Upward trend in patent litigation relating to automobiles

July 2017 | EXPERT BRIEFING | INTELLECTUAL PROPERTY

financierworldwide.com

Cars may soon be the new smartphones, at least with respect to patent litigation and the market for patents. Patent litigation in the automotive industry is nothing new – in fact Henry Ford himself was sued for patent infringement in 1903 – but the degree of litigation in this area has been rising dramatically. Starting around 2008, there was a dramatic rise in litigation relating to smartphones and other converged devices like tablets, so much so that it raised the amount of patent litigation overall and often rose to the level of front-page news. In addition, there arose a hot market for patents and technologies relating to the phones.

There were many reasons for this but prime among them was that the converged functionality of these products – combining computer processing, music playing, streaming, calling and digital camera functionalities, among others – meant that the products could infringe patents in a wide range of technological areas. Now, with autonomous and smart cars on the horizon, automobiles could become the next focus of patent litigation. The most recent large scale study on the issue (in 2015) noted that, since 2008, the number of patent infringement suits in the automotive area quadrupled, with the rate expected to accelerate even more in the near future.

Just as the smartphone integrated a number of previously separate devices and functionalities, and integrated a tremendous amount of computing power, the automobiles of the near future have evolved to the point where they are essentially computers on wheels. The automotive industry’s most important innovations are increasingly more about computer technology rather than more traditional components such as engines and wheels. Automakers are integrating high-tech innovations from other sectors, including WiFi, cellular technology, audio technology, networking technology, security, connectivity, voice recognition, self parking, video technology, mapping and GPS into automobiles.

Technology giants like Apple, Intel and Microsoft are devoting tremendous resources toward the automotive area. For example, Intel announced that it would spend $250m on researching autonomous vehicles and earlier this year purchased Mobileye, a company with autonomous driving technology, for $15.3bn. One measure of the degree to which automobiles are becoming converged devices is their increasing connectivity to the internet – some sources estimate that roughly 21 million connected cars were sold in 2016 and that by 2021 over 80 percent of the cars sold will be connected. Another is the emergence of automotive apps, just like smartphone apps. For example, there is GasBuddy, an app which helps drivers find cheap gas, or the Spotify app that allows drivers to stream music, and apps like Google maps and Waze which are replacing in-car GPS systems.

Self driving cars (also called autonomous cars) are expected to be the next big development and fully driverless vehicles that do not need a driver at all may be on the road as soon as 2020. This change in technology has a number of ramifications, both due to the increasing amounts of technology integrated into automobiles, but also due to the nature of the players developing the technology and being introduced into the market.

Historically, the large automotive manufacturers, and their associated component makers, have been reluctant to sue each other for patent infringement. However, the convergence of functionalities in automobiles has introduced a host of new players into the market because of the sheer number of technologies involved. For example, software, audio, navigation and memory makers are now providing key components of automobiles. Moreover, these new participants come from the high tech area and are both used to litigating vigorously to protect their innovations and do not feel bound by the automakers’ traditions. Thus, these new participants in the industry are more willing to sue to defend their property.

In addition, one of the factors that traditionally constrained both patent litigation in the automotive market and the secondary market for patents relating to automobiles, was the fact that most technologies were either developed by the automakers themselves or their closely bound suppliers. The suppliers were reluctant to sue for patent infringement as they would be suing actual or potential customers. They were similarly reluctant to sell their patents because either way they risked angering their customers – they would either be selling the technology to their customers’ competitors or to non-practicing entities (NPEs) that might assert it against their customers. However, many of these new technologies are from the high-tech area and were not invented by the auto industry, which means car makers and their suppliers do not own the original patents. Accordingly, the holders of the intellectual property relating to many of these new technologies are much more willing to assert or to sell their patents, which again leads to increasing litigation.

In addition, there is increasing activity by NPEs in this space. One of the earliest large NPEs in this space was Beacon Navigation, which acquired a portfolio of patents relating to GPS systems from Magellan. In 2011 and 2013, Beacon filed lawsuits against most of the major automotive manufacturers on these patents and to date has filed almost 70 infringement actions. Since Beacon, there have been other large NPEs that have become active in this space – for example, a subsidiary of Acacia Research Corporation named American Vehicular Services LLC has focused on patents relating to weight measurement and impact sensors and Norman IP Holdings, which has asserted patents relating to local area wireless circuity. The number of large NPEs operating in this area is only expected to increase. One study determined that NPE litigation in the automotive space tripled between 2010 and 2013 and has only continued to increase since then. Nor are the NPEs alone in increasingly suing the automakers. A number of original equipment manufacturers (OEMs) supplying the automakers, such as Paice, Magna and Waymo, have sued the automakers. For example, Paice initiated four patent infringement suits in district court as well as initiating an International Trade Commission (ITC) action against Ford.

To date, much of the litigation in the automotive industry, as well as transactions involving patents for use in the automotive sector, has focused on the area of navigation systems and sensor technology. Other areas of increasing activity include electronic stability systems, remote controls, advanced braking systems and improved electric motors.

The rate of intellectual property litigation in the automotive industry has increased rapidly in recent years and is expected to rise even more dramatically in the near future. Cars are completing their transformation into computers on wheels and integrating new functionalities that potentially infringe a multitude of patents in various sectors. Forward looking companies may need to adopt new strategies when contracting with components makers or parties providing new technologies, and adopt innovative legal strategies to minimise the impact of the changed landscape.

Aarti Shah is a member of Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo. She can be contacted on +1 (202) 434 7408 or by email: ashah@mintz.com.

Aarti Shah

Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo