Ben Husband

Ben Husband

Car buyers now face an overwhelming number of driver-assistance options, including systems which help drivers to:

  • maintain a safe speed and distance to the car in front;
  • monitor blind spots for safe overtaking; and
  • ensure that drivers stay within a particular lane.

As well as driver assistance, software can integrate a smartphone with a car’s infotainment system, such as Apple’s CarPlay, Google’s Android Auto or the Car Connectivity Consortium’s MirrorLink.  The next generation of driver assistance will include so-called ‘connected cars’, which could remove a driver from direct involvement in driving their car. These systems will require the communication of large amounts of data between cars, and between cars and other infrastructure.

In recent years, standardisation has been hugely important to the telecommunications industry to safeguard compatibility between handset providers and operators. Similarly, connected cars will require cross-compatibility to ensure that cars from different manufacturers can communicate with each other.

Standard-setting organisations (SSOs) have been instrumental in developing telecommunications standards. For example, the European Telecommunications Standards Institute is developing standards for car-to-car and car-to-infrastructure communications as part of its intelligent transport systems standards project.

Established car manufacturers are developing much of the new connected car technology. However, other technology companies are becoming involved. For example, Microsoft recently announced a new patent licensing agreement with Toyota that includes broad coverage for connected car technologies. This is unsurprising, since the nature of connected car technology means that technology companies, with their enormous experience in developing communications, software and data-processing technologies, are ideally placed to work with established car companies ‒ the collaboration and licensing opportunities would be substantial.

What impact might this have on the automotive industry in terms of intellectual property? In the telecommunications sector, patent holders declare their standard-essential patents to a relevant SSO.  Indeed, most SSOs require that companies involved in the standard-setting process do this.  As part of this declaration, the patent holder must agree to offer licences on fair, reasonable and non-discriminatory (FRAND) terms. The overall aim is to increase uptake of the relevant standard, while also rewarding those who contribute to the standard-setting process and the technological field.

Licence agreements and royalty rates would then normally be agreed between the standard-essential patent holders and implementers. If there is disagreement as to what FRAND rate is applicable, patent disputes are handled by the courts. Even though the dispute may be over small percentages of a royalty, due to the vast number of handsets, the sums of money involved can be substantial. Most FRAND disputes have ended up settling before judgment, or no guidance has been offered by the courts as to what royalty rate is appropriate under FRAND terms. However, in the recent and well-publicised dispute of Unwired Planet v Huawei Technologies in the UK Patents Court, Justice Birss provided guidance on royalty rate determination.

Birss handed down his judgment relating to various mobile phone standards and provided welcome guidance as to how FRAND royalty rates should be determined on a worldwide basis. Patent holders now have some clarity with regard to how FRAND disputes could be decided if they end up in court, and the repercussions could be felt well beyond the telecommunications sector.

With standardisation increasing in the automotive sector, along with the amount of licensable technology ‒ particularly in the area of connected cars ‒ it seems inevitable that a similar type of FRAND dispute could arise. This could raid some interesting issues: for example, would a FRAND royalty be applicable to the cost of the car, or would it apply only to some component which uses the standardised and patented technology? The economics of the automotive sector is very different to that of the telecommunications sector. While the number of patents in the connected car sector is currently relatively low, the cost of a car far exceeds the cost of a mobile handset. It would also be difficult to identify information on comparable licences, which Birss used extensively in his Unwired Planet judgment.

Another interesting comparison between these sectors concerns the nature of the various entities involved. In telecommunications, the major patent holders and thus beneficiaries of licences have been the handset providers, while network operators ‒ whose networks the handsets use and which sell the handsets to customers ‒ have seen relatively little benefit from patent licensing. In fact, their margins have been squeezed as they must absorb the cost of the licences, rather than passing them on to customers.

Could a similar situation occur in the automotive sector? As with handset providers in the telecommunications sector, one can envisage technology companies ‒ which are increasingly involved in the automotive sector ‒ using their vast licensing experience and growing patent portfolios to squeeze the margins of the established automotive companies which, somewhat like the network operators, will merely provide a platform for new technologies as they become increasingly standardised and important to the consumer. To avoid this, car companies should invest in their patent portfolios and licensing departments and play an active role in SSOs.

In Unwired Planet Birss indicated that a final injunction removing products from the UK market should be awarded against a standards technology implementer if they are found to infringe a valid patent and refuse to take a FRAND licence, as determined by the court. In future, for companies in the automotive sector which refuse to play by the rules of patent licensing already established in the telecommunications sector, might we see cars removed from our roads under a court injunction?

It remains to be seen how connected cars will be realised and exactly which standards will be adopted.  However, given the interplay across technology sectors and competition between manufacturers, it is unclear whether the growth in technology will lead to increased patent filings and future disputes involving companies not traditionally known for operating in the automotive sector (eg, Microsoft and Google). Established automotive companies should be wary and ensure that they are not left behind.

For further information please contact:

Ben Husband
Carpmaels & Ransford LLP
www.carpmaels.com
Email: email@carpmaels.com
Tel: +44 20 7242 8692