Either as a lesson from the smartphone patent wars, or a non-confrontational culture, automakers are keen to avoid patent wars as they computerize their vehicles. However, in an effort to capture as much of the electric and/or autonomous vehicle market as possible and drive demand for their vehicles, the automotive industry appears to be revamping its business strategy when it comes to leveraging their patent portfolios.
Historically, companies attempted to capture market share by asserting large patent portfolios around commercially valuable features in order to exclude rivals. Innovative new technologies poised for large-scale market adoption typically correspond with a heavy uptick of patent filings. Within five years of Apple launching the first iPhone, one out of six active patents was smartphone-related in October 2012, representing more than 250,000 patents. To increase market share, companies asserted their patents against rivals, sometimes in drawn-out battles resulting in large damages awards.
That’s one way to use patents. Automakers, however, may now be avoiding patent wars for various reasons, including insufficient market adoption of electric and/or autonomous vehicles to warrant such large scale patent wars. Instead of asserting patents at this time, some companies with large electric and/or autonomous vehicle patent portfolios have evolved their business strategy to include using patents as a way to tempt rivals into entering the market and spur growth, thereby indirectly increasing demand for their products.
Indeed, Tesla’s patent pledge in 2014 that they would “not initiate patent lawsuits against anyone who, in good faith, wants to use our technology,” while seemingly altruistic at the time, is considered by some an attempt at promoting electric vehicle technology ahead of other early stage technologies such as hydrogen fuel cells. Shortly after this announcement, Toyota countered Tesla by opening up 5,600 of its hydrogen fuel-cell patents in an attempt to promote the adoption of its competing technology.
Last month – almost five years after Tesla’s original pledge – Toyota announced royalty-free access to its nearly 24,000 patents for hybrid and other vehicles using electrification technology. Rather than merely promote growth in the vehicle electrification market, Toyota, a tier 1 automaker, has a new hybrid strategy to also become a tier 2 supplier of hybrid systems. By encouraging adoption of their technology and becoming a supplier for their rivals, Toyota can increase its bottom line by increasing their supply and reducing costs associated with developing electrified vehicles.
While automakers are avoiding patent wars for the time being, they have by no means abandoned leveraging their patent portfolios to reach their business goals. And when the stakes get high enough, which could be within a decade based on projections of $500 billion for electric vehicles and $60 billion for autonomous vehicles, they may yet revert to patent wars.
This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney.
This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary.
The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites.
In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.