A brief history
Since 1903, when Henry Ford was a defendant in a patent lawsuit for infringing US patent No. 549,160, the automotive industry has been innovating, protecting and enforcing its technology on a regular basis. Until the 1960s, automotive technology was all about what's under the hood and, perhaps, the look of the machine, so innovation was concentrated on engines, transmission, tyres and shape. Electronics had little or no role to play until 1968, when Volkswagen introduced a vehicle with a computer-controlled electronic fuel injection system. The industry got its first taste of electronics and, ever since, has had several electronic firsts – from the computer controlled transmission (1971), to the computer controlled "trip computer" (1978), to emission control (1980), to powertrain and transmission (1991) and much more. However, even with this evolution, innovation stayed with the traditional players – General Motors, Chrysler, Daimler, BMW, Porsche etc.
The first entry of an outsider was, perhaps, in 1986 when Carnegie Mellon University's computerised self-driving, autonomous car (Navlab 1) hit the road, signalling the onset of change. As one author puts it, cars started evolving and became "essentially computers on wheels" and the industry moved from engines and tyres to WiFi, cellular technology, mapping, connectivity, voice commands, GPS, and much more. Then, with the entry of Tesla (2003), the industry saw consumers preferring electric/clean energy vehicles and that led to a new direction in automotive technology. One report projects that by 2025 more than 250 non-petrol/diesel car models will be available, up from two in 1997 and 98 in 2019. In recent years, with Tesla's driverless car project and the entry of Waymo (2016) and similar players, the industry has seen a further shift towards artificial intelligence and vehicle IoT with sensing, gathering, processing and sending data now being the way forward in automotive research and development. Consumer adoption of these technologies is also very high. After all, how many of us have picked a car based not on engine performance, but because of features like parking assist, rear-view camera, bluetooth technology or, for that matter, the car being an electric non polluting vehicle?
Developments and the future
So, what does that mean for the automotive industry? In simple terms, the innovation and protection paradigm is shifting (or has shifted). One author suggests that most automotive inventions are going to be directed towards improving computer technology and, particularly towards providing a practical application that improves the functioning of a computer or other technology. Patent filing trends substantiate this premise because, since 2009, the growth in patent filings has been in non-traditional areas. A US-based study indicates that highest growth was in technologies associated with vehicle controlling systems, ancillary vehicle systems, AI-integrated vehicles, and vehicle navigation systems, while patents relating to internal combustion engine technology have been decreasing since 2014. What's more is that outsiders are stepping up their share of inventions relating to the auto industry. Google leads the patenting of self-driving/autonomous vehicle technologies and IBM has a high concentration of autonomous vehicle software patents. Moreover, seven of the top 10 patent filers in the connected car technology space in the US are not automotive companies.
Simply put, automotive companies are now competing with technology companies, and are therefore navigating through the minefield of patenting computer-related inventions (CRIs). What seemed to be someone else's problem a decade ago is now relevant table talk for automotive companies. Patent strategy has to now take into account subject matter eligibility criteria for CRIs, guided by judicial interpretation in Alice Corp. v CLS Bank International, 573 U.S. 208, and its progeny and, closer to home, India's handling of CRIs under Section 3(k) of the Patents Act, the patent office's CRI Guidelines and the Delhi High Court's recent decision in Ferid Allani v Union Of India (2019).
Another change in the industry is that many significant technologies are being developed by hundreds of small suppliers who own the know-how and, therefore, the patents in these technologies. Non-practising entities have been known to take advantage of such a diffusion of patentees by purchasing patents and then leveraging them to earn the maximum profits through licensing on terms which could be detrimental to the actual industry at which the innovations were initially aimed. Thus, there is an increasing need for collaboration with such patentees so that they are not enticed by non-practising entities to sell the assets, which many believe will muddy future patent battles.
In addition, there is the added complication of standard essential patents (SEPs). With respect to communication alone, technologies that vehicles will need to communicate with their environment, such as the Global System for Mobile Communications (GSM), Universal Mobile Telecommunications System (UMTS), Long-Term Evolution (LTE) and Near Field Communication (NFC) have hundreds of SEPs and dozens of players. This means that SEP royalty rates will add to the cost of each vehicle, and will bring into play SEP battles. Automotive companies will therefore also have to understand (and manage) FRAND licensing terms, or risk an injunction.
It is clichéd, but in the end, the automotive companies that survive this changing paradigm will be the ones that think outside the box and decide a patent strategy that takes into account all of the above to ensure survival and longevity.
Pankaj Soni
