[Guest Post] IP in the automotive industry: IP seminar at Volvo cars - day 2
With thanks to Alexander de Leeuw for part 2 of his report:
With the first day of the IP seminar at Volvo Cars in the rear view mirror, participants got up early for discussions of litigation trends, big data, SEPs and 5G, IP valuation, and last but not least trademarks and brands in the automotive industry.
Tim Pohlmann was kind enough to provide us with some numbers on 4G and 5G patents that are declared SEP. He predicts that in 2020 there will be over 20,000 patents in this area that will be declared SEP. Importantly, beyond the smartphone industry the automotive industry is the largest area of application of these patents, and many automotive companies (such as Volkswagen and Robert Bosch) have 4G and 5G patents declared essential. IPlytics is expected to publish a report about this subject later this year (which they are writing for the German government). The data presented by Tim can be found below:
According to Ief Daems (legal director antitrust at Cisco), an important aspect in the royalty discussion is to establish where the standard is implemented. He suggested that this is where the license should be paid (with fair and reasonable compensation, of course). Compensation should furthermore have its origin in the widespread adoption of the standard, rather than in what would be fair and reasonable on a case-by-case basis. Elena Kostadinova (legal officer at DG Grow, European Commission) confirmed that the European Commission is actively searching for how to balance between reasonable return on investment and minimizing transaction costs (although this IPKat dears to question whether any useful guidance should be expected from the European Commission in this respect).
Another related topic is the problem that SEPs are self-declared. The panel dealt with questions such as: should there be an essentiality test? If so, who will pay for this? What would be a valid and accurate essentiality test? Should databases be fully transparent or only facilitate negotiations? And would a single license pool be a good option? Elena Kostadinova indicated that the European Commission is also looking into this and expects to receive results of a study in which IP offices participated early next year. Tim Pohlmann added that the amount of patents in SEP pools are very large and that it is not economically feasible for organisations such as Avanci to check whether all patents in the pool are essential (at least not in a very thorough way).
IP valuation: IP in M&A, joint-ventures and divestitures
Continuing in a different direction, the next panel tried to clarify IP valuation and different value-determination methods, and how IP valuation plays a role at the corporate level. Day one of the seminar portrayed a clear desire for collaboration, and this panel session seems to confirm that the number of collaborations and partnerships in the automotive industry are gradually increasing.
Magdalena Jablonski (director IP counsel at Robert Bosch LLC) made clear that the automotive industry has evolved over the last five years to an industry of acquisitions and joint-ventures, rather than an industry based on organic growth, which means that companies have to rethink their M&A strategy. Moreover, interested parties are no longer looking primarily at established and profitable companies, which means that the risk profile and associated due diligence have also changed. These acquisitions and joint-ventures are essential to fill technology gaps, as explained by Charlotta Ljungdhal (vice president group IP at Air Liquide). Ann Critchell-Ward confirmed that TomTom is involved in many high-tech joint-ventures and is actively acquiring start-up companies to improve their services.
Béatrice Lévy-Moulin (group P vice-president at Valeo France) confirmed an increase in collaborations and partnerships and indicated that Valeo is looking at technology related to charging of electric cars, software for autonomous driving, comfort inside vehicles (such as interior lighting) and how to connect cars. Usually, time is a limiting factor and it is not possible to make a detailed analysis of all potentially interesting technologies. According to Béatrice, it is therefore key to get involved early with new entrants and to be pragmatic.
A lone wolf in the lion’s den was Erik Ahroon (vice president at Acacia Research), who represented what he himself called an “iconic NPE”. Erik explained that most of the deals concerning the automotive industry (which is only a small part of Acacia’s portfolio) are about connected cars, infotainment systems, navigation, charging technologies, and battery technologies. Erik Ahroon confirmed that there are also many licensing challenges from the NPE perspective. One of the difficulties is attributing the right value to IP. According to Erik, “putting value on patents is black magic”. Patents often don’t show their value until they go through litigation, making it difficult to put a value on patents.
