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insuring self-driving cars
). This post looks at the licensing issues surrounding connected car and autonomous vehicle technology.
According to the UK Government, the market for autonomous vehicle technology will be worth £52 billion by 2035. It comes as no surprise that this sector is attracting substantial investment from car manufacturers looking for a share of this new market. What may have been less foreseeable however, is the size of the investment from a significant number of new market entrants, many of which are well known in the wireless technology industry. These new entrants are filing large volume of patents to recoup their investment in the technology. These patents cover not only proprietary technology, but also standardised technology which, for example, ensures that autonomous vehicles can communicate with each other and with roadside infrastructure in a manner which allows them to operate safely. This standardised technology is currently being developed by standardisation bodies such as IEEE and 3GPP, and must be licensed on a fair, reasonable and non-discriminatory (FRAND) basis.
The range and scope of the technologies deployed in autonomous vehicles will mean that patent licences will need to be sought from more stakeholders than ever before. The requirement to obtain a licence to standardised technology in particular has given rise to a number of concerns amongst vehicle manufacturers, including that disputes similar to the infamous “smartphone wars” (commercial disputes between smartphone manufacturers and telecoms patent pool holders as to the appropriate FRAND royalty payable on the sale price of a handset) may start to permeate into the automotive industry.
With such a broad range of technologies involved, it could be very difficult for manufacturers to identify all IP rights for which they require a licence. With this issue in mind, a group of five companies (consisting of Qualcomm, Ericsson, Inter Digital, KPN and ZTE) joined together to form the licensing body Avanci. The aim of Avanci is to simplify licensing for Internet of Things (IoT) technologies, including connected car technologies, by offering a single licence covering all patents held by companies participating in the program. Since its launch in 2016, several additional companies have joined Avanci including Panoptis, Unwired Planet, Conversant, NTT DOCOMO, Nokia and most recently China Mobile in February this year. The platform announced last year that it “
now offers a licence covering a vast majority of the world’s cellular standard essential patents
” (SEPs). However, there are still some notable absentees from the list of participants including Huawei. Further, there are concerns that other patent holders not part of the program may later come forward demanding additional royalties in respect of their portfolios.
Another issue which is likely to be of concern to automobile manufacturers is licence pricing. Whilst it may be tempting to import the model used in calculating smartphone royalties where the manufacturer pays a royalty based on the total selling price of the handset, such a model is generally considered unsuitable for the automotive industry in particular due to the range of different technologies in an automated vehicle, many of which do not require a licence to standards essential technology. The question then arises: what should the rate and terms of a FRAND licence be? In the absence of a court determination, one can only speculate. Previous litigation in the smartphone sector may provide some assistance in relation to the relevant principles to be applied (for example, in the relatively recent case of Unwired Planet v Huawei, the court set out the methodology for determining a handset royalty rate and the terms of a FRAND licence), but it must be remembered that these cases generally relate to the royalty payable on a device in an entirely different industry.
When it comes to pricing, Avanci offer a single fixed price licence based on the value the wireless technology brings to that product. This price is stated on its
to range from $3 dollars per vehicle, which gives drivers the ability to make emergency calls, to $15 per vehicle for full 3G and 4G connectivity, with royalty rates remaining the same even if the number of patents in its licensing pool increases. There are of course other pricing models not offered by Avanci which stake holders could advocate for as FRAND, including for example, the smallest saleable patent practicing unit, a doctrine established in the United States, where the relevant royalty is determined by reference to the value of the smallest component providing the patented functionality. An example of a further possible alternative is a royalty which scales in accordance with the value of the vehicle.
With connected car and autonomous vehicle technology still in its infancy, it is perhaps unsurprising that Avanci have so far secured only one licensee (BMW) which joined the program in December 2017. As the rollout of fully autonomous vehicles draws nearer, we may see more automobile manufacturers jump on the Avanci bandwagon. Whilst this may mitigate against the risk of litigation to a certain degree, the risk of lawsuits from other SEP holders or owners of proprietary technology remains. In relation to the latter, this is evidenced by recent litigation between chip maker Broadcom and vehicle manufacturers Volkswagen, Audi and Porsche in the United States and Germany, which related to non-standards essential patents covering Bluetooth and Wifi technology used in vehicles. Whilst that dispute settled in November last year, one thing seems certain; the risk of litigation in the automotive sector will continue to increase as the technology matures and is commercially deployed.
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