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If we had to choose one sector destined for transformation as a result of the growing digitalization, the automotive sector would be high on the list. For some years now, the automotive sector has been immersed in a complex transition and expansion process aiming to adopt new more secure, sustainable, collaborative and competitive business models aligned with the development of the environment, technology, consumer habits and preferences. This transformation poses several challenges from various perspectives, particularly in terms of intellectual and industrial property on assets.
In fact, the digital transformation has also drifted towards identifying a new seemingly endless source of resources whose value cannot be easily calculated. The new Data Economy era and the utilization of Big Data appears to be one of the industry’s main concerns as vehicles are increasingly capable of achieving unimaginable data capacities through the multiple sensors in their navigation systems, infotainments and control units.
However, all that glitters is not gold. The use of this resource poses considerable inconveniences and—as with raw materials—raw data cannot be exploited as such. To be of use, data require diligent processing, including filtering, categorization and analysis, a process that not all companies want or are in a position to perform.
Data ownership and analysis
Ownership of the data and their licensing model are also uncertain. Sector representatives agree that the traditional intellectual property protection mechanisms such as copyright, trade secrets and other sui generis or similar rights, or even contractual mechanisms, are not sufficient or appropriate to provide comfort in a context in which all the participants in the chain wish to take ownership of or at least have shared access to the data.
Additionally, perhaps most significantly, the legal difficulties arising from the restrictions imposed by the new European personal data protection regulatory framework or in the US, for example, the restrictions arising from the application of the seasoned Federal Driver’s Privacy Protection Act come into play.
The sector has proclaimed it loud and clear: new market players are urgently needed to provide technological solutions based on data analysis that are capable of grappling with the restrictions and difficulties posed by the current regulatory framework. The European Union must speed up its response (currently in the analysis phase) and construct a satisfactory regulatory framework offering legal certainty and adequate protection for all participants and individuals concerned.
Everything does not revolve around data, however. The automotive sector is also coming up against many other obstacles. In general, vehicle connectivity is proving to be another main focus for most manufacturers, and its implementation is not without its difficulties either. It requires multiple contracts involving complex negotiations with telecommunications operators, digital platforms, original equipment manufacturers (OEMs) and intermediaries, for example, as well as developing or acquiring countless software licenses and patents and complying with new legal requirements such as the implementation of eCall (mandatory since March 31, 2018), the EU Geoblocking Regulation or, in general, adapting to the local and international regulatory framework.
Litigation on the use of 4G and 5G patents
If ligation on automotive sector patents was already high, the digital era complicates it further. Experts predict that litigation on 4G and 5G technology patents in the automotive sector will increase over the coming years. The problem is that it is not clear yet whether such patents, traditionally monopolized by large cellphone companies and the telecommunications sector, pertain to the SEPs (standard essential patents) category, and as such, their licensing terms are not clear either. The debate on adopting a fair, reasonable and non-discriminatory (FRAND) licensing model remains open and constitutes another of the sector’s great battles still awaiting a satisfactory response from the European Union (currently in the analysis phase).
Using new disruptive technologies, including Artificial Intelligence, the Internet of Things, 3D printing, Blockchain and virtual reality, and applying them to develop future mobility such as electric cars, self-driving cars, walkcars (so small you can carry them in your bag) or aerial vehicles, entails commitments that raise a myriad of uncertainties, particularly in relation to safety and cybersecurity risks.
Furthermore, access to those technologies requires significant research, resources and specialist knowledge, making it difficult for the sector to develop them independently. In many cases, and to remedy those shortcomings, automobile companies are opting for partnerships and joint ventures or acquiring start-ups and R&D laboratories related to technological contribution or with intermediaries specializing in the automobile sector, for example, in relation to charging electric vehicles, providing digital services or drone technology.
In this context, the problem of valuing technological assets such as the copyright on software or patent ownership arises, given that, in many cases, those assets are in the early stages of development, and their value is not shown until a claim is filed, for example, in the context of a dispute on infringement of third-party rights. Within the sector, sometimes it is much more important that the seller ensures that no third-party rights have been infringed than proving that it owns a certain intellectual property asset (for example, if it is duly registered or patented in its name). The most important thing is the technical and research team, its knowledge and the trade secrets, which have had their own legal framework in Spain since the turn of the year, following the transposition of Directive (EU) 2016/943 on Trade Secrets.
Fight against counterfeits
Last but not least, the automobile sector remains under serious threat due to the volume of counterfeit components and spare parts (mainly brakes, wheels, batteries, and engine parts), which the European Union Intellectual Property Office estimates at around 20.2 billion in annual losses for the industry. Most of these counterfeits, which come from Asia, pose significant threats or risks to user safety. The industry has started to include digital tools for detection, monitoring and prosecution in its processes, despite the high costs and procedural difficulties and the complexities in terms of seizures by customs authorities. The sector also calls on the European Union to consider adopting appropriate legal remedies, such as freezing payment accounts, that have already been adopted and seem to be working in the United States.
Ultimately, it is clear that the automotive sector is facing several complex challenges that give rise to numerous issues related to intellectual and industrial property and that, in addition to the industry’s own efforts to adapt to the new times, many of these issues require a consistent legislative response that can provide certainty to all stakeholders in the chain and ensure fair balance of all the interests at play.
Author: Claudia Morgado
This post is also available in: Español