Where is the highest value from a collaborative perspective? A patent portfolio is clearly a plus, but the panellists seemed to agree that people and know-how are the most important assets. Also, it is more important to know that you are not infringing someone else’s patents (freedom to operate), rather than having your own patents for the technology you are using. Erik Ahroon commented that this is of course different for NPEs, who require there to be patent applications at the very least.
Trade marks and brands overview: new online marketplaces, evolution of distribution channels from B2B to B2C, lookalikes and counterfeiting
With plenty of patent mileage behind us, the seminar turned to trademarks and brands in the automotive industry, mainly focussing on how fake car parts affect the industry.
According to Sergi Garcia (product manager director at Red Points), counterfeit car parts cost the industry approximately 20 billion per year. Not only do counterfeit car parts reduce revenue, they also present serious safety hazards to their users. The most common car parts bought online are brakes, wheels and engine components. These are critical elements of a car and typically the car parts that must meet strict safety requirements. What do customers look for when trying to check the authenticity of the parts they intend to buy? Price is still king and trust is second, but trust is mainly found in reviews. It will not come as a surprise that fake reviews are also fairly common… Moderator Tracy Durkin (trademark and design lawyer at Sterne, Kessler, Goldstein) urged companies to use digital tools to scan the market for counterfeits.
Legal teams responsible for tracking and taking down counterfeit offerings are still relatively small, but an increased awareness was reported among panellists. The core focus of these teams is in China, with Robert Sterner (head of trademark and design enforcement at Audi) reporting three to four raids every week in Chinese factories. Considering the limited budget and people, it is important to prioritise enforcement efforts. Lisa Selar (senior trademark and design counsel at Volvo Cars) explained that Volvo's main focus is on parts that will affect safety, and the other panellists confirmed that this is their focus too. Problematic in this respect is that the amount of car parts that affect safety is increasing with recent automotive developments. Another difficulty is that customs authorities are primarily concerned with fighting terrorism and drugs, and not IP infringement. It is therefore important to keep a good relationship with customs authorities.
An interesting brand policing option can be found in the United States, which enables quick (4-6 months) and effective takedown of counterfeit offerings. The process was referred to as electronic payment seizure, and allows PayPal accounts of alleged infringers to be frozen. If an order is granted, all the money in the PayPal account will be frozen (it does not matter whether the account includes other products as well). The panel’s experience with this process is that defendants generally agree to settle and that the requesting party gets more money back than what was actually frozen on the PayPal account. Usually, defendants also sign an undertaking not to sell counterparts again in the future. The process is illustrated in the slide below:
Looking at the future: mega-trends and disruptive technologies
At times the final session of the seminar felt more like science-fiction than a realistic look into the near future, but participants were assured that technologies such as self-driving hotel rooms, personal aerial vehicles, dedicated electric charging lanes and autonomous ‘walkcars’ that can fit inside a laptop bag are topics to currently think about.
What do all these technologies have in common? Claudio Simao (chief technology officer at Hexagon AB) explained that autonomy is the driving force behind these concepts. The difficulty is that these systems are complex, and that one action can have a lot of non-linear consequences. That is not the way most designers think. People are used to designing stand-alone solutions, which is not streamlined and scalable. Claudio Simao urged that ‘system thinking’ is the future.
Cecilia Sunnevång (VP research engineering and development, Autoliv) stressed that we should not become too technology-driven and forget that there is always a user involved. The ultimate goal is, for example, not self-driving vehicles, but providing users with a safer driving experience. New business models are more often driven by offering full-service rather than a standalone product. Victoria van Camp (chief technology officer at AB SKF) put this in the perspective of a circular economy for physical products, which means that you are not only selling a product, but also installing, using, recycling and upcycling them. She also touched upon the interesting topic of predictive maintenance, suggesting that knowing when things will break down is more important than building things that might never break down.
This again boiled down to the difficulty of the amount of data involved in these changing business models. This panel suggested that AI could potentially be the solution, allowing incredible amounts of data to be processed into useable information, enabling the complexity of the ecosystem to thrive rather than to stall innovation. Then again, we should remain aware of artificial stupidity (e.g. AI systems that learn from humans who are not themselves always acting correctly).
Ronan Stephan (chief scientist at Plastic Omnium) added that there is a fantastic pool of choices to build new technologies, and that the revolution in the automotive industry is illustrated by scientific results that are published by flows of patents every year. Disruptive technology is not one technology, but a composition of technologies, making collaboration essential. Ronan urged that companies should not only collaborate with start-ups, but also with the labs and researchers behind the patents.
As summarised by one of the panelists: “There will be disruption and everybody will have to find its place, but the possibilities are endless.”
Concluding remarks
Many thanks to Premier Cercle for researching and providing this wonderful seminar dedicated to IP in the automotive industry, to the panellists and to Volvo Cars for hosting 250+ participants in Gothenburg. The writer looks forward to next year’s seminar and sincerely hopes that you have enjoyed reading these two reports.
With the first day of the IP seminar at Volvo Cars in the rear view mirror, participants got up early for discussions of litigation trends, big data, SEPs and 5G, IP valuation, and last but not least trademarks and brands in the automotive industry.
Litigation trends kick-off
Vladimir Bud (Darts-IP) had the difficult task of warming up the crowd for another day of IP. He succeeded with an insightful presentation about litigation trends among the biggest automotive industry players, picking up where the final session of day 1 ended.
Interestingly, litigation data over the last few years show a strong increase in trade mark litigation and a moderate decline in patent litigation. The decline in patent litigation can mainly be seen in Europe and in the United States. In patent litigation that still takes place, only 7% is litigated between the top 20 automotive industry players. The rest of the litigation is conducted against other third parties.
We may be on the verge of an increase in patent litigation, however, as the number of SEP declared patent families for 5G technology related to vehicular application has increased from zero in 2015 to 994 in 2018. An increase in SEP litigation related to vehicular application of telecommunications technology can already be observed in Europe, and it will be interesting to monitor how this will develop throughout the rest of the world.
Like some of the participants, you may be wondering how these changes in litigation can be explained. Unfortunately, Vladimir explained that Darts-IP is only an observer and that they cannot comment on the reasons for any observed changes. He also pointed out that his presentation was limited to data regarding the top 20 automotive industry players, and that the results would probably be different when looking at the entire automotive industry.
Big data: barbarians at the gate?
Traditionally, oil is one of the most valuable resources. This first panel session of the day explored the increasingly important and valuable resource of data, suggesting that it is even more valuable than oil. The session was passionately moderated by Michael Natterer (managing director and co-founder of Dennemeyer Octimine) and turned to questions relating to different categories of data, ownership of data, and licensing of data.
A problem common to legal discussions is the use of the same words but with a different meaning. The same is happening in the discussions about data. It was explained that ‘data’ refers to numbers and words, for example, and when you have data out of its context it is not really all that useful. If you combine data with some form of intelligence and place it in the right context, however, you will end up with ‘information’ that can be useful and have value. Information is useful, data not per se.
Turning to data, Anna Maria Lagerqvist (senior IP counsel at Volvo Cars) explained that data is like quicksand: “you get in, you get sucked down, and eventually you die”. Car manufacturers are transforming from hardware producers to software producers, forcing the automotive industry to go further and further into the quicksand. However, there are no real paths to follow as quicksand does not show any paths. The challenge is to adapt to the changing circumstances and find different paths through the quicksand. The quicksand is furthermore expected to grow, considering that the number of sensors, electronic control units and lines of codes controlling these units, is expected to increase as time passes.
