The digitalisation of automotive brings with it a wealth of opportunities, many of which will be enabled by cloud technology. But with new opportunities come new challenges, some of which the tech sector is already familiar with. One such challenge involves the patents that protect technologies that are essential for complying with connectivity standards including 4G and, moving forward, 5G. Most of these technologies work behind the scenes, and without them, cellular digital services including cloud applications would not be possible.
Data transmission, carrier aggregation, network resource allocation and even some battery management techniques for smart devices are all covered by Standard Essential Patents (SEP). These are highly regulated, and determining exactly which technologies are essential for a standard—and therefore which must be covered by SEPs—is a highly complex process. SEPs allow developers to recover their high research and development costs through licensing: any company producing goods or services that are reliant on standards such as 4G must secure licenses for SEP technology.
Neat little package
With the advent of the connected car, this increasingly concerns automakers. Laurie Fitzgerald is Senior Vice President at Avanci, a SEP marketplace that connects automakers with 42 licensors including Ericsson, Siemens and Nokia, bringing together tens of thousands of SEPs. Numerous automakers now depend on the company to streamline the process, including VW Group, BMW and Volvo. As Fitzgerald explains, the task of securing licenses is no mean feat.
“Standards such as 4G and 5G are often referred to as open,” she explains, “and that means anyone can incorporate wireless connectivity into their product. But open does not mean free: the technology behind the standards is the result of billions of dollars of R&D investment and is protected in countries all around the world. Licenses are therefore required.” The difficulty lies in the sheer amount of SEPs involved in meeting up-to-date wireless standards, an issue that will only grow with the arrival of 5G and new standards.
“In effect, automakers would need to go to each technology owner, and then request and negotiate access to a licence, all at a cost,” she says. “There are dozens of technology owners, and a single licence negotiation involves multiple engineers and contract lawyers. Sometimes it takes months if not years to conclude the process, and discussions can sometimes break down, resulting in litigation and added cost and time.”
For automakers, it is one more thing to worry about at a time of upheaval. Avanci is one company hoping to provide an alternative to approaching technology owners one by one, allowing automakers to dedicate energies to other areas such as R&D. The company began aggregating 2G, 3G and 4G SEPs from different licensors into a single package, launching its first offer inlaunching initially in 2016. It is now preparing the release of a 5G package, the terms of which are due to be unveiled before the end of 2021.
Cloud solutions will be reliant on several standards covered by SEPs, including Wi-Fi alongside the different generations of cellular network technology, and their adoption will be accelerated by the rollout of 5G which promises faster connections, wider bandwidth and high reliability. As Fitzgerald explains, the 5G standard will ensure cloud service providers can send and receive data quickly and reliably.
Our three goals at Avanci are to encourage faster 5G adoption, to help avoid disputes between patent owners and automakers, and to lower transaction costs, all in a way that is consistent with U.S antitrust law
“The vehicle is going to use licensed technology to communicate with the cloud, and the 5G standard will include technologies that ensure reliability which the automotive industry expects,” she says. Along with vehicle-to-cloud connections, a 5G package will also look to cover the other technologies which connected vehicle services will use, including vehicle-to-vehicle and vehicle-to-infrastructure technologies. Without licenses in place, data cannot move between the many ports of call which a typical cloud service involves.
Speeding up adoption
Fitzgerald stresses that Avanci is just one option for automakers now moving to cement their digital prowess. What is to stop them from using aggregators for licenses? Historically, she explains, automakers have relied on their suppliers to provide licences for various inputs into the vehicle. But with connectivity bringing about a growing intersection between the automotive and telecoms industries, there are reasons—and benefits—for automakers to turn to aggregators for the task.
A 4G connected vehicle package from Avanci, for example, costs an automaker a one-time payment of US$15 a vehicle. “An upshot of this transparent approach to pricing is that it gives automakers confidence they’re getting the best deal: everybody pays the same, and the price will never change,” she says.
This level of certainty and the reduced time to market means that long-term solutions such as Avanci’s could accelerate adoption of connected vehicle services and technologies. Progress can be slowed by the disputes and conflicts which can accompany the go-it-alone approach, she says, and these can be avoided in situations like Avanci’s where much of what would be agreed upon through long and hard hours of negotiation is already available upfront.
A recent incident has underlined the potential need for patent pools like Avanci’s: in June 2021, it was announced that Daimler and Nokia had signed a licence agreement, bringing to an end a long-running dispute in which Daimler has originally argued its suppliers should be responsible for patent ownership. Nokia begged to differ, arguing that as the end user, Daimler required the licence. The case was referred to the Court of Justice of the EU, but all litigation has now been dropped, and Daimler will now make payments to Nokia.
The vehicle is going to use licensed technology to communicate with the cloud, and the 5G standard will include technologies that ensure reliability which the automotive industry expects
At the same time, solutions providers like Avanci must be careful not to run foul of antitrust and competition laws in different markets. In 2020, a Texan judge dismissed a claim from Continental that Avanci’s business model amounted to a breach of antitrust legislation, and a business review letter from the US Department of Justice has since clarified it does not consider Avanci’s licensing pool to be anti-competitive.
“Our three goals at Avanci are to encourage faster 5G adoption, to help avoid disputes between patent owners and automakers, and to lower transaction costs, all in a way that is consistent with U.S antitrust law,” says Fitzgerald. “Anytime you put patent owners together into a patent pool, antitrust law will come into play, and we now have assurance that we are operating in a pro-competitive manner.”