Last week's most read article: Licensing or litigation? Next steps for resolving connected car tech tensions
Managing IP is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX
Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Last week's most read article: Licensing or litigation? Next steps for resolving connected car tech tensions

Nokia, Ericsson, Audi and Visteon discuss their concerns surrounding IP licensing and litigation in the connected cars industry

It is no secret that IP tensions have been bubbling away for some time in the connected cars industry. With automotive makers seeking to implement various technology in their cars, standard-essential patent (SEP) owners from outside the industry, including cellular specialists Nokia and Ericsson, have been keen to ensure that they are remunerated for use of their inventions. However, to date, patent owners largely have nothing to show for their efforts. 

One of the major problems, as Patent Strategy reported in November 2018, is who should pay for a licence – the car company, which sells the final product incorporating the patented technology, or a third party, such as a component supplier. As these discussions between stakeholders continue, it is fair to say that the deadlock is testing the patience of the patent owners.

Teemu Soininen, head of the automotive licensing programme for the Nokia patent business in Finland, says it concerns him that discussions are being dragged out, “because unauthorised use needs to stop”. Soininen, who reveals that Nokia is in licensing discussions with at least 20 car companies, warns that “at some point, these issues will need to be resolved,” adding that “the sand in the hour glass is drawing to an end for sure”.

Mathias Hellman, vice president of strategy and portfolio management at Ericsson’s IPR and licensing unit, says he is equally frustrated by the lack of progress, particularly because there is a solution: Avanci. The SEP licensing platform, which was set up by Ericsson’s former chief IP counsel Kasim Alfalahi, covers an array of technologies including connected cars. However, there has been just one major deal in this field – with BMW taking a licence to wireless technologies. Hellman says that he thought car companies would be willing to sign more deals. “In short, we’re not really happy with the progress,” he says.

“Usually we don’t have a hard time getting over the section 101 hurdle. There is no magic to this. But we do scrutinise the applications” Dalpreet Saluja, VisteonHellman believes that there is pushback on the $15-per-car royalty rate for the LTE standard, “but we firmly believe it is a good deal considering the value a car owner receives from the LTE connection”. Of course, he adds, pushback on price is always expected and features in almost all licensing negotiations.

Nevertheless, this appears to be the only major SEP licensing deal in this industry, and it poses the question of what happens next. For Soininen at Nokia, the BMW-Avanci agreement provides a strong indication that the level of royalty and point of licence can be acceptable. However, that brings us back to whether car companies and patent owners can find some common ground and potentially strike more deals. Hellman points to culture differences between the two groups, adding that the “indemnity deadlock,” whereby car companies have typically indemnified their suppliers, needs to be solved. “We want to find business solutions to this,” he says. “We are very patient, but we never go away. We want to collect what we are owed. We can wait a little more, but the pressure is increasing on us to collect this.”

Is litigation inevitable?

Asked whether litigation is the answer, Hellman says that it’s too early to know. However, he believes that if court cases do arise, they will be wasteful. He stresses again that Avanci offers a one-stop shop patent pool to avoid litigation. “If litigation happens, I will be a little sad that we didn’t solve this in a business way,” he explains.

His views seem at odds with those of Matthias Schneider, chief licensing officer at German carmaker Audi. Speaking in a personal capacity during a Managing IP webinar, Schneider said that courts will have to decide whether patent owners have met FRAND obligations when they have only approached an OEM for a licence rather than those in other parts of the supply chain. “I don’t think many people believe you can take the same percentage of a car as for a cellular unit, for example,” he explained during the discussion. “Automotive is no longer this island of peace – we are seeing patent fights coming,” he adds.

One company on the front line of the automotive industry is Visteon, the largest supplier focused exclusively on cockpit electronics. It is spearheading the transition of digital cockpits to autonomous driving. Dalpreet Saluja, chief IP counsel at the US company, admits that there are certain circumstances where OEMs or tier 1 suppliers will have no choice but to pay a licence fee. The question is just how much they will pay, with FRAND licensing issues coming into play, he says, “Negotiations need to be done fairly. There needs to be a level of transparency that doesn’t currently exist.” Saluja believes that in the US, at least, the inter partes review is one option available for challenging the validity of asserted patents. On the issue of potential litigation from a defensive perspective, he says that most plaintiffs he has dealt with have been fairly reasonable and been looking to settle. “If you’re willing to not make it too contentious, you’re willing to work with them, the party will be willing to work with you. It’s been a lot more fruitful than fighting it every time.”

Grappling with patentability

Aside from licensing, one of the biggest issues facing Saluja as chief IP counsel is how to protect Visteon’s inventions. The company is very focused on filing patents – both the design and utility versions – and as it moves towards more software products, that’s starting to change. He adds that trade secrets are “very prominent for us,” while Visteon is also looking to protect its software with copyright.

On the contentious issue of software patentability, Saluja agrees that it is becoming harder to patent such inventions in the US. “But the big misconception is that because it’s harder, it’s impossible,” he says. Visteon’s approach requires being more careful with what it includes in its patent applications, scrutinising them more, and making sure that they meet the right standards. Visteon is often free of software patent struggles because a lot of its software is tied to its hardware, .ie., something physical. “Usually we don’t have a hard time getting over the section 101 hurdle. There is no magic to this. But we do scrutinise the applications,” he says.

He adds that as artificial intelligence technologies become more prominent in the connected cars industry, there are questions about how to protect these, with patents and trade secrets being two possibilities. Amid these IP strategy dilemmas and the ongoing FRAND licensing disputes, Saluja concludes that the biggest questions right now concern what IP means in this industry and how it will be used. “These are the types of questions that keep me awake at night,” he concludes.

more from across site and ros bottom lb

More from across our site

Meet the esteemed judges who are assessing the first-ever Social Impact Awards
Lawyers debate whether the Supreme Court’s ruling helps maintain confidence in the trademark system
We provide a rundown of Managing IP’s news and analysis from the week, and review what’s been happening elsewhere in IP
The group of lawyers, which includes seven IP partners, say they were impressed by ArentFox Schiff's wide-reaching experience
Andy Sherman, general counsel at Dolby Laboratories, says the company will continue to make GE Licensing’s patents available through existing pools
CMS, which represents Nestlé, had been told to respond to a cancellation action by February 12 but filed its response a day later
Keith Bergelt, CEO of the Open Invention Network, explains why AI technologies were not part of an update to its cross-licensing project
Kirkland & Ellis partners explain how they secured the dismissal of a patent case in which the other side had lied under oath
Managing IP understands the association had been considering other options, including Madrid or Vienna, after concerns were raised over Dubai’s positions on various rights
Chris Marando tells Managing IP that he's excited to work on PTAB matters at Perkins Coie, which recently hired another lawyer from his former firm
Gift this article