Does the automotive sector's trend toward innovating hint at a potential increase in the risk of litigation? - Ingenious e-Brain

Does the automotive sector’s trend toward innovating hint at a potential increase in the risk of litigation?

Today’s economies are evolving phenomenally, driven by development in diversified sectors, the constant introduction of sustainability policies & innovative technologies, along with the changing consumer preferences around ownership. Digitization and Artificial Intelligence have penetrated almost all industries, and automotive will be no exception.

We’ve observed, and are still witnessing, the explosion of innovation and technological adaptation in the automotive industry. There have been huge leaps in technology and usage in electric vehicles (EVs), connected vehicles, and autonomous cars, and the trajectory is still ascending. Hence, automakers must be skeptical of potential IP infringements due to their increasing reliance on non-traditional technology suppliers.

Changing bond strength between patent owners and automakers with time

Historically, the technology transfer deals between the suppliers and car manufacturers were quite straightforward, as the patent owners were unwilling to enforce their patent monopolies against automakers. The major reason behind such reluctance was that their existing clients (automakers) might stop purchasing other technologies from them. Thus, even after acquiring the specific technologies from patent owners, the car makers didn’t have to stress about any patent infringement cases.

An example of this dynamic was seen in BASF Corporation & Ors v Carpmaels And Ransford (A Firm) [2021] EWHC 2899 (Ch). The judgment referred to a 2015 meeting between BASF and Audi, during which BASF complained that one of its competitors was selling a product to Audi without freedom to operate (effectively infringing the BASF patent rights). Audi responded by stating that one of its ‘strategic’ options was to stop buying a range of products from BASF, and to undertake “no further cooperation with BASF”.

However, the scenario is different in several important respects.

The extension of SEP litigation to car manufacturers:

The advent of connected vehicles has already seen some car manufacturers getting caught up in litigation started by telecoms and/or Wi-Fi patent owners. This sort of litigation has previously only been an issue for large telephone manufacturers like Apple and Huawei, but car manufacturers are increasingly becoming high-value targets. The most obvious example of this is the global litigation between Nokia and Daimler (now the Mercedes-Benz Group), which was finally resolved by the parties agreeing to license terms in 2021, pursuant to which Nokia agreed to license certain mobile telecommunications technology to Daimler. Such incidences raised several important issues relating to the market power of standard essential patents (SEPs) owners and which parties in a supply chain are entitled to a license on so-called FRAND (Fair, Reasonable, and Non-Discriminatory) terms under standard-setting organizations’ patent policies. SEPs are patents that are essential to a certain technical standard (such as 5G). If a telephone manufacturer or a car manufacturer sells products that operate in accordance with the relevant standard, then that manufacturer will infringe the SEP unless they have the consent of the SEP holder. This can make infringement simpler to prove for SEP holders.

Car manufacturers increasingly rely on ‘non-traditional’ suppliers:

Second, the explosion of innovation means that potentially relevant patent owners are not just the traditional automotive industry suppliers – they could be companies never thought relevant to the automotive industry until recently. For example, they could be companies with patents relating to older (non-EV) electric motors, batteries, charging, radar, lidar, optical sensors, and many others, apart from telecoms and Wi-Fi.

These companies may not be as reluctant to assert their patents as typical, historic suppliers to the automotive industry. They may not be subject to the same pressures because they may not depend on the automotive industry for most of their product sales; their patents and businesses may not solely focus on the automotive industry.

Further standardization is coming down the line:

Finally, to connect both the issues discussed, many of the systems and methods related to the above technologies (aside from telecoms/Wi-Fi) are not yet standardized. However, their standardization is, in many cases, coming down the line, and with increasing speed as EV technology, driverless vehicles, and connected vehicles become more common. Once that happens, many, if not all, of the legal issues that apply to SEPs and FRAND licensing in the telecoms/Wi-Fi worlds will also apply to patents in those other technologies. Therefore, non-practicing entities and even entire patent pools emerging with respect to patents in these technologies are likely being observed.

To stay ahead, car manufacturers should:

  • Keep abreast of SEP litigation and the law relating to the licensing of SEPs
  • Secure freedom to operate with respect to non-supplier patent holders.
  • Remain involved in standardization processes to ensure that as much standardized technology as possible is available on an open-source basis.

 

Reach out to our IP experts to pragmatically deal with such patent litigation-related lawsuits in the automotive industry by emailing us at contact@iebrain.com

 

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