Patent Wars: Automotive Industry Fights Back

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In the past decade, the biggest patent wars were fought in the cellphone industry. Now, many believe the next big patent war could take place in the automotive industry. Expect to see a growing number of cases, like the suit filed by Signal IP in April 2014 against a long list of big automakers – Ford, BMW, Fiat, Honda, Jaguar-Land Rover, Kia, Mazda, Mercedes-Benz, Mitsubishi, Nissan, Subaru, Volkswagen and Volvo. Signal IP claimed the automakers violated patents on a wide range of electronic features, from keyless entry to airbag sensors and lane departure warning systems.

Where did Signal IP get all these patents? Most had been registered in the 1990s and 2000s by Delphi Corp., a former supplier of GM and by Delphi’s predecessor, Delco Electronics Corp., and later purchased by Signal IP.

Signal IP is a “patent assertion company” – a company that buys up patents but doesn’t invest in building or creating any products of its own, relying on licensing fees from manufacturers, or big wins in lawsuits, for its profits.

Similarly, non-producing entities like Intellectual Ventures and Acacia Research Company have explicitly identified the automotive business as a growth area. They’re making patent acquisitions in this space, and they’re responsible for the majority of patent infringement lawsuits filed in the automotive space.

As automakers continue to adopt traditionally non-automotive technologies in their cars, that’s increasing the complexity of patent risk for car manufacturers. As a result, manufacturers are taking steps to protect themselves and to prepare for the next wave of innovation.

Some automakers are quietly surpassing tech companies in filing patents for self-driving cars. They’re making sure they have the right patent assets and considering their ‘patent position’ as part of their overall strategies.

They’re looking for innovative measures, too.

In February, Hyundai and Kia joined a non-profit coalition, called LOT Network, aimed at disarming patent trolls. LOT stands for License of Transfer; the group’s more than 50 members control about 360,000 patents. If any falls into the hands of a patent troll – defined as an entity that derives more than half of its revenue from patent lawsuits – the group automatically cross-licenses the patent to all members so that they cannot be sued over it. Members pay a relatively small cost -- $1,500 to $20,000 a year – to be part of the coalition. Organizers compare LOT Network’s strategy to the “herd immunity” that’s conferred by vaccinating large groups of people.

Ford Motor Company is fighting back with another strategy. After the company was sued for patent infringement more than a dozen times from 2012-2014, Ford signed a contract recently with RPX Corp., which helps corporations identify and license relevant patents. RPX spent almost $1 billion buying up patents for the purpose of defending against trolls.

Ford’s payment wasn’t disclosed, but members pay a fee averaging $1.5 million a year, for access to RPX’s shared portfolio of patents. It’s not cheap, but it controls exposure and allows automakers to turn their focus to more important matters.

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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