Patents and the automotive industry – an explosion of litigation could be coming

Car manufacturers need to be wary of potential IP infringements as they increasingly rely on non-traditional tech suppliers, write RPC lawyers Matthew Jones and Ricky Cella

The introduction of telecoms and Wi-Fi tech into cars can increase IP risk Shutterstock

We have seen, and are still in the middle of, an explosion of innovation and technological adaptation in the automotive industry. There have been huge leaps in both technology and usage in relation to electric vehicles (EVs), driverless vehicles and connected vehicles, and the trajectory is still upward.
The historic relationship between patent owners and car manufacturers
Historically, there has been a good relationship between suppliers of patented technology and car manufacturers with respect to intellectual property. Suppliers have been reluctant to enforce their patent monopolies against car manufacturers because they are aware that, if they do so, those manufacturers may stop buying other products from them. As a result of this, car manufacturers have, by and large, been insulated from patent infringement lawsuits.
An example of this dynamic was seen in BASF Corporation & Ors v Carpmaels And Ransford (A Firm) [2021] EWHC 2899 (Ch). The judgment referred to a 2015 meeting between BASF and Audi, during which BASF complained that one of its competitors was selling a product to Audi without freedom to operate (effectively infringing the BASF patent rights). Audi responded by stating that one of its ‘strategic’ options was to stop buying a range of products from BASF, and to undertake “no further cooperation with BASF”.
However, this situation is changing in several important respects.
The extension of SEP litigation to car manufacturers
First, the advent of connected vehicles has already seen some car manufacturers getting caught up in litigation started by telecoms and/or Wi-Fi patent owners. This sort of litigation has previously only been an issue for large telephone manufacturers like Apple and Huawei, but car manufacturers are increasingly becoming high-value targets. The most obvious example of this is the global litigation between Nokia and Daimler (now the Mercedes-Benz Group), which was finally resolved by the parties agreeing licence terms in 2021, pursuant to which Nokia agreed to license certain mobile telecommunications technology to Daimler.
The various complaints and actions that comprised the Nokia and Daimler dispute are beyond the scope of this article. Suffice to say that it raised several important issues relating to the market power of standard essential patents (SEPs) owners, and which parties in a supply chain are entitled to a licence on so-called FRAND (Fair, Reasonable and Non-Discriminatory) terms under standard-setting organisations’ patent policies.
SEPs are patents that are essential to a certain technical standard (such as 5G). If a telephone manufacturer or a car manufacturer sells products that operate in accordance with the relevant standard, then that manufacturer will infringe the SEP unless they have the consent of the SEP holder. This can make infringement simpler to prove for SEP holders.
Car manufacturers increasingly rely on ‘non-traditional’ suppliers
Second, the explosion of innovation means that potentially relevant patent owners are not just the traditional automotive industry suppliers – they could be companies never thought relevant to the automotive industry until recently. For example, they could be companies with patents relating to older (non-EV) electric motors, batteries, charging, radar, lidar, optical sensors and many others, in addition to telecoms and Wi-Fi.
These companies may not be as reluctant to assert their patents as typical, historic suppliers to the automotive industry. They may not be subject to the same pressures because they may not be dependent on the automotive industry for most of their product sales; their patents and their businesses may not be solely focused on the automotive industry.
Further standardisation is coming down the line
Finally, to marry the two issues discussed, many of the systems and methods related to the above technologies (aside from telecoms/Wi-Fi) are not yet standardised. However, their standardisation is, in many cases, coming down the line, and with increasing speed as EV technology, driverless vehicles and connected vehicles become more common. Once that happens, many, if not all, of the legal issues that apply to SEPs and FRAND licensing in the telecoms/Wi-Fi worlds will apply to patents in those other technologies as well. We may therefore see non-practising entities and even entire patent pools emerging with respect to patents in these technologies.
Staying ahead
It is important that car manufacturers (and those advising them) keep abreast of SEP litigation and the law relating to the licensing of SEPs, for the purpose of negotiating with SEP holders. Of particular importance is further litigation and guidance on what constitutes ‘fair, reasonable and non-discriminatory’ under FRAND licensing regimes.
Car manufacturers should also consider: 

  1. securing freedom to operate with respect to non-supplier patent holders; and 
  2. getting involved in standardisation processes to ensure that as much standardised technology as possible is available on an open-source basis.

We predict an explosion of patent litigation in the automotive industry in the next five years or so. Now is the time to get ahead of these developments so as not to be caught off-guard.

Matthew Jones is a partner in RPC’s IP practice. He specialises in UK and cross-border patent disputes, and is experienced in FRAND licensing disputes. Ricky Cella is a senior associate in RPC’s IP and technology team.

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