Patent Encumbrance of Large Automotive Ni MH Batteries - Chevron and Cobasys

Chevron and Cobasys

In 2001, oil company Texaco purchased General Motors' share in GM Ovonics. Texaco was itself acquired by rival Chevron several months later. The same year, Ovonics filed a patent infringement suit against Toyota's battery supplier, Panasonic, that ultimately succeeded in restricting the use of its large format NiMH batteries to certain transportation uses. In 2003, Texaco Ovonics Battery Systems was restructured into Cobasys, a 50/50 joint venture between ChevronTexaco and Ovonics, now known as Energy Conversion Devices (ECD) Ovonics. Chevron's influence over Cobasys extends beyond a strict 50/50 joint venture. Chevron held a 19.99% interest in ECD Ovonics as of a public filing made January 15, 2003. In a later filing on May 17, 2005, Energy Conversion Devices announced that they had exercised an option to purchase back 4,376,633 shares of stock from a Chevron subsidiary, and would cancel and return them to authorized-unissued status. This is the exact number of shares that was listed as owned by ChevronTexaco in the January 15, 2003 filing.

ChevronTexaco also maintained veto power over any sale or licensing of NiMH technology. In addition, ChevronTexaco maintained the right to seize all of Cobasys' intellectual property rights in the event that ECD Ovonics did not fulfill its contractual obligations. On September 10, 2007, ChevronTexaco (now known as simply "Chevron") filed suit claiming that ECD Ovonics had not fulfilled its obligations. ECD Ovonics disputed this claim. The arbitration hearing has been repeatedly suspended while the parties negotiated with General Motors over the sale of Cobasys back to GM. As of March 2008, no agreement had been reached with GM.

Cobasys contracts demonstrated that the company was willing to sell smaller NiMH batteries (less than 10 amp-hours) for use with hybrid electric vehicles (HEV). For instance, in March 2007, GM announced that it would use Cobasys NiMH batteries in the model year 2008 Chevrolet Malibu hybrid. Toyota uses NiMH batteries in all of its HEV models. However, Cobasys' sales policies raised questions about its willingness to sell larger format batteries for use in EVs and PHEVs.

In her 2007 book Plug-in Hybrids: The Cars that Will Recharge America, Sherry Boschert argues that large-format NiMH batteries (i.e., 25 amp-hours or more) are commercially viable but that Cobasys would only accept very large orders (more than 10,000) for these batteries. The effect is that this policy precludes small companies and individuals from buying them. It also precludes larger auto manufacturers from developing test fleets of new PHEV and EV designs. Toyota employees complained about the difficulty in getting smaller orders of large format NiMH batteries to service the existing 825 RAV4 EVs. Since no other companies were willing to make large orders, Cobasys was not manufacturing nor licensing any large format NiMH battery technology for automotive purposes. Boschert quotes Dave Goldstein, president of the Electric Vehicle Association of Washington D.C., as saying this policy is necessary because the cost of setting up a multimillion dollar battery assembly line could not be justified without guaranteed orders of 100,000 batteries (~12,000 EVs) per year for 3 years. Boschert concludes that, "it's possible that Cobasys (Chevron) is squelching all access to large NiMH batteries through its control of patent licenses in order to remove a competitor to gasoline. Or it's possible that Cobasys simply wants the market for itself and is waiting for a major automaker to start producing plug-in hybrids or electric vehicles."

In an interview with The Economist, Ovshinsky subscribed to the former view. "I think we at ECD made a mistake of having a joint venture with an oil company, frankly speaking. And I think it's not a good idea to go into business with somebody whose strategies would put you out of business, rather than building the business." In the same interview, however, when asked, "So it’s your opinion that Cobasys is preventing other people from making it for that reason?", he responded, "Cobasys is not preventing anybody. Cobasys just needs an infusion of cash."

Critics also argue that historical evidence demonstrates the willingness of the oil industry to engage in such anti-competitive behavior. In 1949, the U.S. Supreme Court found Chevron (then known as Standard Oil of California) guilty of conspiring to buy and dismantle the Los Angeles electric street car system, in what became known as the Great American streetcar scandal. In an effort to prevent the passage of California's zero emission mandates in late 1993 and early 1994, oil companies also funded a series of advertisements that questioned the viability of electric vehicles.

Cobasys' problems with other potential customers also raised questions about the company's sales policies. In October 2007, International Acquisitions Services, Inc. and Innovative Transportation Systems AG filed suit against Cobasys and its parents for refusing to fill a large, previously agreed-upon, order for large-format NiMH batteries to be used in the Innovan electric vehicle. In August 2008, Mercedes-Benz sued Cobasys for again refusing to fill a large, previously agreed-upon order for NiMH batteries.