota that covers 23 hybrid electrical control patents. In 2015, it said it reached similar licensing agreements with Hyundai Motor Co Ltd 005380.KS and Kia Motors Corp 000270.KS.

Paice claims on its website that it shared with Volkswagen its patented hybrid technology, including computer modeling and control algorithms with Volkswagen from 2001 to 2004 in a

“But after learning everything it needed from Paice, VW abruptly ended the collaboration and never licensed Paice’s technology,” the company said, adding that the automaker shifted its efforts to develop diesel technology instead.

Paice, founded in the early 1990s by Soviet-trained electrical engineer Alex Severinsky, said it holds 29 U.S. and foreign patents related to hybrid vehicle technology. The firm is partly owned by the non-profit Abell Foundation in Baltimore, which has provided over $25 million in funding support and is also listed as a complainant in the ITC case.

The Baltimore firm also has pursued patent litigation against Ford Motor Co. F.N since 2014. In that case, however, Ford has managed to get some of Paice's infringement claims dismissed by the Patent Trial and Appeal Board, while several other challenges are pending.

In Germany, a VW spokesman said the company “does not comment in principal in ongoing legal disputes”.

In comments submitted on the ITC website, lawyers for Volkswagen and its subsidiaries described Paice’s patents as “weak” and said pursuing an investigation was against the public interest.

A submission from Edgar Haug, a lawyer for Porsche AG, said that Paice’s complaint relies too heavily on investments made by Hyundai and Kia as part of their technology licenses with the firm.

“Neither Hyundai nor Kia sell competitive articles that replace or are a substitute for Porsche’s accused vehicles,” Haug wrote.

Reporting By David Lawder, additional reporting by Jan Schwartz in Hamburg, Germany; Editing by Alistair Bell