New York City hybrid taxi plan winding its way through court
On June 22, Southern District of New York Judge Paul Crotty granted a preliminary injunction preventing enforcement of Taxi and Limousine Commission (TLC) regulations that attempt to convert the New York City taxi fleet to hybrid vehicles. The City of New York has now officially appealed the decision to the Second Circuit. The regulations are part of Mayor Bloomberg’s initiative to incentivize “greener” taxicabs. Notably, Judge Crotty rejected a related plan in October 2008. The previous plan created a miles-per-gallon rating for taxicab owners, and required the owners to purchase only taxis that had hybrid or clean-diesel engines. Shortly after Judge Crotty enjoined that plan, Mayor Bloomberg announced his intent to come up with an alternative.
The alternative plan attempted to create financial “incentives” for taxicab owners to convert to hybrid vehicles. In particular, the regulations decreased rates at which taxi owners could lease non-hybrid taxis to drivers. By 2012, these lease rates were scheduled to decrease by $12. In contrast, taxi owners could increase lease rates for hybrid or clean-diesel engine taxis by $3. The other features of the plan were that the lease rates would be determined based on policy rather than cost to the owners, and the plan did not grandfather in non-hybrid taxis that had been purchased after a 2001 authorization of the use of such taxis.
In response to the new plan, Plaintiff operators of taxicab fleets and trade association sued New York City and TLC. Judge Crotty found that the regulations constitute a mandate, which was preempted by the Energy Policy and Conservation Act (EPCA) and the Clean Air Act (CAA). Judge Crotty found that the incentives and disincentives of the TLC regulations “constitutes an offer which cannot, in practical effect, be refused.” The EPCA preemption clause prohibits local rules that are “related to fuel economy standards.” The CAA preemption clause prohibits “any standard relating to the control of emissions from new motor vehicles or new motor engines.” Judge Crotty noted the expansive interpretation given to the term “related to,” and held that the TLC regulations were related to both fuel economy standards and the control of emissions.
Although Judge Crotty has dealt some major blows to Mayor Bloomberg’s initiative, it is unlikely that this will be the end of his attempts. Mayor Bloomberg’s overall goal is to convert the entire New York taxi fleet to hybrid vehicles by 2012. This would make the New York taxi fleet the largest hybrid fleet in the world.
Green Patents: setting royalties for clean technology
Co-authored with Cyrus Frelinghuysen.
On April 17th, Judge David J. Folsom of the US District Court for the Eastern District of Texas issued an order in Paice LLC v. Toyota Motor Corp., increasing the royalty rate that the Toyota Motor Company must pay Paice LLC for sales of Prius, Highlander, and the Lexus RX400h vehicles found to infringe a Paice patent involving hybrid vehicle technology. Judge Folsom had previously ordered Toyota to pay $25 per infringing vehicle but on remand raised the rate to roughly $98 per vehicle.
The decision stems from a series of lawsuits Paice brought against Toyota alleging infringement of its patents related to hybrid electric vehicles. Paice filed its complaint in this particular case in June 2004. A jury later found that Toyota had infringed two claims of US Patent No. 5,343,970 for drive trains for hybrid electric vehicles. Paice was awarded $4,269,950 for past infringement, but Judge Folsom denied Paice’s request for injunctive relief in light of the Supreme Court’s decision in eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006). Instead, Judge Folsom ordered Toyota to pay Paice an “ongoing royalty” of $25 per infringing vehicle until the expiration of the patent.
On appeal, Paice argued that the district court did not have the authority to impose an ongoing royalty and, even if it did, that the jury should have determined the amount of the royalty. The Federal Circuit affirmed the infringement verdict as well as the district court’s imposition of an ongoing royalty without a jury determination on the issue: “In most cases, where the district court determines that a permanent injunction is not warranted, the district court may wish to allow the parties to negotiate a license amongst themselves regarding future use of a patented invention before imposing an ongoing royalty. Should the parties fail to come to an agreement, the district court could step in to assess a reasonable royalty in light of the ongoing infringement.” The Federal Circuit then remanded the case to the district court because Judge Folsom provided no reasoning to support his selection of $25 per infringing vehicle as the appropriate rate.
On remand, Toyota argued that the rate should be lowered from $25 to $16, largely “because Toyota has experienced increased costs and is no longer making as much profit on the infringing vehicles that is attributable to ‘hybridness.’” In contrast, Paice argued for a higher rate based on the high price of gas and modifications to federal fuel efficiency laws, which it argued have increased demand for hybrid vehicles. Judge Folsom ultimately set the rate at less than 0.5% of the wholesale price for each of the vehicles, remarking that, “These royalty rates continue to allow Toyota to make a reasonable profit.”
As litigation on “clean” energy patents increases, we expect to see similar arguments over the value of such technology compared to conventional fuel sources in determining reasonable royalty damages.
