Warning: heavy workload ahead
It used to be so much simpler. A car was a motorised metal box that got people from A to B. Legally, manufacturers might have to protect their brands, car body shapes or engine technology from copying. Or they might have to settle the odd dispute with a supplier. But everyone was in the same industry. Things rarely got out of hand.
Now it’s different. A car is fast becoming a smartphone on wheels. Connectivity is increasingly essential. It lets cars send signals to emergency services when they’re in accidents. It helps drivers access their Spotify playlists, find their way round cities and spot issues with their cars before they turn into big repair bills. In 10 or 20 years, driverless cars will be talking to each other on smart roads. But wireless standards like 4G (and soon 5G) are already as much a part of cars as their clutches or exhausts. And the complexity of wireless standards essential patents – patents that cover the essential tech for this new connectivity - means legal letters might soon start appearing in your in-tray.
Preparation cuts potential patent pain
If you’re a car manufacturer, technology could open a new world of competitive advantage. But it could also open a costly world of legal pain unless you’re well prepared and able to unravel who’s involved in the technology you’re using. The same goes for suppliers, who could also be exposed to the kind of wrangling that’s long been common in telecoms. And if they’ve indemnified manufacturers, they could be fielding even more IP claims.
Wireless accounts for a small percentage of the technology in new cars. But that will ramp up significantly as cars become more connected and go fully driverless. This will see owners of standards essential patents become stronger in licensing negotiations. And they won’t be afraid to go after as big a chunk of auto industry revenue as they think they can get given their need to get a good return on their large research and development budgets.
So, while two telecoms tech vendors can often partly cancel each other out in a patent dispute, the balance could be a lot less equal when tech squares up to automotive.
To tackle any legal disputes, there are three things you need to consider.
Know your risks
Negotiating with the holder of standards essential patents means being prepared. Understanding that not all declared essential patents are technically essential is a good start. Standards essential patents reports are a vital investment. They catalogue all the patents in a given field of technology and show whether or not they’re technically essential. They also show how big that field is. Both are key factors in working out a possible royalty bill. And knowing that potential bill can strengthen your negotiating position significantly.
One of our reports has been crucial in limiting the royalty bill in a recent case about Wi-Fi essential patents. Innovatio IP Ventures LLP claimed that thousands of US restaurants, coffee shops, hotels, grocery stores and others were infringing patents by offering Wi-Fi to their customers. To counter this, Wi-Fi equipment suppliers like Cisco, Netgear and Hewlett Packard used our report to show the true value of Innovatio’s patents. This saved the companies millions.
Build the right team – inside and outside
The ideal situation is to know where you stand before a licensing demand arrives. And again, that means being prepared. Bring together a team, preferably with telecoms experience, that can quantify risk, model data (such as royalty demands vs. paid royalties in telecoms and how that varies in the auto industry) and map how patent holders are likely to make demands. This way, you always know your long- and short-term position well enough to plan a response to a patent owner.
Alongside patent data, you’ll need professional insight about patent holders’ likely negotiating tactics. The licence deals they do are mostly one-on-one and any reports are usually redacted, so that knowledge isn’t readily available. It comes from those with first-hand experience of such negotiations and companies. This could tell you, for instance, whether you’ll get a better deal if you’re the first to settle over a certain technology. So it’s important to establish relationships with potential advisors in different jurisdictions.
The better you understand the market, the clearer you’ll be on other issues, like rolling patent risk into your pricing and how to negotiate with suppliers. Building a database of your supplier agreements, including information on indemnification, might sound time- consuming but it could be very valuable ahead of patent negotiations.
A big legal dispute can be a drain on resources in more ways than one - it could monopolise management time, make investors nervous and run up steep legal fees. An efficient, planned process where everyone knows their roles will help avoid this. That means being clear about the team handling the dispute, including lawyers and IP consultants - who does what, who approves what, when to involve the board, and when and how to talk to shareholders.
As you venture into this fast-emerging environment, it could also pay to consult with telecoms businesses who have already learned the lessons.
The world of technology licensing is one the automotive industry is still discovering. But by taking these steps, you’ll be better equipped to deal with any bumps in the road.