|The days of innocence, when car-makers|
designed and manufactured their own
parts, are unlikely ever to return
The past 18 months have seen the most rapid and stunning shifts yet in this turbulent industry sector, as Tesla, Ford and Toyota have opened up several thousands of automotive patents, mainly in the electric vehicle, battery and fuel cell fields. In the cases of Tesla and Toyota, this use is free. Why?
Major car manufacturers are not charitable foundations. They are driven by investment and depend for their continued existence on delivering a return. Patents are cash-generating assets. If they are to produce value correlative to the cost of developing them, how can this be done if they are neither sold nor commercially licensed and are dropped as barriers to market entry?
Opening an automotive patent portfolio for free use can achieve many things strategically.
|The rise of suppliers' patents, if not always consistent, |
appears inexorable (© Cipher 2015)
First, it reduces the risk of defending invalidity claims and, while patent litigation in the sector has never been close to the white-hot intensity of mobile telecommunications, it has been expensive and unsettling enough to be worth avoiding.
|Where car-makers patent is an indication of their market plans (© Cipher 2015)|
Secondly, it provides a basis on which the patent owner’s innovations can become normative within the sector, or at least a ground on which they can be part of a standard shared with other manufacturers. This may have the result of locking recipients of free licences into products, components and manufacturing processes that will give them the option of related improvements and innovations that are not free to use – and for which they will have to pay. This Cipher Snapshot of the spread of fuel cell patents at the time of Toyota’s opening-up illustrates that it is virtually impossible for a single player to monopolise the entire market, which indicates that some sort of sharing or standardising arrangement offers the most realistic opportunity to benefit from an investment.
|The spread of suppliers' patents is equally indicative of their intent (© Cipher 2015)|
Thirdly, if there is a struggle between the car manufacturer and its suppliers for control of the direction the industry takes, opening up thousands of patents for free licensing can take the wind out of the sails of innovative suppliers, whose backers will ask what is to be gained by investing in new technologies that, however good they may be, are competing with free-to-use ones.
Is this third point plausible? Read on to find out.
This blogpost is based on an earlier IAM Industry Report, "Car manufacturers or part suppliers: who’s in the patent driving seat?", which you can read in full here.