Within the period of internet-connected automobiles, Europe’s carmakers are embroiled in mental property battles with among the area’s largest telecoms teams. Looming behind these conflicts is worry in regards to the rising dominance of China.

Firms from Asia’s largest economic system, led by Huawei, have filed a deluge of patents across the important know-how that permits merchandise, from automobiles to cell gadgets, to entry 4G, 5G and WiFi networks. Something that connects to the web should safe a licence for these so-called customary important patents (SEPs) from know-how creators.

Chinese language corporations have been behind 65 per cent of filings of SEPs final yr to requirements physique ETSI, in accordance with knowledge collected by Clarivate, up from 37 per cent in 2019. EU commissioner Thierry Breton this week famous that since 2014, the share of SEPs globally held by European corporations dropped from 22 to fifteen per cent, whereas Chinese language corporations’ doubled.

“I’m strongly urging and inspiring corporations to file and file and file patents . . . Chinese language corporations are doing it loads,” he mentioned.

Breton was setting out new European Fee proposals to extend transparency and cut back litigation within the patent market, led partially by fears that competitiveness within the bloc was underneath risk. Underneath the brand new guidelines, corporations must register their patents with the EU Mental Property Workplace, which might in flip assist set licensing and royalty charges.

The transfer has sparked controversy amongst main patent holders who worry it would create much more onerous procedures, equivalent to registering each single patent with the brand new physique, and cut back their entry to the courts for infringement instances. This might in the end hit their world competitiveness, they fear.

The assessment follows a number of authorized disputes, together with a lawsuit between Nokia and Mercedes-Benz. The telecoms group sued the carmaker, beforehand often called Daimler, for patent infringement when negotiations over pricing broke down. The case was settled exterior court docket two years in the past.

China’s rising curiosity in SEPs has sparked concern within the automotive business, which is already reliant on the most important Asian nation for key parts throughout a lot of its provide chain and has turn out to be deeply cautious of the escalation of geopolitical tensions between Washington and Beijing.

Huawei, which has suffered from US and European sanctions imposed over fears it helps Beijing conduct cyber-espionage and know-how theft, has led the pack, submitting hundreds of patent functions in 2020 and 2021.

“In 5G, the winner is evident — it’s Huawei,” mentioned Michael Schlögl, head of patents at German automotive provider Continental.

Huawei, which invested $21.8bn in R&D in 2021, has developed a number of licensing relationships inside the automotive business. Nevertheless it has to this point opted to not license its IP through a patent pool referred to as Avanci utilized by Ericsson, Nokia and others, selecting as a substitute direct agreements with element makers together with a Volkswagen provider. It has signed bilateral SEP agreements with at the least 13 carmakers, together with Audi and BMW.

Employees work on the production floor at the Voith Turbo Power Transmission Co. auto parts factory in Shanghai
Huawei, which invested $21.8bn in R&D in 2021, has positioned specific concentrate on the automotive business © Qilai Shen/Bloomberg

Patent possession can turn out to be an excellent supply of earnings for telecoms know-how corporations equivalent to Huawei, which has been shedding enterprise internationally as many western international locations have began purging the corporate from telecommunications networks due to issues over its relationship with Beijing.

Chinese language corporations are actually more and more ready the place they may “preserve different corporations out of enterprise — not simply within the automotive provide, however for the entire Web of Issues”, mentioned Schlögl.

Christian Loyau, authorized affairs and governance director on the physique answerable for standardisation of communication know-how in Europe, ETSI, warned that if Chinese language corporations felt they weren’t allowed to take part pretty in western markets, Beijing may resolve to “use their patents as weapons” and curtail western corporations’ entry to key applied sciences.

An individual near Huawei mentioned that it negotiates licences in a “pleasant and amicable method” within the hope that its know-how may be “useful for the entire business”.

Telecoms gear group executives level to the truth that the amount of patents filed doesn’t essentially equate to their high quality and that Ericsson and Nokia nonetheless dominate on the subject of profitable high quality patents. Huawei generated about $1.3bn from patent licensing between 2019 and 2021. Nokia generated €1.5bn in 2021 alone, whereas Ericsson generated round €900mn final yr.

Nonetheless, fears in regards to the function of Chinese language corporations in patent improvement come as a rising variety of merchandise turn out to be related, prompting the necessity for licences for wi-fi entry to 4G, 5G and ultimately 6G networks.

Automotive corporations are amongst conventional industries more and more cautious of the ability telecoms gear makers maintain over circumstances equivalent to pricing for the IP licences.

Teams together with Nokia and Ericsson have been pegging the worth of connectivity patents to the worth of a automotive, slightly than the considerably cheaper connectivity {hardware} developed by automotive suppliers, that means they’ll cost extra.

Anja Miedbrodt, senior counsel in mental property defence at Mercedes-Benz, mentioned the battle between the 2 industries was additionally threatening to upend provide chains.

With automobiles such because the Mercedes-Benz E-class requiring greater than 3,700 completely different elements from greater than 340 suppliers, she mentioned, carmakers couldn’t be answerable for making certain every half was patent-compliant — including that requiring this “would flip across the complete set-up of the automotive business”.

Nevertheless, an individual near Nokia mentioned that patent holders have been charging solely round $20 per automotive. The corporate mentioned that the “refusal by some corporations to pay for using different corporations’ know-how is the primary barrier to environment friendly and efficient SEP licensing”.

The $20 price “may not sound like a lot for the buyer, however multiply this by a whole bunch of requirements [needed by] automotive applied sciences”, mentioned Schlögl, including that if connectivity SEP charges saved rising, “you would possibly certainly see a invoice of licence charges that an finish shopper would by no means settle for”.

Further reporting by Javier Espinoza

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