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Valence sued over UT patent
Austin American-Statesman
02/16/06

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Battery maker Valence Technology Inc. has been hit with a patent-infringement lawsuit that could significantly cut into its revenue.

Canadian utility Hydro-Québec filed the suit late Tuesday in U.S. District Court in Austin. The company alleges that Austin-based Valence is improperly using technology that Hydro-Québec licensed from the University of Texas in 1997.

Hydro-Québec said it warned Valence about infringement in 2004. Valence’s infringement is “open; it’s notorious,” said William Brewer, the Dallas lawyer for H-Q. “It’s something we’ve decided to stop.”

He said the utility has tested some Valence products and determined it is violating the patent. “We’ll have the full line of products tested,” he said.

In a statement the company said, “We believe Valence Technology has a strong position with regard to our (intellectual property), and we will vigorously defend this position.”

The outcome could be critical to Valence’s operation. “Whether or not an intellectual-property litigation claim is valid,” Valence said in its latest annual report, “the cost of responding to it…could be expensive and harm our business.”

The company never has had a profitable quarter, and as of last March 31 reported an accumulated deficit of $461.3 million.

In recent years, it has been financed almost solely by its chairman and largest shareholder, Carl Berg, who has pumped more than $100 million into the company since its inception in 1989. He did not return a call for comment on the suit.

Under its licensing agreement with UT, H-Q gets 35 percent of any revenue from licensing the technology or money it gets in litigation, such as the case against Valence. The university and professor John Goodenough split the remaining 65 percent, according to Barry Burgdorf, general counsel for the University of Texas System.

The Valence case is small compared with the other suit H-Q has filed over the technology: a 2001 technology theft lawsuit against Japanese telecommunications giant NTT Corp. H-Q and the University of Texas System alleged that an NTT scientist stole Goodenough’s research. The suit is pending.

H-Q hasn’t specified the damages it will seek from NTT, but its experts have estimated the figure could reach $350 million to $500 million.

The rechargeable lithium-ion batteries power cell phones, computers and other technology products and have potential in electric vehicles and energy storage. The UT patent’s value stems from its potential as a core element in larger, more powerful batteries that are safer and better for the environment.

Most lithium-ion batteries today use cobalt, a heavy metal that’s both expensive and toxic. The new compounds identified by Goodenough’s team at UT replace the cobalt with metals such as iron, which is cheaper, easier to produce and less harmful to the environment.

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