To give the discussion about data some context, Ann Critchell-Ward (vice president IP at TomTom) indicated that TomTom has about 500 million connected devices, five billion traffic measurements per day and roughly 400 million different data sources. This means that there is a phenomenal amount of raw data coming into the system at any given point in time. Some of the data will be inaccurate and poor quality, meaning that the data must be cleaned up and categorized. Users have no use for data, they need information, which requires a lot of data processing.
Where does all this data go and how is it managed? Typically there is a central unit with data coming in from all the different sources. Some of the data is stored in the car, some is sent to the cloud and stored there, and some is handled in a transient way. Hence, different types of data will be managed in different ways. It is not feasible to keep records of all the data. Most companies have more data than they know what to do with it. Like crude oil, raw data is useless and has little value (although this depends on where in the value chain you are). The information extracted from raw data is what makes it valuable. This brings us to ownership questions (also discussed during the first day of the IP Seminar).
Jill Hubbard Bowman (associate general counsel IP at Intel) pointed out that there is a lot of scepticism about what it means to ‘own’ data. There could potentially be IP – information could be kept secret, data processing software could benefit from copyright or patent protection, etc. – but this cannot cover the entire spectrum and could be difficult to enforce. Property rights can also be mimicked with contract law (defining ownership between parties), but this does not lead to some sort of personal property or ownership-like right. Also, the difficulty with the contractual route is that there are many different parties who all want access to the data, leading to complicated agreements. Instead of a two-party transaction, data licensing requires an ecosystem of parties with a domino effect throughout the entire transaction chain. Privacy is also sometimes suggested as a potential option, but there are limits to privacy laws and individuals cannot control what third parties do with their personal information.
Interestingly, the European Commission and other institutions have acknowledged the importance of the data economy and are assessing how to manage access and usage rights. According to this panel, the European Union has been slow in addressing these issues and an example can be taken from the United States, where there is some relevant legislation in force. Jill Hubbard Bowman referred to the Federal Driver’s Privacy Protection Act, and to Californian legislation basically stating: your car, your data. This will be an area of legislation (and politics) to closely monitor over the coming years.
Another important area to monitor are export limitations for data from certain countries.
Standard Essential Patents in the connected, semi-autonomous car: the case of 5G
A subject that can’t be missing from a conference about IP in the automotive (or should I say telemotive) industry are telecommunications patents and the related FRAND and SEP litigation. In a panel moderated by Tom Oliver (senior associate at Powell Gilbert), it soon became clear that “all things FRAND are completely opaque and unclear,” and that there is no sight of improvement anytime soon. This panel explored the availability of SEP licenses, questions of essentiality, possible solutions to the FRAND problem, and many related issues.
The changing automotive industry will require more and more connectivity. As Tim Pohlmann (managing director of IPlytics) explained, all connectivity in a car is based on standards which are highly patented. The convergence of telecommunications with automotive brings with it a cultural clash in terms of licensing. The telecommunications industry is familiar with licenses in return for a royalty percentage at the product level. In the automotive industry, on the other hand, licenses are commonly based on component selling price. If this clash remains unresolved it has the potential for high licensing costs for SEP portfolios with only a minimum increase of car prices. Thus, a relevant question to be asked is what the basis of the license should be: the product or the component?
Tim Pohlmann was kind enough to provide us with some numbers on 4G and 5G patents that are declared SEP. He predicts that in 2020 there will be over 20,000 patents in this area that will be declared SEP. Importantly, beyond the smartphone industry the automotive industry is the largest area of application of these patents, and many automotive companies (such as Volkswagen and Robert Bosch) have 4G and 5G patents declared essential. IPlytics is expected to publish a report about this subject later this year (which they are writing for the German government). The data presented by Tim can be found below:
Another related topic is the problem that SEPs are self-declared. The panel dealt with questions such as: should there be an essentiality test? If so, who will pay for this? What would be a valid and accurate essentiality test? Should databases be fully transparent or only facilitate negotiations? And would a single license pool be a good option? Elena Kostadinova indicated that the European Commission is also looking into this and expects to receive results of a study in which IP offices participated early next year. Tim Pohlmann added that the amount of patents in SEP pools are very large and that it is not economically feasible for organisations such as Avanci to check whether all patents in the pool are essential (at least not in a very thorough way).
