Finding Stability in Today’s Automotive and Transportation Industry
Written by: Jonathan H. Spadt
There are many significant social and technological phenomena converging on the transportation industry which are permanently redefining it. Environmental awareness and concerns over climate change are driving new technologies in electric mobility. Shared digital platforms and improved data flows allowing for ride sharing and new forms of fleet management are changing consumer preferences for vehicle ownership. Defining the performance of the vehicles are new technologies in energy storage, sensors, cameras, communication protocols, GPS, radar, data processing (both locally in the vehicle and remotely in the cloud), machine learning, AI and materials to reduce weight and improve efficiency. Apart from these direct technologies are all of the ancillary services and infrastructure that are being developed to support this massive transformation. Expanding the impact of these changes is the recognition that they have applicability to mobility in significant areas beyond just automobiles and trucks. Aerospace and maritime industries stand to be wholly transformed as well.
These fundamental changes to transportation are happening quickly and with that speed comes heightened challenges to affected industries on many levels. Even if one looks only at electric vehicles (EV) and autonomous vehicles (AV), the impact on the economy is significant. Manufacturers are making aggressive decisions on strategies, and suppliers are being forced to make hard and quick decisions in response to those strategies. Ancillary service providers are also responding to this completely new environment with influential factors changing by the day. Government regulations and law will, as is always the case, lag behind the accelerating momentum of the new markets and the issues that evolve. Further adding to this uncertainty are external factors created by political instabilities impacting the market.
Significantly, all of this is evolving in a world where auto production fell 5% in the first half of 2019 as compared to the first half of 2018. This has had a particular impact on Germany, which not only has a strong manufacturer base, but also very strong tier 1 and tier 2 suppliers. Add to this the U.S. – China trade dynamic, and the current uncertainty with the U.S. – Mexico – Canada Trade Agreement (USMCA), and we see a very interesting market. Moreover, extraordinary changes to technology, consumer demand, and trade stability combine to make decision making more challenging than ever. Are there areas on which we can focus with some degree of certainty?
The shifts noted above are driving the development of significantly new innovations and associated intellectual property. This is one area that affords some stability in terms of investment strategy and business planning. There are actually a number of IP considerations that can be used to impart some stability, some of which are developed below.
A starting point for any company that has been in the traditional auto industry is an audit of its current IP portfolio. If you have unused or moderately important IP focused on technologies unique to internal combustion vehicles (ICV), you might think about divesting it or even donating it to the public domain. This would include not just powertrain technologies, but also related technologies like emission controls and products, like catalytic converters. Monetizing this IP through a sale or beneficial tax strategy can provide a budget booster for more important IP development moving forward. Taking this a step further, it may be that spinning off an entire business unit focused on ICV technologies could make sense. Several large tier 1 suppliers are already pursuing this strategy. Internal combustion vehicles are not disappearing tomorrow, but over time IP in ICV’s will likely decrease in value. Timing your exit is of course very company-specific, but should be a factor in your long-term strategy.
A second consideration for any innovator in this new industry is a commitment to the development of smart, high-quality patent strategies. This is particularly important in the U.S. where the subject matter eligibility requirements for patentability have been weakened and, arguably, become nebulous. Earlier this year, the Court of Appeals for the Federal Circuit found the following claim to be directed primarily to an abstract idea, and therefore unpatentable under Supreme Court jurisprudence:
- An apparatus, comprising:
a control device to turn electric supply on and off to enable and disable charge transfer for electric vehicles;
a transceiver to communicate requests for charge transfer with a remote server and receive communications from the remote server via a data control unit that is connected to the remote server through a wide area network; and
a controller, coupled with the control device and the transceiver, to cause the control device to turn the electric supply on based on communication from the remote server.
The case is ChargePoint, Inc. v. SemaConnect, Inc., 920 F.3d 759 (2019). It is important to note that the court found this claim unpatentable not because of the provisions for patentability over the prior art, but solely because the court found it to be directed to an abstract idea. Much has been written about this decision and the cases that led up to it. That commentary goes well beyond the scope of this article. Suffice it to say, however, that smart patent drafting is paramount to the development of a valuable IP portfolio in this new industry.
Related to the above, innovators in this new-world mobility industry should be aware of the state of political interest in possibly reforming the patent-eligibility requirements for U.S. patent protection. Both chambers of the U.S. Congress are considering the possibility of legislative modifications to the Supreme Court’s recent redefinition of subject matter eligibility. There is, however, some controversy as a large contingent of the high-tech community believes the current status quo is in fact the appropriate state of the law. For example, the High Tech Inventors Alliance, a trade group including Google, Amazon and Intel, among others, believes that “Courts, not Congress, should define the line between eligible and ineligible subject matter and apply it to fast-changing technologies.” This is tantamount to an endorsement of the status quo. Right or wrong, stakeholders in this new industry should become educated about this important debate, and incorporate it into their IP policy decisions.
Other IP strategies should also form a part of a comprehensive scheme. Trade secret protection, unfair competition laws, trademark and trade dress strategies, creative licensing plans, and even design patent protection should all be considered a priority as the sheer size of this new industry will yield significant rewards to the stakeholders who are conscientious and committed to a long-term vision of their role in tomorrow’s transportation industry. A strongly pursued, well-defined and properly funded global IP strategy will provide leverage and some stability against many of the uncertainties that exist in today’s evolving transportation industry. This will not only provide a degree of clarity and certainty for investors, but also a vision that employees and business partners need to see.
About the Author:
Jonathan H. Spadt is an attorney, engineer and CEO of RatnerPrestia. He is an expert on global innovation, intellectual property law, trade-related aspects of IP, and global supply-chain IP strategies. With an established worldwide reputation as more than an attorney, but a counselor and policy developer, he has a broad view of economic and trade policies that interact with intellectual property law and policy. He routinely writes and lectures throughout the United States and Europe in both the private and public sectors, and actively participates in policy discussions relevant to trade and IP law.