Tuesday, July 12, 2022

Automakers get final boarding call from Avanci for $15-per-car 4G standard-essential patent license: come September, per-unit fee will go up by one third to $20

Juve Patent's Amy Sandys was first (and IAM's Adam Houldsworth second) to report on today's announcement by the Avanci standard-essential patent (SEP) pool according to which the license fee for Avanci's 4G program (which also includes 2G, 3G, and eCall patents) will--"for new licensees signed after August 31, 2022"--increase from the current rate of $15 to a new per-unit royalty of $20. That is an increase by one third.

This means car makers who'd rather save the extra $5 per car have about seven weeks left to sign up. The press release says "the Avanci agreement is a simple form license." That's why the patent pool is "confident that any auto maker who wishes to take an agreement before the rate increase will be able to do so." Whoever has a license now or at least by the end of August will then have 4G price stability for the remainder of the lifetime of those patents.

At an IP conference that took place in Munich last month (which I didn't personally attend), Dr. Claudia Tapia--Ericsson's Director of IPR Policy and Legal Academic Research--raised the question of whether it was fair that BMW, which became Avanci's first-ever licensee in late 2017, and Ford, which took a license in May 2022 and only after losing out in litigation, were paying the same per-car rate. Indeed, Ford could hardly have claimed to be eligible for an early-bird discount.

There's another fairness issue here: about half of the automotive industry (by volume) is now paying the Avanci license fee, but the other half is not. Alfred Sant MEP (Member of the European Parliament), a former prime minister of Malta, has raised this issue in a follow-up set of questions to the European Commission. In April I commented on the Commission's response to his first set of questions.

The upcoming rate hike should create a strong disincentive for further hold-out. Daimler, Tesla, and Ford took their chances in litigation, and just ended up wasting money on lawyers (like a German tire company that apparently never gets tired of losing).

Currently, the multi-brand Stellantis group (Fiat Chrysler, Opel etc.) and Nissan have to defend themselves against several Munich patent infringement cases brought by Avanci licensors. Their chances of defending themselves against all those Munich cases are slim as some of those patents have previously been deemed valid and standard-essential, and Avanci licensors apparently don't even have to make bilateral licensing offers to car makers: they can just point to the availability of the pool license.

Avanci has a total of 49 licensors--far more than when BMW signed up. In February, one of the largest 4G SEP holders--LG Electronics--joined the pool. Cellular SEP heavyweights like Ericsson, Nokia, and Qualcomm had joined the pool long before. The value proposition should be a non-issue. On LinkedIn, one leading licensing expert, Eric Stasik, has called Avanci's rate a "bargain." What I wouldn't doubt for a second is that 49 bilateral licenses would end up costing more than the pool license, even more so if transaction and potential litigation expenses are factored in.

Car makers typically charge customers hundreds of euros or dollars over the years for mobile data services, which are typically included in the car's purchase price for the first two or three years, after which the subscription must be renewed.

In all those years during which Avanci has slowly but surely convinced ever more licensors and more and more licensees to sign up, no better alternative has been presented. Avanci licensors have prevailed in court, again and again and again.

I would be surprised if we didn't see a number of additional Avanci sign-ups this month and next. There is a closing window of opportunity now for the $15-per-car deal, and every single car maker who opted for litigation has lost after wasting many millions on lawyers (the wisdom of whose advice has since been questioned by some people). And car makers who join now may still have a chance to be involved in Avanci's 5G program when it launches.

There are some unresolved issues in SEP licensing, but for the automotive industryit appears to me that the Avanci model has won. I wasn't initially convinced, but can't argue with success.