Resolving AV ownership and licensing issues
Since the first semi-autonomous Navlab and ALV vehicles emerged from Carnegie Mellon University in the 1980s, self-driving vehicles have been powered by a complex combination of disparate technology. It’s been a long and bumpy road for automakers to figure out how to incorporate the tech they need without inviting patent conflicts.
It was predicted that historically nonlitigious car companies might overcome their hesitancy to sue one another over alleged patent infringements. The expanding scope of intellectual property (IP) and introduction of new players might expose manufacturers and suppliers to an increase in IP litigation. Carmakers and suppliers would need to develop, purchase, or license a great deal of technology that falls outside the scope of their traditional product development, which would be prohibitively expensive.
Have any of these predictions come true, what other issues relating to innovation have arisen, and what’s expected in the near future? Mauricio Uribe, a partner in the Seattle office of Knobbe Martens, answers a few questions:
Q: Are historically nonlitigious car companies overcoming their hesitancy to sue one another over alleged patent infringements?
A: With regard to IP, the automotive industry is well-versed and sophisticated in terms of not only how companies develop complex, global patent portfolios but also in how IP can be enforced to be monetized or to influence market share. In fact, the automotive industry was an early proving ground for the development of countering offensive and defensive theories in patent litigation with the 1903 assertion of the Seleden patent portfolio on the automotive industry against emerging manufacturing companies such as Ford. While patent litigation did not disappear entirely in the automotive industry, the evolution of the automotive manufacturing industry into the organized hierarchy of OEMs/manufacturers and tiered suppliers (e.g., Tier 1 suppliers, Tier 2 suppliers, etc.) lent itself to the perception of hesitancy for industry participants to engage in widespread patent assertions and counter assertions. More specifically, because the same supplier or set of suppliers provided mechanical components to multiple OEMs, business relationships between the tiered suppliers and the manufacturers often deincentivized patent assertions in the marketplace. These same business relationships and pressures continue to exist today and continue to preserve the general patent assertion litigation among the traditional automotive industry participants.
However, it seems more appropriate to conclude that it is the dissolution of the traditional tiered supplier value chain by the incorporation of additional technologies and inclusion of additional, nontraditional vendors/suppliers that likely has provided the greatest change in terms of the assertion of patents within at least portions of the automotive marketplace.
Q: Is the expanding scope of IP and introduction of new players exposing manufacturers and suppliers to increased IP litigation?
A: Traditionally, the automotive industry value chain could have been modeled with the OEM/manufacturer at the top of the value chain followed by Tier 1 suppliers and one or two additional subcomponent tier suppliers (e.g. Tier 2 and beyond). As the top of the value chain, the OEMs had greater control or influence as to the exposure by lower tiers of the value chain.
The development of new technologies within the traditional lower tiers, such as video technology, sensors, etc., have injected new nontraditional vendors into the value chain. These suppliers often do not adhere to the same patent litigation-resistant strategies that were previously established in the automotive industry. Moreover, many of these technologies, such as video compression technology or short-range wireless communication, are already associated with higher levels of patent assertions. This results in an almost immediate exposure of the automotive industry to “external” patent threats simply by virtue of adoption of such technologies.
Additionally, OEMs no longer represent the “top” of the automotive industry value chain in the current era of advanced vehicle technologies/connected vehicle technologies. For example, additional technologies and services, such as data and network services, machine learning/AI decision making system, and data brokerages, now represent higher levels of the value chain. OEMs/manufacturers are now exposed to additional patent assertions/threats related to utilization/incorporation of the services/products provided by the new, higher tiers of the current automotive industry value chain.
Q: Have carmakers and suppliers’ needs to develop, purchase, and/or license a great deal of technology that falls outside the scope of their traditional product development proven more expensive than anticipated (and what has the resulting impact been)?
A: The addition of additional technologies and inclusion of new suppliers/vendors, as discussed above, creates two areas of increased costs for the traditional OEMs/vendors of the automotive industry.
First, to the traditional OEMs/vendors, the technologies and corresponding products are outside of the scope of their technological expertise and business relationships. For example, a Tier 1 supplier providing a cellular-based communication component may source a cellular communication chipset from a mobile provider without need to have in-house technical expertise as to how the chipset specifically functions to implement the wireless air interface standards (e.g., LTE) and without developing or engaging the business relationship typically included in product development. This results in additional costs, however, in the event of patent assertions against the Tier 1 supplier based on implementation of the cellular-based communication component. In such scenarios, the traditional OEM/vendors, such as the exemplary Tier 1 supplier, incurs additional costs as embodied in increased technical and legal costs to defend against the assertions as well as lacking the business relationships/knowledge that often play a role in resolving such assertions.
Second, OEMs/manufacturers are increasingly becoming targets for patent assertions against new technologies being adopted in the automotive industry simply because automobiles/vehicles present a likely greater royalty basis for patent assertions. With reference to cellular technologies, for example, patent holders asserting patents that are directed to the wireless air interface standards and have no specific tie to automobiles, could launch specific, targeted patent assertion campaigns targeting royalties based on the vehicle as the royalty basis. This not only results in more expensive costs to defend, but also increases the risk profiles carried by OEMs/manufacturers in managing patent assertions.