IP valuation: IP in M&A, joint-ventures and divestitures
Continuing in a different direction, the next panel tried to clarify IP valuation and different value-determination methods, and how IP valuation plays a role at the corporate level. Day one of the seminar portrayed a clear desire for collaboration, and this panel session seems to confirm that the number of collaborations and partnerships in the automotive industry are gradually increasing.
Magdalena Jablonski (director IP counsel at Robert Bosch LLC) made clear that the automotive industry has evolved over the last five years to an industry of acquisitions and joint-ventures, rather than an industry based on organic growth, which means that companies have to rethink their M&A strategy. Moreover, interested parties are no longer looking primarily at established and profitable companies, which means that the risk profile and associated due diligence have also changed. These acquisitions and joint-ventures are essential to fill technology gaps, as explained by Charlotta Ljungdhal (vice president group IP at Air Liquide). Ann Critchell-Ward confirmed that TomTom is involved in many high-tech joint-ventures and is actively acquiring start-up companies to improve their services.
Béatrice Lévy-Moulin (group P vice-president at Valeo France) confirmed an increase in collaborations and partnerships and indicated that Valeo is looking at technology related to charging of electric cars, software for autonomous driving, comfort inside vehicles (such as interior lighting) and how to connect cars. Usually, time is a limiting factor and it is not possible to make a detailed analysis of all potentially interesting technologies. According to Béatrice, it is therefore key to get involved early with new entrants and to be pragmatic.
A lone wolf in the lion’s den was Erik Ahroon (vice president at Acacia Research), who represented what he himself called an “iconic NPE”. Erik explained that most of the deals concerning the automotive industry (which is only a small part of Acacia’s portfolio) are about connected cars, infotainment systems, navigation, charging technologies, and battery technologies. Erik Ahroon confirmed that there are also many licensing challenges from the NPE perspective. One of the difficulties is attributing the right value to IP. According to Erik, “putting value on patents is black magic”. Patents often don’t show their value until they go through litigation, making it difficult to put a value on patents.
Where is the highest value from a collaborative perspective? A patent portfolio is clearly a plus, but the panellists seemed to agree that people and know-how are the most important assets. Also, it is more important to know that you are not infringing someone else’s patents (freedom to operate), rather than having your own patents for the technology you are using. Erik Ahroon commented that this is of course different for NPEs, who require there to be patent applications at the very least.
Trade marks and brands overview: new online marketplaces, evolution of distribution channels from B2B to B2C, lookalikes and counterfeiting
With plenty of patent mileage behind us, the seminar turned to trademarks and brands in the automotive industry, mainly focussing on how fake car parts affect the industry.
According to Sergi Garcia (product manager director at Red Points), counterfeit car parts cost the industry approximately 20 billion per year. Not only do counterfeit car parts reduce revenue, they also present serious safety hazards to their users. The most common car parts bought online are brakes, wheels and engine components. These are critical elements of a car and typically the car parts that must meet strict safety requirements. What do customers look for when trying to check the authenticity of the parts they intend to buy? Price is still king and trust is second, but trust is mainly found in reviews. It will not come as a surprise that fake reviews are also fairly common… Moderator Tracy Durkin (trademark and design lawyer at Sterne, Kessler, Goldstein) urged companies to use digital tools to scan the market for counterfeits.
