Wednesday, July 7, 2021

Huawei signs 4G patent license agreement with Volkswagen supplier, its largest automotive licensing deal thus far

Huawei, which owns one of the world's leading cellular standard-essential patent (SEP) portfolios, just put out a press release announcing "a license agreement with a supplier of Volkswagen Group." The announce goes on to say that it's a 4G deal (suggesting to me that they're still going to have to negotiate 5G terms) and "covers Volkswagen vehicles equipped with wireless connectivity." According to Huawei, it marks the Chinese company's "largest licensing deal in the automotive industry." Huawei apparently has other license agreements in the automotive industry in place as well, and "expects more than 30 million vehicles to be licensed under its patents based on existing license agreements." (emphasis added)

Huawei itself is an automotive supplier, too. I've seen them as an intervenor in the Nokia v. Daimler cases, and a license agreement between Huawei and Sharp effectively covered about 86% of Daimler's car sales.

I'd like to know the name of that unnamed Volkswagen supplier, and whether it's a tier 1 license deal (covering telematics control units (TCUs)) or covers components higher up in the supply chain.

Whether it's a tier 1, 2 or 3 license, the announcement suggests that the licensee can't sell those components to other car makers under this particular license agreement, which appears to be specific to Volkswagen Group's 12 brands: Volkswagen, Audi, SEAT, ŠKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial Vehicles, Scania, and MAN.

In April I mentioned a presentation by Volkswagen Group's IP chief Uwe Wiesner. In that one he also talked about an approach commonly referred to as "joint licensing negotiation group." The idea is that car makers and their suppliers would jointly negotiate license agreements with major patent holders. Today's announcement, however, does not say whether Volkswagen played an active role in those negotiations or whether Huawei was negotiating with only the supplier.

Given that the announcement describes Volkswagen's unnamed supplier as the licensee, the deal structure is undoubtedly distinct from Nokia's recent settlement with Daimler, which is a car-level license. But, to be fair, when Nokia and the Avanci pool (to which Nokia is a major contributor) are asked about their willingness to license component makers, they don't rule out license deals that cover tier 1 (TCU) suppliers but are specific to the incorporation of those components into the cars made by one particular manufacturer. There may still be significant differences between the structure of the deal Huawei announced today--especially if it's not a tier 1 deal--and the coverage Nokia and Avanci are willing to extend to tier 1 suppliers, such as so-called "have made" rights. What those deal structures potentially have in common is that the license agreement announced today may not cover components the same supplier sells to other car makers. For example, when Avanci announced its patent license agreement with BMW in December 2017, it noted that the license agreement "[would] to a large extent be handled through {BMW's] supplier for telematics units, providing them access to the essential wireless technology of many different telecommunication and patent holding companies."

Huawei is not an Avanci contributor. It holds the most important portfolio that cannot be licensed through Avanci. Today's announcement doesn't specifically endorse Avanci's model, but for the reasons I just explained, it is definitely not bad news for Avanci and its key contributors such as Nokia and Ericsson.

Volkswagen's Avanci license appears to be rather limited, as one can infer from the numbers. It seems that most Volkswagen cars are licensed only up to 3G, and only some of its brands or models are covered by a 4G license.

Avanci is widely expected to announce its 5G license fees later this year, possibly as early as in a couple of months. There will be a lot of pressure on the automotive industry, which is already incorporating 5G into many cars, to enter into cellular SEP license agreements, or to upgrade existing agreements. Today's high-volume deal between Huawei and that unnamed Volkswagen supplier sets the stage for more automotive patent license deals.

Recent developments in Germany strengthen the negotiating position of wireless SEP holders. The impact of this year's legislative amendment on patent injunctions is negligible at best, and Sisvel v. Haier is here to stay as even the Dusseldorf Regional Court won't try again to question the SEP injunction case law of the Federal Court of Justice of Germany: they won't send another preliminary reference to the European Court of Justice (after the one in Nokia v. Daimler got withdrawn as a result of the settlement). It looks like § 315 licensing offers will be safe harbor for implementers, but in that case the license fee would have to be adjusted by a court of law in the event of a dispute, and German courts are known to be rather patentee-friendly. There will be no better jurisdiction for 5G SEP enforcement than Germany.

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