Automotive Lawsuits: Are Car Makers Facing a Patent War?

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With the advent of the ‘connected car,’ new car buyers enjoy a wide array of nifty new infotainment features.   But those who follow the intellectual property (IP) law landscape see another new feature on the backs of those cars: targets. Automotive manufacturers are increasingly becoming targets of lawsuits filed by patent assertion companies. The number of cases in the automotive industry rose from 17 in 2009 to 107 in 2014.

And as cars rely more and more heavily on new software and technologies, the auto industry’s exposure to patent lawsuits is likely to continue to increase.

Some cases have resulted in significant payouts. Hyundai paid $11.5 million to a company claiming the automaker violated its patent on a method for producing customized booklets for customers; Toyota was ordered to pay $5 million, along with $98 in royalties for every Prius sold, to a company that claimed the hybrid’s powertrain violated one of its patents. (The latter suit was later settled out of court for an undisclosed amount.)

A history of control

While this latest spate of lawsuits represents a new trend, patents played a key role in the origin story of the U.S. automotive industry. In 1895, George Selden patented his idea for an automobile powered by an internal combustion engine. Selden never built any cars himself but threatened to sue automakers that did; most ended up paying him royalties rather than go to court.

By the mid-20th century, the big automakers largely fended off patent issues by cooperating on industry standards and maintaining tight control of patented technologies. GM, for example, required each supplier to share patents with at least one other supplier, to help ward off parts shortages.

The automakers’ iron fist over intellectual property during this time was so legendary, that it inspired a few Hollywood films. Think Tucker: The Man and His Dream, the 1988 story of Preston Tucker, whose 1940s innovative car boasted then-unheard of features like disk brakes and seatbelts, but never hit the road, because big automakers put Tucker out of business. Or Flash of Genius, the story of an engineer who filed a patent on the intermittent windshield wiper in the 1960s. After Kearns demonstrated his invention to automakers, they promptly ignored the patent and added the feature to their cars. (Kearns eventually won in court, but not until the 1990s.)

These 20th century innovations, which the automakers controlled so successfully, remained in the mechanical realm. Today, automotive manufacturers are adopting technologies that are not specific to their industry – like GPS and map-based systems – and no longer enjoy control over the relevant patents.

As a result, there has been a general increase in patent activity in the auto sector in recent years, including a rise in new infringement lawsuits. We’ll discuss what’s happening, and how automakers are fighting back, on May 12, 2016.

For more information on this topic, please visit our Patent Litigation service page, which is part of our IP & Business Litigation practice.

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.  Additional information about the patent law firm and its patent attorneys may be found at www.klemchuk.com.

Klemchuk LLP hosts Culture Counts, a blog devoted to the discussion of law firm culture and corporate core values with frequent topics about positive work environment, conscious capitalism, entrepreneurial management, positive workplace culture, workplace productivity, and corporate core values.

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