2 November 2020News
Over the last decade, the automotive industry has quickly built connectivity in cars, introducing GPS-based navigation systems in 2003, Bluetooth functionality in 2006, Wi-fi and 4G between 2008-2012 and streaming services in 2014. While the “smartphone patent wars” peaked during this period, the automotive industry was left unharmed and continued implementing the latest connectivity solutions to bolster safety measures and added value for their customers. As it is common practice in the automotive industry, the suppliers in the respective tiers – if at all – contractually agreed to obtain the necessary licenses for the use of these technologies.
Automotive Licensing Offers: While the smartphone patent wars increased the license-saturation in the mobile phone industry, the end user prices also declined significantly, particularly in the low-price segment for smartphones. Although sizable, the price sensitivity in the smartphone market led to tough license negotiations, often requiring years of litigation.
It is understandable for big licensors to explore other avenues for their license offers – finding premium (and connected) automobiles an ideal market-segment with high implementation rates, very low numbers of licensed products and very high-end user prices. A $USD 50k+ vehicle would be unsellable if a low double-digit dollar license was added to the sales price? Pooled offers like Avanci (2016) or Via, along with standalone offers like Broadcom (2015) and others began to emerge.
The “Uh Oh” Moment
Then came the sizable lawsuits, with Broadcom sueing Volkswagen in 2017 over automotive connectivity asserting a Billion-Dollar claim; infringement campaigns against BMW and Daimler followed in 2019. While BMW quickly paved the way for Avanci’s license offer by taking an automotive license in 2018 with Volkswagen and Volvo to follow shortly afterwards in 2019, Daimler was not willing to conclude any patent license agreements and was consequently sued by three Avanci pool members in early 2019. Daimler decided not to settle but stood up to the claims by Nokia, Sharp and Conversant in a full-blown patent battle involving different tiers of suppliers, anti- and anti-anti-suit injunctions, antitrust complaints and even public campaigns to change the law.
The costly efforts by Daimler and its suppliers to evade payment obligations could not save the car manufacturer before court. Even though the European Commission proposed an arbitration solution, and German anti-trust authorities sent a first-time-ever amicus curiae brief to all seized courts trying to spare Daimler and asking the courts to refer the cases to the Court of Justice of the European Union, the courts in Munich and Mannheim rendered injunctions based on Sharp, Nokia and Conversant patents. These verdicts were an imminent threat and could be used to enforce a production and sales ban in Daimler’s very heartlands.
Learn from similar assertion cases and always have a proper defense strategy up your sleeve.
Daimler and its suppliers put together a sound IP defense strategy with one major flaw: it was more than a decade too late. While Daimler sold products that implemented the latest state of wireless connectivity and used these to compete especially in the luxury segment and gain market shares, it simply pushed the IP-related business implications on its suppliers and relied on contractual indemnity clauses. Whether the suppliers conducted proper freedom-to-operate searches and actually tried to collect the required licenses was not tracked until the patent battle dawned upon the car manufacturer.
Patents that could have been used as bargaining chips for a cross-license for Nokia’s infrastructure offers and Sharp’s handheld and TV offers have been sold throughout the past decade, patents for autonomous driving chips and more are in fact listed right now on the IPwe private listings. If car manufacturers and/or suppliers are not interested in these, they might well lead to the next litigation in the space.
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