2 May
2016

There'll be big ticket disputes in the auto sector, but thermonuclear war is not going to break out

With the smartphone patent wars all but finished, a US Supreme Court case notwithstanding, the search for the next big patent choke point is well and truly on. Arguments have been made for possible large-scale conflicts in sectors such as medtech, fintech, wearables, the cloud and the internet of things, but perhaps the most persistently forecast arena for a major conflab is the auto industry.

People look at increasing technological convergence, not to mention the rush to develop driverless cars, as well as new market entrants and the rise of Chinese companies as major players and they see the potential for an explosion. It is surely no coincidence that NPEs have been focusing on the industry for a while. If you want a really thorough primer on the lay of the land I can thoroughly recommend Automotive Technology and IP Outlook, a briefing put together by 3LP Advisors at the end of last month.  

Tomorrow, IAM and our sister publication World Trademark Review, will be jointly hosting a one-day conference at the Ford Conference Centre in Detroit entitled IP in the Auto Industry: Challenges and Opportunities in a Converging World. The event has attracted a great deal of interest and a large turnout is expected; one of the subjects at the forefront of everybody’s minds is doubtless going to be whether this forecast patent war will actually end up occurring.

For what it’s worth, I suspect not. My guess is that despite increasing litigation in the sector between operating companies and continued suits launched by NPEs, we are not going to see what we saw in the mobile communications industry. Instead, it is likely that the disputes that do occur will not be thermonuclear and designed to wipe competitors out, but will predominantly be what 3LP Advisors describe as “technology ownership battles” – companies jockeying for position and advantage – with some NPE assertion thrown in for good measure at the fringes. There are a few reasons for this:

  • The auto sector is not the smartphone sector. Many auto companies have been around for decades, they have a history of working alongside each other and have cooperated on a number of occasions – see AutoHarvest, for example.

  • The smartphone wars erupted because Steve Jobs took Android extremely personally. There is no indication of a similar sentiment in the auto industry. Those involved see it as a business not as something that is intrinsic to their very beings.

  • Much of the constituent value of a car remains in traditional technologies – engine, body, brakes, suspension, tyres, steering etc. Convergence is occurring and it is important, but it is not pivotal and it often affects suppliers to auto-makers more than it directly affects the auto-makers themselves. Mike Pellegrino wrote a fascinating article on this in a recent issue of IAM.

  • The general litigation climate in the US is very different these days. It is much harder and riskier to enforce patents than it was when the smartphone wars broke out. The PTAB is now another line of defence for accused infringers, while even operating companies cannot be sure of being granted an injunction should they prevail. NPEs, of course, cannot get one.

  • Nobody won the smartphone war – though it is arguable that almost everyone benefited from them. However, there is little point expending the time and effort required to fight a relentless global litigation battle if at the end of the process your competitors are still there and are possibly stronger than they were before. Everyone should look and learn from how the smartphone wars panned out; I imagine that senior figures in auto have done just that.

In short, when I look at the auto sector I see an established industry populated by rational, risk-averse players who are not hugely vulnerable to all-out patent attack. The same largely applies to the new entrants too, while NPEs are only interested in accruing licensing revenues and are not equipped for all-out assault in any case.

Of course, there will be auto-related disputes and some of them may well turn out to be big ticket - all those involved in the sector are going to have to develop sophisticated IP strategies to ensure their freedom to operate - but we are not going to see companies relentlessly chasing each other around the world filing suit and counter suit in myriad courts as they attempt to wipe each other out. In fact, I’d hazard that kind of behaviour is unlikely to be repeated in any sector for a very long time, if ever. The smartphone wars were the product of a unique set of circumstances. We will not see their like again.  

Joff Wild

Author | Editor-in-chief

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Joff Wild