A New Way to Manage IP Rights in the Automotive Sector is Needed

February 17, 2020 by Luke James

With the automotive sector constantly innovating, vehicles that are currently only seen in movies may soon become reality. Intellectual property will continue to play a major role in advancing the industry.

In early February, the Nissan LEAF set a new record when it completed its 230-mile, almost completely autonomous journey between Bedfordshire and Sunderland, England. While this achievement marked a huge leap forward for autonomous vehicle tech and is a reason for celebration, it also serves as a bittersweet reminder that the automotive industry must be mindful of the role IP plays in this rapidly developing environment. 

As investments pour into the automotive industry and spur research and development, established business models and manufacturers are being disrupted. With many vehicles now coming to market featuring some level of automation, and fully autonomous cars being tested on public roads, we need a new way to manage IP rights and solve the fundamental challenges that are facing autonomous vehicles and the modern automotive industry as a whole. 


Autonomous vehicle Nissan Leaf.

The Nissan Leaf autonomous vehicle that completed the 230-mile trip, the longest trip for an autonomous vehicle in the UK. Image used courtesy of Human Drive.


IP in Automotive is More Important Than Ever 

IP, or “intellectual property”, is by far the most important and valuable set of assets that a company can own. Without having IP rights strictly protected by law, businesses, brands, companies, and publishers – you name it – simply could not function. 

With innovation and technology evolving at a rate that itself is increasing by the day, and competition among automotive manufacturers and suppliers being as fierce and cutthroat as ever before, the protection and enforcement of IP is more important now than ever. 

Today, the most important categories in the automotive sector are safety and security. All major vehicle manufacturers have now joined the so-called “safety revolution” and are focusing just as much as, if not more than, engineering features. Safety elements in a vehicle include high-tech sensors, cameras, advanced driver-assistance systems (ADAS), and other parts that mitigate accidents. 

With so much technology packed into modern cars (and so much more yet to come with the striking leaps forward being made with driverless cars) intellectual property will play a major role in facilitating further innovation.  


Car assembly line in a factory.

As the automotive industry develops and more innovations are introduced, there will be a greater and natural need to acquire and enforce patents by manufacturers. 


Auto Firms Heavily Engaged in Patenting Activity

As tech has started to become more commonplace in the automotive sector, with much of the focus relating to autonomous vehicles and communication – both between vehicles and the wider elements of the self-driving ecosystem – the patent portfolios of larger Tier 1 and Tier 2 suppliers have grown exponentially. This is because the sooner manufacturers and suppliers have patents in the development cycle with broad applications, the better positioned they are; everybody entering the sector is heavily engaged in patenting activity and competitors must do all they can to remain ahead of one another. 

This trend of increasing patent activity reflects that a lot more money is being invested in R&D. It is also reflective of there being more disruption as newer companies enter the market, develop their own patent relevant tech, and compete with existing OEMs (original equipment manufacturer). Since automakers must need to keep up with competitors, OEMs are not just developing their own patents, but buying them through acquisitions and hiring specialists to boost further R&D, leading to even more patents. 

It is not only Tier 1 and Tier 2 suppliers that are heavily engaged in patenting and other IP-related activity, either. The growing number of tech-led companies in the automotive space, including software developers, IoT solutions providers, and AI innovators, amongst others, are start-ups, and start-ups are traditionally more ‘patent hungry’; they are highly geared and their business models require them to protect and monetize their IP whenever possible in order to survive and thrive. Again, this leads to more patents. 


Aren’t More Patents a Good Thing?

On the one hand, more companies entering the industry and innovating is a good thing. When companies innovate and file patents, they bring to market lots of new products, solutions, tools, processes, methods that automakers can then use to further their own R&D. 

On the other, it means that there are more owners of relevant patents, many more than in the past, which leads us to one of the key challenges facing the automotive industry today: automakers that assemble, manufacture, and sell vehicles do not necessarily own, or have rights to, the tech that is key to their vehicles being developed and then functioning when on the road.

Much of the equipment driving today’s autonomous vehicles is owned not by the automakers, but by IT companies, telecoms providers, and software developers. While some of this technology provides a competitive advantage (meaning that the patent owners perhaps have a claim to some of the automakers’ revenues where it is used without a license) a lot of it will be used for communication, safety and security.

This is problematic because who is to blame if an autonomous vehicle’s critical systems fail and lead to an accident, or worse? The automaker? The patent owner? The driver? Without clearly defined licensing models or a new way to manage IP rights in the modern automotive environment, we simply do not have an answer. Although the sector is working fine under its current sort-of “gentlemen’s agreement”, patent infringement claims, litigation, and battles in court are virtually guaranteed to follow if these agreements are not replaced by new, solid and unambiguous legal arrangements.


Cars parked next to each other in a black and white photo.

A necessity for the continuous growth and development of the automotive industry is for IP issues and challenges to be resolved.


Side Note: Could a Patent War Be Looming?

In November 2019, BMW was sued in the U.S. for alleged patent infringement by Paice, a hybrid engine company, and The Abell Foundation, a not-for-profit organization that is a Paice investor. To make a long story short, the case hinges on whether BMW unfairly took advantage of the IP shared with them “in good faith” by Paice. It is claimed that BMW used this IP in the design and manufacture of eight of its hybrid and plug-in vehicle models. Litigation is presently ongoing. 

Legal action taken against BMW by Paice, a tech-led company, should be taken as a clear sign that litigious activity is ramping up. Given that technology companies have traditionally been proactive when it comes to leveraging their IP assets and asserting their rights, the automotive sector should be prepared for more over the coming years. 

If a patent war is looming, automakers could face serious and costly disruption if they are unable to rethink their IP strategies. 


Solving IP Problems Now Will Avoid Disruption

While the introduction and adoption of autonomous and connected vehicles will depend on many factors, solving these complex IP problems will be key to ensuring that safe, efficient, trusted, and cost-effective vehicles can come to market. If IP challenges are not addressed, then this new technology will be delayed. 

Addressing the IP problems will not only support the automotive sector, either. As the IoT grows in size, 5G systems are rolled out, and more and more devices are connected to one another, similar challenges will be faced in these areas, too. If the auto industry is able to find a solution now, it may become a model for the successful licensing of IP rights in the digital age.


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