In the age of internet-connected vehicles, European automakers are embroiled in intellectual property battles with some of the region’s biggest telecommunications groups. Behind these conflicts looms the fear of China’s growing dominance.
Companies in Asia’s biggest economy, led by Huawei, have filed a deluge of patents around essential technology that enables products from cars to mobile devices to access 4G, 5G and WiFi networks. Anything that connects to the internet must license these so-called Standard Essential Patents (SEPs) from the creators of the technology.
Chinese companies were responsible for 65% of SEP filings last year with standards body ETSI, according to data collected by Clarivate, up from 37% in 2019. EU Commissioner Thierry Breton noted this week that since 2014, the share of SEPs held worldwide by European companies has fallen from 22% to 15%, while that of Chinese companies has doubled.
“I strongly urge and encourage companies to file and file and file for patents. . . Chinese companies do that a lot,” he said.
Breton was presenting new proposals from the European Commission to increase transparency and reduce litigation in the patent market, partly out of concern that competitiveness in the bloc could be threatened. Under the new rules, companies would have to register their patents with the EU Intellectual Property Office, which would in turn help set licensing and royalty rates.
The move has sparked controversy among major patent holders who fear it will create even more onerous procedures, such as registering each patent with the new body, and reduce their access to the courts for infringement cases. This could ultimately hurt their global competitiveness, they worry.
The review follows several legal disputes, including a trial between Nokia and Mercedes-Benz. The telecommunications group sued the automaker, formerly known as Daimler, for patent infringement when price negotiations broke down. The case was settled out of court two years ago.
China’s growing interest in SEPs has raised concerns in the auto industry, which already depends on Asia’s largest country for key components in much of its supply chain and has become deeply suspicious of the escalation of geopolitical tensions between Washington and Beijing.
Huawei, which has suffered from US and European sanctions imposed over fears of helping Beijing carry out cyber espionage and technology theft, led the pack, filing thousands of patent applications in 2020 and 2021.
“In 5G, the winner is clear – it’s Huawei,” said Michael Schlögl, patent manager at German automotive supplier Continental.
Huawei, which invested $21.8 billion in R&D in 2021, has developed several licensing relationships within the automotive industry. But it has so far chosen not to license its intellectual property through a patent pool called Avanci used by Ericsson, Nokia and others, opting instead for direct agreements with component manufacturers, including a Volkswagen supplier. It has signed bilateral SEP agreements with at least 13 automakers, including Audi and BMW.
Patent ownership can become a good source of revenue for telecom technology companies such as Huawei, which has lost business internationally as many Western countries have begun to purge the company from telecom networks in because of concerns about its relationship with Beijing.
Chinese companies are now increasingly in a position where they could “prevent other companies from going bankrupt – not just in automotive supply, but for the entire Internet of Things,” Schlögl said.
Christian Loyau, director of legal affairs and governance at the body responsible for standardizing communication technologies in Europe, ETSI, warned that if Chinese companies felt they were not allowed to participate fairly in Western markets, Beijing could decide “to use their patents as weapons” and restrict Western companies’ access to key technologies.
A person close to Huawei said it was negotiating licenses in a “friendly and friendly” way in the hope that its technology could be “beneficial to the whole industry”.
Telecoms equipment group executives point to the fact that the quantity of patents filed does not necessarily equal their quality and that Ericsson and Nokia still dominate in lucrative quality patents. Huawei generated around $1.3 billion from patent licensing between 2019 and 2021. Nokia generated €1.5 billion in 2021 alone, while Ericsson generated around €900 million in 2021. last year.
Still, fears over the role of Chinese companies in patent development come as more and more products become connected, requiring licensing for wireless access to 4G, 5G and possibly 6G networks.
Automakers are part of traditional industries and are increasingly wary of the power that telecom equipment manufacturers hold over terms such as IP license pricing.
Groups such as Nokia and Ericsson have pegged the price of connectivity patents to the price of a car, rather than the significantly cheaper connectivity hardware developed by car suppliers, meaning they can charge more.
Anja Miedbrodt, senior intellectual property defense lawyer at Mercedes-Benz, said the dispute between the two industries also threatened to upend supply chains.
With vehicles such as the Mercedes-Benz E-Class requiring more than 3,700 different parts from more than 340 suppliers, she said, automakers could not be responsible for ensuring every part complied with patents. – adding that requiring this “would be up to the entire automotive industry set-up”.
However, a person close to Nokia said the patent holders only charge around $20 per car. The company said that “the unwillingness of some companies to pay for the use of other companies’ technology is the main obstacle to effective and efficient SEP licensing”.
The cost of $20″ may seem like little to the consumer, but multiply it by hundreds of standards [needed by] automotive technologies,” Schlögl said, adding that if SEP connectivity fees continue to rise, “you could indeed see a licensing fee bill that an end consumer would never accept.”
Additional reporting by Javier Espinoza
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