Firms in Patent Feud Over U.S. Mandated Railroad Safety Technology

By Christopher Yasiejko | January 18, 2019

Two companies battling for a share of more than $14 billion in mandated safety upgrades on U.S. railroads are set to collide in federal court to resolve a dispute over technology that prevents train accidents.

Germany’s Siemens AG accuses U.S. rival Wabtec Corp. of using patented technology without permission and is demanding royalties, along with possible reimbursements for lost profits for its TrainLink products. A trial starts Monday in Wilmington, Delaware. Wabtec denies that it infringes and contends the patents are invalid.

The two companies compete for contracts from freight and passenger railroads required to upgrade with a system known as positive train control (PTC). The technology can automatically stop a train by predicting rail conditions ahead and taking control when needed, such as if the train is going too fast around a curve or continuing into an area where it should have stopped.

“The federal PTC mandate is the single-largest regulator cost ever imposed on the rail industry” by the Federal Railroad Administration, Siemens said in its initial 2016 complaint.

The government mandated rail operators implement the systems by Dec. 31, 2018, anywhere passenger trains operate or on all passenger lines or those where hazardous materials are transported. The impetus for the upgrade was a 2008 head-on collision in California between a freight train and commuter train that killed 25 people.

But as of Dec. 31, just four of 41 railroads had implemented a PTC system, according to the U.S. Department of Transportation. Thirty-three sought compliance extensions of as much as two years, with the Federal Railroad Administration approving nine. In September, the FRA conditionally approved a request by New Mexico Rail Runner Express for a deadline of Dec. 31, 2020.

Antitrust Accusations

Siemens sued Wabtec in April 2016. Wabtec, in turn, accused Siemens of infringing three of its own patents related to the technology. Those counterclaims were severed from the case, and Wilmerding, Pennsylvania-based Wabtec re-filed them in a separate lawsuit, which is pending in Delaware.

Siemens, in its response to those allegations, said Wabtec’s patents are invalid and accused it of violating antitrust laws. Wabtec has a “pattern of exclusionary distribution and tying practices to maintain monopoly control” over the markets for the train-safety technology, Siemens said in a heavily redacted filing. Siemens also accused Wabtec of making false and deceptive statements about Siemens products.

Wabtec in 2017 had sales of about $322 million related to train control and signaling, which includes PTC, the company said Nov. 21 in a financial filing.

Freight rail operators are expected to spend more than $10 billion on development and deployment of the systems by the time it’s fully operational nationwide, according to the Association of American Railroads. The commuter railroad industry’s cost to implement the systems will exceed $4.1 billion, according to the American Public Transportation Association.

Philadelphia Crash

The technology would have prevented the derailment on May 12, 2015, of an Amtrak train in Philadelphia after the engineer went too fast around a curve, according to investigators with the U.S. National Transportation Safety Board. The accident killed eight people and injured more than 200.

Amtrak has since installed the system on the lines it controls between Washington, D.C., and Boston, the so-called Northeast Corridor, which in fiscal 2017 carried some 12 million passengers.

Wabtec has sold its systems for use in Alaska, Denver, California, Illinois and Washington state, according to the complaint. Bombardier Inc. on Jan. 9 said it won a $669-million contract with New Jersey Transit Corp. to provide 113 commuter rail cars equipped with PTC technology.

The case is Siemens Mobility Inc. v. Westinghouse Air Brake Technologies Corp., 16-cv-284, U.S. District Court, Delaware (Wilmington).

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