Minimising casualties in an autotech sector patent war

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.