Diversity and Inclusion - best laid plans
Fintech meet up
Out-Law Analysis | 13 Apr 2018 | 11:52 am | 5 min. read
The importance of having a robust patent strategy stems from the fact that innovative products in the connected and autonomous vehicles (CAVs) market will be unable to operate effectively unless they are developed using standardised technology.
Wireless communication technologies allow these vehicles to link to their surroundings and, for example, identify potential risks in real time. These technologies are, on the whole, standardised. Standardisation ensures that the vast number of devices and systems supporting the operation of CAVs produced by a range of entities are interoperable. Without interoperability, the cars of the future will not be able to interact properly with their surrounding environment, from underlying road and traffic infrastructure to other vehicles.
There are opportunities for businesses in the automotive sector to secure a strong position in this emerging market by adopting an appropriate patent strategy.
Connected and autonomous vehicles technologies
A connected car is a car equipped with internet access, and usually a connection to a wireless local area network. Connected cars are therefore able to communicate both with the car’s external environment and with the passengers' handheld devices inside the car. This technological shift provides tremendous opportunities for automotive companies that embrace this step change.
The cars of the future promise to operate much in the same way as a smartphone does today – they will themselves be devices capable of transmitting and receiving data.
Communications technologies are at the heart of this information exchange and will operate in conjunction with the vehicle's hardware, cloud-based software solutions, sensors and other 'internet of things' (IoT) technologies.
New technologies and use cases will develop over time. However, existing technical standards used in mobile communications are relevant and indeed critical to the smooth operation of today's CAVs. This includes, for example, technical standards providing for 'handover' between 'cells' – a core principle in ensuring that connections are not dropped as a mobile handset user moves between different areas.
The role of standard-essential patents
Standards are typically developed by standardisation organisations (SOs), whose members consist of market participants in the respective industry sector. During the course of developing a particular technical standard, SO members put forward proposals for specific functionalities that the standard should have, typically based on their research and development which they have patented or seeking to patent. If a patented technology becomes part of a standard and it is mandatory to implement the particular feature as part of the requisite standard, such patents are designated as standard-essential patents (SEPs).
However, just because technology is standardised doesn’t mean it is free. The SEP holder can ask implementers to pay a royalty for using that technology. However, the technology included in the standard should be available to any potential implementer of the standard and the holder of an SEP must license on fair, reasonable and non-discriminatory (FRAND) terms.
Where the implementer of a standard-compliant product does not have a licence to the SEP, or is unwilling to license, then the patent holder may raise claims against them for infringement based on 'essentiality' to the technical standard.
Demands from a SEP holder must be managed carefully in order to balance concerns related to competition law and businesses accessing existing standardised technologies must also be mindful of the interface of the FRAND licensing rules for SEPs with competition law.
Any connected device, including CAVs, will involve a multitude of SEPs declared to various technical specifications. The sheer number of patents that may need to be licensed to use some technologies means that it is no longer possible to rely on individually assessing patents in freedom to operate exercises.
Patent strategy options
Despite their expertise in designing and manufacturing cars, automotive businesses will be unable to deliver connected and autonomous vehicles without accessing standardised technology predominantly in the wireless space. Conversely, technology companies sitting on patent portfolios and eager to exploit the opportunities presented by CAVs, lack many of the skills, networks and infrastructure to manufacture the vehicles themselves.
This is why many businesses across the automotive and technology sectors in recent times have moved to collaborate. We have seen automotive businesses acquire technology companies, enter into joint venture arrangements and otherwise engage in new models of contracting to underpin bilateral or multilateral partnerships.
Outside of collaboration arrangements, it is also open to businesses to acquire existing portfolios of SEPs or agree licenses with patent rights holders for their use. Even established businesses in the automotive market may find it useful to develop their own patent portfolio for leverage in negotiations over cross-licensing.
There are also opportunities for businesses in the automotive sector, not previously involved in standard setting, to innovate and look to get the solutions they come up with adopted as part of new technical standards from which they can derive future benefits.
A cultural challenge for the automotive sector will be considering these patents more as an income generator rather than as a cost centre. SEPs require an initial investment in terms of R&D, and then getting the technology covered by the SEP adopted into the standard takes time and energy. The potential advantage of this investment, however, is huge as that SEP becomes a potential revenue stream of its own.
Risk of litigation
The adoption of new and existing wireless technologies in cars, together with new players entering the market, is likely to contribute to a more litigious climate in the future. There are a number of reasons for this. Competitors may look to patent litigation to preserve or even increase their market share. There is another risk, however, not previously known to the automotive sector.
A number of non-practicing entities (NPEs) have already acquired patents that may be relevant to CAVs. The diverse technologies that make up the IoT provide NPEs with many points of attack, and given that established companies in the automotive and technology sectors have been investing significantly in developing new IoT technologies tensions over patent rights are likely to develop. The story so far with NPEs in the mobile phone world has been to target well-funded new entrants to the market and, preferably, the seller of the end product, as opposed to component suppliers.
We have also seen well-known patent licensing companies express an interest in acquiring patents for technology relevant to electric and autonomous vehicles. However, NPEs will already have patents in their portfolios that cover technologies implemented by CAVs. Currently, it is communications technologies that are the main patent risks for businesses in the automotive sector. There are vast numbers of patents applicable to the Wi-Fi, 2G, 3G, and 4G (LTE) standards. Cars developed with 'wireless' connectivity capabilities and sold as "standards-compliant" will be susceptible to these patents.
With many of these existing communications technologies relevant to CAVs, a new front is opening in the smartphone patent wars as we see more litigation in the CAVs market.
Mark Marfé is a specialist in intellectual property law at Pinsent Masons, the law firm behind Out-Law.com. Experts from Pinsent Masons will be discussing the future of electric, connected and autonomous vehicles at the Financial Times Future of the Car summit 2018 event in May.
Diversity and Inclusion - best laid plans
Fintech meet up