Protect yourself from patent litigation

The auto industry's transformation from manufacturing traditional vehicles to creating what today is often likened to "computers on wheels" has catapulted the industry to the forefront of technology innovation. But the transformation has also ushered in some new challenges. One of the biggest is a sharp increase in the rate of patent litigation in the sector — a trend that is only expected to rise even more dramatically in the near future.

What can auto companies do to protect themselves in this ever-changing and more competitive patent secondary market? A lot, if they're proactive.

Historically, large automotive manufacturers and their suppliers have been reluctant to sue each other for patent infringement. Many competitors of equal size have cross-licenses, which is based on the prevailing patent policy set by the National Automobile Chamber of Commerce in 1914 that inaugurated a cross-licensing policy among its members that numbered at its peak 131 in 1922.

This policy lasted until 1969, but its spirit continues today. The convergence of new functionalities in automobiles, however, has caught the interest of a host of new intellectual property, or IP, rights holders because of the sheer number of technologies involved.

The average cost of IP litigation can easily range from $2 million to $5 million and even the cost to invalidate patents at the U.S. Patent and Trademark Office is running between $250,000 and $500,000.

Some companies operate in denial mode when it comes to IP — they simply refuse to accept or believe that the organization faces any IP-related risks. Others take a reactive approach, addressing IP risk only when a problem materializes. Still others, may elect to "efficiently infringe" third party IP.

But some auto and ride-hailing companies — such as Ford, Honda, Lyft and Uber — are taking a more proactive approach: identifying risks early, analyzing the potential risks, prioritizing them and then taking appropriate IP risk mitigation actions if and when needed.

How can auto companies develop a more proactive approach to mitigating IP risk?

At a basic level, they can and should find a way to monitor the litigation landscape. They can follow the actions of patent assertion entities to see what may be coming, monitor the secondary marketplace to see what patents might be of risk, join a defensive aggregator, obtain IP insurance, work with anti-counterfeit specialists and acquire patents for defensive purposes.

Organizations such as Open Invention Network, Unified Patents, LOT Network and AST can help auto companies stay abreast of what's happening in the patent marketplace.

So rather than hire a staff internally to monitor the marketplace, auto companies can join one or more of these IP industry bodies that does the work for them, as each serves a different problem.

Membership in such an organization can offer several tools and advantages, including consortium buying opportunities, cost sharing on defensive patent acquisitions, monitoring services of the secondary patent marketplace and sharing best practices and knowledge as part of a community of patent lawyers, licensing professionals and IP experts at similarly situated companies.

The patent marketplace has seen some innovations in proactive purchase solutions with the arrival of fixed-price, fixed-term buying programs. These models streamline patent selling and buying by adhering to a fixed price, rapid response model.

So auto companies are now on notice — there are options out there and strategies to pursue to help mitigate the risk of increased patent litigation in the sector. Don't settle for being a denier. Evaluate your risk mitigation decision-making processes, so you can design cost-effective strategies that will protect your company, reduce costs and save unnecessary stress. Be proactive.