A flurry of litigation activity at the end of 2019 suggests change is afoot in the automotive sector when it comes to the way in which innovative companies leverage and enforce their intellectual property rights. Could we expect more of the same in 2020, asks Diego Black, partner and patent attorney at Withers & Rogers?
In November last year, news broke that BMW is being sued for alleged patent infringement in the US by the hybrid engine tech company, Paice, and not-for-profit organisation, The Abell Foundation. The case seems to hinge on whether BMW took unfair advantage of the IP shared by these organisations and subsequently used it in the design and manufacture of eight of its hybrid and plug-in hybrid models. A further case, which involves Nokia going head to head with Daimler over licensing of part of its patent portfolio is another example of tech-led litigation in the sector.
Whilst legal action of this nature is not yet widespread, there are signs that autotech sector companies are taking a more assertive approach when it comes to enforcing their IP rights. So, could the industry be heading for a patent war, similar in scale to that seen in the global telecoms industry?
In the past, vehicle manufacturers (VMs) have tended to rely on indemnities from component suppliers bundled in with the purchasing cost and on the use of cross-licensing agreements to share tech know-how with each other and in doing so, accelerate their innovation activity. There has also been an unwritten ‘detente’ between the biggest VMs. As a result, there was relatively little movement of assets, with Tier 1 and Tier 2 manufacturers occasionally buying patents and little litigation activity.
The growing influence of tech-led companies – including software developers, as well as IoT and AI innovators – has introduced a new dynamic to the marketplace. Many of these businesses are start-ups or early-stage businesses, which tend to be highly geared, and their business model requires them to monetise their IP rights wherever and whenever possible.
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Other, more established companies, have invested heavily in R&D of new autotech or in technologies relating to communication standards and come from industries in which those costs are commonly recouped through licensing or litigation. In this more litigious climate, a growing number of manufacturers have been opting to invest in the relative security of an aggregator or patent pool.
The old way of managing IP rights is dead
Patent aggregators, such as RPX, and licensing platforms like Avanci, offer a number of key benefits to VMs and component manufacturers in the sector. The absence of any standard technologies to indicate the path that innovators should take when it comes to investing in the development of autonomous driving or connected car technologies for example, means the stakes are high.
By placing their IP in a patent pool or by joining a patent aggregator network or licensing platform, businesses benefit from access to a broader asset portfolio, which means they are less likely to be sued and better placed to defend any infringement actions. Being part of a large patent pool also makes it easier for individual businesses to influence the development of new regulatory and/or technological standards.
To date, these patent aggregators and pools have been more commonly associated with the telecoms sector. Attracting a growing number of innovative tech companies, the autotech sector has recently adopted the use of standards in areas such as connectivity and further standardisation is likely with the move to driverless motoring. Such standardisation provides a focus for innovators, allowing them to direct their R&D activity accordingly.
Involvement in the creation of new standards also provides the opportunity for innovators to help set the direction for the adoption of new technologies and to ensure that their interests are represented. As the market matures and regulatory and technological standards are established, litigation activity in the autotech sector is likely to plateau and then tail off – but this process will undoubtedly take time.
For VMs and component manufacturers, it is important to understand that the old way of managing IP rights is dead and a new way of thinking is required. It is no longer advisable to rely on cross-licensing agreements with the mutual understanding that suing each other could be costly and counterproductive. The need to collaborate with technology companies in order to trial new solutions prior to market entry, means they must be willing to share their IP. However, they should only consider doing so with the protection of a non-disclosure agreement in place and a commercial contract, which makes it clear who owns what and who will own any new IP.
While it is too early to say whether an autotech sector patent war has broken out, there are clear signs that litigation activity is ramping up and based on what we know about technology companies and their proactive approach to leveraging their IP assets, the industry should be prepared for more of the same in the year ahead. With this in mind, companies may need to rethink their IP strategies – spreading their assets where necessary and collaborating to mitigate risk and realise the potential of emerging technologies.
Diego Black, partner and patent attorney at European intellectual property firm, Withers & Rogers.
Unfortunately the patent system only benefits the large companies that can afford to enforce their patent rights. Litigation is very expensive, and well out of the reach of medium or small companies and individual inventors. The patent process can consume most of the R&D budget, leaving nothing for the actual R&D. The current patent system has acted to reduce innovation, not to promote innovation. A good example is the Gemini Electric Motor & Generator, at a time when industry should be embrace stunning improvements in electric motors and generators, they have shown no interest, WHY.
John – all excellent points. The biggest obstacle to business growth and development is that everyone wants to make a profit and gain a competitive advantage. Perhaps if a global body like the United Nations designed and developed important things like energy storage systems (I like FESS) and made the specifications and designs open-source (as was the strategy for Wikipedia) then all business around the world could consider the reduced costs and benefit from delivering it. I, for one, would be the first to volunteer to work as an United Nations engineer.
To expand on John’s point, let’s be perfectly honest; the current patent system is a state-sponsored ‘protection’ racket, which demands ‘money with menaces’ and gives NO protection. The failure of ineffective IP law to protect human rights is an expensive scandal. As Richard intimates, National (biased!) Patent Offices should be closed and the system run by a single world body. (WIPO?)
The chassis design conventions of VMs are stuck in the last century, because I can’t afford patents on the proven balanced dynamics I invented in the late eighties. That applies to the entire industry, from F1 to family car, HGV or armoured personnel carrier. Countless thousands have been killed or injured on the race track, open road and off-road as a direct consequence of their lousy design. My passive engineering works better. The failure of Active Suspension is explained in this article.
https://www.motorsportmagazine.com/archive/article/december-2001/69/active-suspension
“Everyone wants to make a profit and gain (an unfair!) competitive advantage.” – Just so and in the case of GM foods or medical breakthroughs, it’s insufferably immoral to profit off the hunger and pain of helpless humanity. (Trump insists the NHS must pay Big Pharma what it wants.) A system where the poor are powerless and the wealthy given privileges is indefensible in civilised society.
The ‘establishment’ intransigence was summed up in the DTI’s letter to me, 25 Jan. 2005:-
“The economic inequality argument can be used in any situation where some people have more money than others. I am not discounting your argument, I just emphasise that there is no obvious solution. I would be interested in any solution you may have that does not adversely impact on the taxpayer or make our patent system inoperable internationally.” – Ben Chesson, Assistant Director of Innovation Strategy. Laws that protect patents without charge are a basic human IP right.
The current system precludes promotion/publication, the very opposite of its original purpose!!
David, we see eye-to-eye on IPR. I am also interested in your suspension thoughts; could you email tony@eway.direct