1. Patents and Autonomous Vehicles
Jeffrey A. Miller, Esq.
Kaye Scholer, Esq.

2. The Patent Landscape
The automotive industry generates thousands of patents
According to Thomson Reuters, worldwide patent filings in the automotive industry lag only computing/peripherals and telecommunications:
Thomson Reuters, 2014 State Of Innovation Report, available at

3. The Patent Landscape
The automotive industry generates thousands of patents
According to Thomson Reuters, worldwide patent filings in the automotive industry lag only computing/peripherals and telecommunications:
Thomson Reuters, 2014 State Of Innovation Report, available at

4. The Patent Landscape
The number of patents in the industry is increasing
Thomson Reuters, The State of innovation in the Automotive Industry 2015, available at

5. The Patent Landscape
Thomson Reuters reports that Toyota, TM and Hyundai are most active patent filers for autonomous driving patents
Thomson Reuters, The State of innovation in the Automotive Industry 2015,

6. The Patent Landscape
Thomson Reuters reports that Bosch, Audi, BMW, Continental, Daimler, Valeo and Volkswagen are most active patent filers for Driver Assistance patents
Thomson Reuters, The State of innovation in the Automotive Industry 2015,

7. The Patent Landscape
I compiled my own data using the Cooperative Patent Classification (“CPC”) system used by U.S. Patent and Trademark Office
Classes include autonomous vehicles and driver assist technologies since both are likely important in litigation and licensing environments
Also include analogous technologies such as video processing, navigation, active safety, etc.
Classes (and subclasses) intentionally chosen to be over inclusive, but some manual culling was performed
No date limit
Data include both issued patents and published applications
USA only

8. The Patent Landscape

9. Licensing Environment
Autonomous vehicles likely to have significant standards setting organization (“SSO”) activity
Most SSOs have an intellectual property rights (“IPR”) policy governing how patent owners treat other members in SSO
Often require an election on how to treat standard essential patents (“SEPs”)
Participation can bind members to “Fair, Reasonable and Non-Discriminatory” licensing obligations (“FRAND”)
IEEE
SAE

10. Licensing Environment - IEEE
Early 2015, IEEE amended its IPR policy
Requires participants to identify any patent claims that may be essential to practice of standard
IEEE will request “Letter of Assurance”
IEEE’s “Letter of Assurance” form is only allowed form

11. Licensing Environment - IEEE
Obligations of submitter of Letter of Assurance:
Must allow any applicant to obtain a license
License can be either royalty free or FRAND
Submitter can require that applicant grant reciprocal license
Cannot seek injunction
FRAND based on “smallest salable component” of product
See (“Understanding Patent Issues During IEEE Standards Development” for examples
If participant refuses to license, will be referred to IEEE Patent Committee (PatCom)

12. Licensing Environment - SAE
SAE has IPR policy
SAE Technical Reports can incorporate patented subject matter “if there is in the opinion of the committee developing the Technical Report technical justification and provided that SAE receive assurance from the patent holder that it will license applicants under reasonable terms and conditions for the purpose of implementing the standard.”
The “assurance” can be in form of:
SAE Intellectual Property Rights and Usage Policy
Exemplary assurance letter at: letter_assurance.docx

13. Licensing Environment - FRAND
There has been significant litigation involving FRAND obligations
Motorola v. Microsoft
IEEE (W-LAN) and ITU-T H.264 (video compression)
Motorola had FRAND obligation
Motorola filed patent infringement actions in both International Trade Commission (“ITC”) and District Court
Also filed lawsuit in Germany
Motorola sought injunctive relief in District Court and in Germany
Motorola sought Exclusion Order in ITC
During negotiations, Motorola sought 2.25% royalty on all xBox consoles and all computers running Windows
This amounted to ~$4 Billion/year in royalty obligations

14. Licensing Environment - FRAND
There has been significant litigation involving FRAND obligations
Motorola v. Microsoft
Bench trial at District Court (no jury) found FRAND of $1.8 Million/year
After FRAND determination, jury trial held to determine whether Motorola breached contractual obligations to SSOs
Jury returned $14.5 Million verdict to Microsoft
Found that Motorola breached “implied contractual covenant of good faith and fair dealing”
Verdict affirmed by 9th Circuit Court of Appeals
Motorola v. Microsoft provides framework for determinations of FRAND royalty rates in litigation

15. Licensing Environment - FRAND
There has been significant litigation involving FRAND obligations
In re Innovatio IP Ventures
IEEE SEP
Prior owners of patents agreed to FRAND obligation
Innovatio asserted royalty should be percentage of selling price of end products
Laptops, tablets, access points, etc.
$4.17 per laptop, $16.17 pert tablet, etc.
Manufacturer defendants asserted royalty should be based on percentage of selling price for wireless chips used in system-level products
Royalty would range from .72 cents to 3.09 cents
Court holds that it “must calculate royalties “not on the entire product, but instead on the ‘smallest salable patent-practicing unit.’ ”
Wireless chip

16. Licensing Environment - FRAND
There has been significant litigation involving FRAND obligations
In re Innovatio IP Ventures
Court largely follows Motorola v. Microsoft
Used own calculation, which it called a “top down approach”
Start with average price of a Wi-Fi chip ($14.85)
Multiply by 12.1% profit margin to get profit per chip ($1.80)
Court used Broadcom’s average profit margin from
Multiplied $1.80 by 84% (the value attributable to top 10% of all SEPs), which is $1.51
Multiplied $1.51 by 19/300 (i.e., Innovatio owned 19 of 300 SEPs in top 10% of all SEPs)
Results in 9.56 cents per chip

17. Licensing Environment - FRAND
Lessons
Royalty rates will be based on smallest salable patent-practicing unit
Importance of patents to implementation of standard affects royalty
Courts will set royalties to avoid patent “hold ups” (e.g.., seeking unreasonably high royalties when SSO participants fail to identify SEPs)
Failure to offer FRAND can lead to contract liability
Follow SSO IPR policies!

18. Enforcement
There are a large number of patents already issued and on file directed to various autonomous vehicle technologies
Patent “gold rush” almost always leads to protracted patent disputes
Incumbents seem likely to license

19. Enforcement

20. Enforcement Non-Practicing entities (“NPEs”) already active
American Vehicular Sciences
Filed multiple lawsuits against all major OEMs
One campaign involves automatic headlight dimming
Empire IP
Through its subsidiary, Cruise Control Technologies, sued multiple OEMs
Patent directed to “autonomous intelligent cruise control”
Patent found invalid during Inter Partes Review (IPR) proceeding

21. Enforcement Landscape has changed
IPR proceedings are proceedings before the U.S. Patent and Trademark Office (USPTO) that allow validity challenges
Very popular
According to USPTO statistics, 1737 IPR petitions filed in FY2015

22. Enforcement As of November 30, 2015: 2,296 total petitions filed
“Trial” instituted in 1127 proceedings
452 proceedings terminated during trial (settlement, request for adverse judgment)
675 completed trials
In 487 trials, all instituted claims cancelled
In 97 trials, some instituted claims cancelled
In 91 trials, no instituted claims cancelled
See
Much better odds than in Federal District Court

23. Contact Information
Jeffrey A. Miller Two Palo Alto Square 3000 El Camino Real Suite 400 Palo Alto, California (650)