Increased Litigation Over Automotive Related Software & Technology
When my father was growing up in the sixties, technology was simple. Phones had rotary dials, personal computers did not exist yet, and mechanical gas engines powered cars. In fact, besides the advent of electronic fuel injection, cars had little if any electronic component to them. Nowadays, cars are riddled with electronics and run by computers; tablets are being installed in dashboards and electronic driver aids such as electronic stability control and lane departure warning systems are standard features. There are electric and hybrid cars, powered solely by battery, such as the Toyota Prius and Tesla Model S. All cars employ advanced engine management software and electronic components are increasing by the day. But better gas mileage and new technological features are not the only byproducts of improving automotive software. Automotive giants such as Ford, GM, and Toyota are facing increased litigation stemming from development of this software.
Patent assertion companies, commonly known as “patent trolls” have started targeting the automotive industry. These companies do not sell or produce any products; instead, they buy up patents and initiate lawsuits against companies that have allegedly misused the intellectual property associated with one of their many patents. In 2014, patent trolls filed a total of 107 lawsuits against automakers and suppliers, up from seventeen lawsuits filed in 2009.[1] In one case filed in April of 2014, Signal IP Inc., a patent assertion company, brought suit against Ford, BMW, Mazda, Mercedes-Benz and others, claiming that these manufacturers were infringing on patents covering electronic features such as keyless entry and lane departure system technology.[2]
In response to these lawsuits, some automotive companies have taken defensive measures to stymie their efforts. Recently, Ford entered into an agreement with RPX, a firm that owns a portfolio comprised of over $1 billion in patents, in order to protect itself from future patent infringement litigation. On average, RPX charges it’s members $1.5 million annually for shared access to its patents. For Ford and others, this is an attractive alternative to paying hundreds of millions to amass it’s own portfolio of patents. Notably, the RPX patents are predominantly information technology related, not automotive.[3]
Ford Motor Company is no stranger to patent litigation. The company has a long history of fighting what it classifies as patent abuse, dating back to 1903 when a young patent attorney named George Selden sued the founder of Ford Motor Company, Henry Ford. Selden held a broad patent for “road engines,” issued to him in 1895, which covered all types of motor vehicles with gas-powered engines.[4] Akin to patent trolls, Selden had no intention of manufacturing his invention, but sought to profit from it by licensing his idea to automotive manufacturers. Under threat of litigation, many manufacturers obliged and paid licensing fees to Selden or the Association of Licensed Automobile Manufacturers (ALAM), the company to whom Selden sold the patent.[5] Henry Ford was the only holdout – he refused to pay any royalties and Selden filed suit. Ultimately, Ford prevailed in court by arguing that Selden’s patent was limited to two-stroke engines, and did not cover the four-stroke engines he was using in his cars.[6] Twenty-two years later, Ford commented “No man has a right to profit by a patent only, that produces parasites, men who are willing to lay back on their oars and do nothing. If any reward is due the man whose brain has produced something new and good, he should get enough profits from the manufacture and sale of that thing.”
As cars continue to evolve by incorporating more and more technology, small tech-savvy start-ups with little or no automotive background will enter the automotive market place and patent litigation will continue to grow. To solve the problem, I propose that manufacturers revert back and embrace the overarching automotive ideology of the 1960’s; less software and more muscle.
Image: Patent troll image courtesy of Inc.com.
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