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Tech convergence drives autonomous car patent licensing tension



Patrick Wingrove


A sudden influx of new players with standard essential patents into the automotive market is causing conflict between automotive companies and their driverless-car suppliers over who should take a licence in the supply chain

The convergence of technologies in autonomous vehicles is driving licensing tensions between automotive companies and connected-tech suppliers with standard essential patents (SEPs), according to telecoms and automotive manufacturers. 

In-house sources explain that while automotive companies have developed a culture of wanting to buy components from suppliers that are free from third-party rights, telecoms firms and some other SEP owners have traditionally filed infringement actions against parties at the end of a value chain.

"Driverless car makers are now in a situation where they could be attacked for patent infringement because their suppliers did not get a licence for the technology, and they have never really had to worry about third-party rights before," says the IP manager of a car parts manufacturer. 

He adds that this clash of cultures has led to conflict over who should be the party to take out a licence in the chain – which could be a problematic confrontation for all stakeholders. While car companies do not want to be sued, most SEP owners do not want to stall the flow of royalties in these highly lucrative projects.

Top 25 self-driving vehicle applicants
at the EPO 2011-2017

Samsung 624
Intel 590
Qualcomm 361
LG 348
Robert Bosch 343
Toyota Motor 338
Nokia 280
LM Ericsson 264
Microsoft 259
Continental 259
Sony 240
Boeing 213
Volvo 209
Google 201
Panasonic 161
Huawei Techn 159
Audi 142
Hitachi 140
Siemens 139
Honda Motor 120
Here Global 118
Valeo 113
Honeywell Inc. 112
BAE Systems 112
Nissan Motor 107
Source: The EPO's Patents
and self-driving vehicles report

"The problem we have at the moment is that infringers or potential licensees are in a favourable position," explains the head of transactions at global telecoms company. "They can stall and wait until they’re compelled to take a licence and then only have to pay what they would have if they’d taken it when it was first offered."

He adds that companies do not want this same situation for the driverless car market that emerged in the telecoms sector in cases such as Unwired Planet v Huawei.

Beyond this challenge, automotive companies are also compelled to consider future licensing tensions and those that arise from the creation of cross-collaborative projects.

The clash has come about because of the sudden influx of new players into the automotive industry to meet the demand for technologies needed to build driverless cars – from radars and ultrasonic sensors to artificial intelligence software and 5G systems.

As well as big players in the software and telecoms sectors such as Intel or Qualcomm, car companies are working with hundreds or thousands of SME or start-up companies with specialisms in tech specialities such as AI to develop these self-driving cars.

Statistics on top patent filers for driverless car technologies released by the European Patent Office this month illustrate the number of different companies and sectors in the market and their stake in it. Out of the 25 top European patent filers, only nine were automotive companies and only one of those ranked in the top five.

Who should drive?

Automotive company sources argue that their companies should not be the ones to take out a licence because of a potential lack of expertise in various driverless car components.

The automotive parts IP manager points out that car makers could always look to a patent claim to determine if they were infringing a patent in the past. But because of the convergence of unfamiliar telecoms technologies in driverless cars, determining infringement of an SEP and working out a licence agreement is much more challenging.

"When Apple and Qualcomm, for example, get together to license a communication patent, each side has people that will be familiar with the technology," he says. "But when it comes to driverless cars, automotive firms could have no idea whether they’re using a patent or not."

The senior patent manager at a global car manufacturer says that a good solution may be to have module manufacturers take a licence because they are in a better position to identify infringement.

He adds that automotive companies are trying to convince courts and politicians to give suppliers a right to request a licence – which is not happening at the moment because an SEP holder can choose who to license to in the supply chain.

The fact that automotive companies have such large supply chains for driverless cars, he points out, also raises the risk of a supplier taking a licence without the company knowing about it and leading to 'double dipping’.

In-house counsel at telecoms companies may be less convinced. The head of litigation at a global telecoms company says automotive businesses have an obligation to develop their expertise in the technologies that form their autonomous products.

"I do believe when they say they have no idea – they have to face the fact that if they enter a new market they have to learn the skills," he says. "If I become a doctor I should learn how to do surgery or else not enter the profession.

"There are enough people around who can give legal advice – car companies have IP departments of 30 or 40 people and should be able to do this."

Christine Maury-Panis, general counsel and security at Viaccess-Orca, a subsidiary of Orange, says that as this tension develops, the industry will likely see large car companies swallow up SME and start-up firms to bring the necessary expertise of telecoms modules in house.

"Yes I think that merger and acquisition will happen," she says, adding that the trend is coming.

Road to valuation

A lack of expertise in driverless car components would also make it difficult for car manufacturers to determine how much a licence would be worth, according to in-house sources.

The head of licensing at a global car manufacturer (the same company as the senior patent manager) points out that, due to exhaustion issues and other rights, the value of a licence should cover that of the entire supply chain.

But that is a particularly difficult prospect for automotive companies that have huge supply chains that provide unfamiliar technologies.

"If you think about 5G, which will require a larger spread of tech, there will be many more modules with different capabilities that need different patents, which will come with different royalties.

"And if you have hundreds or thousands of SMEs producing products for connected tech, it is unlikely that many will have the technical expertise or patent or IPR knowledge to really negotiate licence agreements - and it is going to be a nightmare if we do not find a way of streamlining these licensing costs."

The telecoms head of litigation says telecoms companies could smooth this valuation process by making their rates more transparent and easily accessible.

"I think for example, if every SEP owner had a standard rate and made it public – via a patent pool such as Avanci, for example – it would streamline the process."

Other parties

But should automotive firms and current SEP owners bury the hatchet in the near future, that result might not mean the end for licensing tensions in the industry. The number of parties that automotive companies have to deal with when it comes to SEPs and the clash of licensing cultures may increase as the products become more sophisticated.

The IP adviser of a global car manufacturer points out regulatory bodies could begin to have more of a say over how a driverless car should operate, and may force companies to collaborate on and license their inventions.

That raises a new challenge for automotive companies that they need to work with traditionally aggressive licensors and litigators, such as Google or Apple, when they’ve traditionally taken a more lenient approach.

Maury Panis at Viaccess-Orca agrees, and adds that we may see an industry trend of different players with different licensing habits working together, where perhaps one is used to monetising assets for large amounts. 

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