Legal teams responsible for tracking and taking down counterfeit offerings are still relatively small, but an increased awareness was reported among panellists. The core focus of these teams is in China, with Robert Sterner (head of trademark and design enforcement at Audi) reporting three to four raids every week in Chinese factories. Considering the limited budget and people, it is important to prioritise enforcement efforts. Lisa Selar (senior trademark and design counsel at Volvo Cars) explained that Volvo's main focus is on parts that will affect safety, and the other panellists confirmed that this is their focus too. Problematic in this respect is that the amount of car parts that affect safety is increasing with recent automotive developments. Another difficulty is that customs authorities are primarily concerned with fighting terrorism and drugs, and not IP infringement. It is therefore important to keep a good relationship with customs authorities.
An interesting brand policing option can be found in the United States, which enables quick (4-6 months) and effective takedown of counterfeit offerings. The process was referred to as electronic payment seizure, and allows PayPal accounts of alleged infringers to be frozen. If an order is granted, all the money in the PayPal account will be frozen (it does not matter whether the account includes other products as well). The panel’s experience with this process is that defendants generally agree to settle and that the requesting party gets more money back than what was actually frozen on the PayPal account. Usually, defendants also sign an undertaking not to sell counterparts again in the future. The process is illustrated in the slide below:
Looking at the future: mega-trends and disruptive technologies
At times the final session of the seminar felt more like science-fiction than a realistic look into the near future, but participants were assured that technologies such as self-driving hotel rooms, personal aerial vehicles, dedicated electric charging lanes and autonomous ‘walkcars’ that can fit inside a laptop bag are topics to currently think about.
What do all these technologies have in common? Claudio Simao (chief technology officer at Hexagon AB) explained that autonomy is the driving force behind these concepts. The difficulty is that these systems are complex, and that one action can have a lot of non-linear consequences. That is not the way most designers think. People are used to designing stand-alone solutions, which is not streamlined and scalable. Claudio Simao urged that ‘system thinking’ is the future.
Cecilia Sunnevång (VP research engineering and development, Autoliv) stressed that we should not become too technology-driven and forget that there is always a user involved. The ultimate goal is, for example, not self-driving vehicles, but providing users with a safer driving experience. New business models are more often driven by offering full-service rather than a standalone product. Victoria van Camp (chief technology officer at AB SKF) put this in the perspective of a circular economy for physical products, which means that you are not only selling a product, but also installing, using, recycling and upcycling them. She also touched upon the interesting topic of predictive maintenance, suggesting that knowing when things will break down is more important than building things that might never break down.
This again boiled down to the difficulty of the amount of data involved in these changing business models. This panel suggested that AI could potentially be the solution, allowing incredible amounts of data to be processed into useable information, enabling the complexity of the ecosystem to thrive rather than to stall innovation. Then again, we should remain aware of artificial stupidity (e.g. AI systems that learn from humans who are not themselves always acting correctly).
Ronan Stephan (chief scientist at Plastic Omnium) added that there is a fantastic pool of choices to build new technologies, and that the revolution in the automotive industry is illustrated by scientific results that are published by flows of patents every year. Disruptive technology is not one technology, but a composition of technologies, making collaboration essential. Ronan urged that companies should not only collaborate with start-ups, but also with the labs and researchers behind the patents.
As summarised by one of the panelists: “There will be disruption and everybody will have to find its place, but the possibilities are endless.”
Concluding remarks
Many thanks to Premier Cercle for researching and providing this wonderful seminar dedicated to IP in the automotive industry, to the panellists and to Volvo Cars for hosting 250+ participants in Gothenburg. The writer looks forward to next year’s seminar and sincerely hopes that you have enjoyed reading these two reports.
![[Guest Post] IP in the automotive industry: IP seminar at Volvo cars - day 2](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcmyUnmTPSCLx-7ieBwFXJWFU0rJwNNB21Z6iITcuHRrjoCpscXzaFJYGEy92wbAYo8p9FEn6OintvyMAs7YpFYBkZzlAlSLZM48ViQEn408TwZZnYsGnFMUR9HncNfJx7rnlorcuw46k/s72-c/volvo1.jpg)