Tuesday, April 26, 2022

Avanci licensee Volkswagen continues to advocate automotive patent licensing negotiation groups without alleviating cartel concerns in any way

At the Auto IP conference in Frankfurt that I mentioned in a recent post, Volkswagen's IP chief Uwe Wiesner delivered his first public speech since the appointment of his successor--Silke Reinhold--was made official (see yesterday's Juve Patent article)--and possibly also since VW upgraded its Avanci standard-essential patent (SEP) license to 4G on a group-wide basis.

Mr. Wiesner, who was accurately introduced as a very well-respected figure in the IP community, portrayed VW's attitude as follows: "Don't complain, don't go to courts, find acceptable solutions." While VW may not have formally lodged complaints, it is a fact that the car maker has been lobbying competition authorities and policy makers in multiple jurisdictions in an effort to secure green light for an exemption from cartel law. This blog has discussed the concept of licensing (or "licensee") negotiation groups (LNGs) on a few occasions, such as when one of Qualcomm's most senior executives said everyone involved in such buyers' cartels "should go to jail." In its patent infringement complaint against VW (one of several cases that were settled by VW upgrading its Avanci license to the cellular standard it had already been implementing for years), Acer pointed to this blog for a more detailed discussion of the legal and policy concerns that LNGs would raise.

In today's presentation, Mr. Wiesner did give Avanci some credit for its efforts to bring cellular SEP licensors and car makers together, but he then called for different measures and developments he would consider prerequisite to a more balanced framework for automotive SEP licensing. In an effort to make the case for change, he pointed to the fact that there are approximately 10,000 components in a car, any single one of which could be patented in one way or another, and the multiplicity of patent owners, with Huawei and Qualcomm towering above all other contributors to cellular standards according to the numbers Mr. Wiesner relied on. He then went on to raise the issue of informational asymmetry, though I, quite frankly, don't think that Continental--the most vocal one of all tier 1 (= direct) automotive suppliers to demand exhaustive SEP licenses for its components--is really a match for the likes of Ericsson, Nokia, and Qualcomm (to name but three major Avanci licensors) when it comes to cellular standards and SEP licensing.

Mr. Wiesner is clearly dismayed at the patentee-friendly leanings of the German judiciary and, in today's context (SEP licensing), primarily with the Sisvel v. Haier case law. He called for a return to the pre-Sisvel v. Haier application of Huawei v. ZTE, and mentioned a challenge to Sisvel v. Haier that is pending before the Federal Constitutional Court of Germany. What sets the Federal Constitutional Court apart from the U.S. Supreme Court, however, is that it is not a court of final appeal with broad in rem jurisdiction. It only deals with a narrow range of questions, and in context like patent law, this mostly comes down to alleged violations of the right to be heard. One may or may not agree with Sisvel v. Haier, but I'd be very surprised if the Federal Constitutional Court overruled the Federal Court of Justice. It would be unprecedented in German patent law. Most likely, the constitutional complaint will go nowhere.

Part of VW's strategy is to describe automotive SEP licensing as a "pilot" for the wider IoT industry. I wouldn't deny that there are parallels, but there are also some important differences. In particular, many IoT companies are tiny compared to even niche automakers. Also, things are very much in flux and I expect some interesting developments in IoT SEP licensing this year and beyond.

The most aggressive demand continues to be that "licensor pools should negotiate with LNGs." In today's 30-minute presentation, there was nothing new that would address or assuage patentees' and competition authorities' legitimate concerns over LNGs being tantamount to buyers' cartels and leading to a group boycott. It also appears that negotiations between pools and LNGs would still give potential licensees the option to decline to take a pool license and pursue bilateral licensing instead, entailing further holdout.

Arguably, another one of his proposals is comparably radical: no non-disclosure agreements (NDAs) in SEP licensing negotiations. Mr. Wiesner rightly noted that the specifications of the standards in question and the declared-essential patents are public documents. That is just a limited part of the picture (and, at any rate, I believe every NDA I've ever signed or seen defined what constitutes Confidential Information, clearly excluding public documents from the scope of the term). What I would agree is that NDAs should not get in the way of working out solutions to the problem of duplicative royalties. But neither patentees nor car makers or their suppliers would really want to negotiate without at least some degree of confidentiality.

In sum, there's quite some discrepancy between the far-reaching proposals and demands that Volkswagen makes on the one hand and the specifics it states in public--on such occasions as this week's Frankfurt conference--about how it wants to make all of that work without wreaking havoc to the licensing process. I would encourage VW to publish a position paper that lays out what the company has in mind, how it would work, and addresses the concerns that have been raised (not only, but also by this blog). The alternative would be to just abandon the idea altogether, given its conspicuous lack of support from antitrust watchdogs.

VW's patent department has grown from a small team (when he started, they were just about a dozen people) to--if I recall correctly--approximately 100 professionals. The fields of technology relevant to the automotive sector changed a lot during his 30+ years with the company.

Are VW's C-level execs are fully aware of how important IP will be to the future of the entire company? Is the world around VW possibly changing faster than its approach to IP? Those are important questions. The jury is still out on them.

Mr. Wiesner's successor--Mrs. Reinhold--will take over in July and has most recently been in charge of "electronics, mobility, designs and SEPs." She graduated in "material science," which is quite far from the digital space, but I don't know her and by now she may understand wireless technologies and artificial intelligence extremely well. The alternative (which I believe management consultants would have seriously recommended at this transformative stage) would have been to bring in new IP leadership from the industry with which the auto sector is converging, such as someone from Apple, Google, Samsung, Qualcomm, Ericsson, or Nokia, and to grant the new IP chief significant autonomy to adapt to the needs of our times, which has structural implications and should also involve substantial investments in the creation and acquisition of IP in certain fields. That opportunity for deliberate discontinuity--in order to accelerate developments that Mr. Wiesner had already put in motion--was probably missed.

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