Antitrust complaints are like London buses. You don’t get one for ages then four come at once in the same industry. That’s what has happened this past month in the auto sector.
Mike Sax is Founder and Chairman of ACT The App Association, a trade group that ranks many small IoT developers among its members.
First there was Daimler, then the supplier of onboard communications Bury, both German manufacturers at the vanguard of automotive communications technology.
This week, German’s Continental and France’s Valeo, two more leading automotive manufacturing companies, also filed complaints. And they likely won’t be the last.
They are all complaining about Nokia, one of a small handful of companies that own patents essential to standardized communications technologies that car makers and their suppliers need to connect cars to the internet.
All the carmakers are at it. After smartphones, connected cars are likely to be the next and most ubiquitous example of the long-anticipated Internet of Things (IoT). Nokia, together with Qualcomm, Ericsson and a few other smaller firms, are stretching for as big a slice of the IoT pie as possible through licensing of standard essential patents (SEPs).
The carmakers, as well as other developers of IoT technologies, argue that these communications chipmakers are also stretching the law, because they are not honouring voluntary promises made to license their SEPs on fair, reasonable and non-discriminatory (FRAND) terms.
Nokia et al have submitted countless patents to standardization efforts that have defined 3G and 4G technologies, and that are beginning to define what 5G technologies are. In return for getting access to a massive market of SEP licensees that will utilize a standard, SEP owners voluntarily commit to offering licenses to all applicants on FRAND terms.
And that’s not happening, according to Daimler, Bury, Continental and Valeo and several other companies in the automotive sector who are also considering launching separate complaints themselves.
Smart cars are just the tip of the IoT iceberg. Similar licensing negotiations with this small handful of SEP owners are ongoing across a wide range of industries, in anticipation of the rollout of 5G networks.
In the coming years, agricultural machinery makers, engineering firms, energy providers, and medical appliance makers (among others) will all be knocking at the doors of the firms holding standard essential patents on communications chips.
Clearly, for the small handful of owners of the communications SEPs, the arrival of the IoT is a licensing bonanza. It’s already underway and will accelerate sharply when 5G takes off.
The auto sector isn’t the first to have its technological ambitions held up by over-zealous SEP holders. The mobile phone industry has been plagued by similar disputes for the past ten years, and there’s no sign of this abating, with high-stakes litigation taking place across the globe.
And it won’t just be big firms that can afford expensive legal counsel to help them negotiate with the SEP owners. As the IoT gathers pace, small developers will be at its vanguard.
Carmakers and big technology firms have teamed up with small app developers to draft a set of guidelines on how to negotiate SEP licenses fairly. The guidelines will be published by the European standards body CEN CENELEC in the coming month.
But to illustrate how contentious the issue of SEP licensing is, license holders are also drafting guidelines through CEN CENELEC – ones that – perhaps not surprisingly – promote practices that favour license holders to the detriment of innovators that need reasonable access to standards. Nokia is leading this charge.
Nokia is also hitting back. In the past month, it has filed a string of lawsuits against Daimler in several German courts, accusing the carmaker of infringing its patents on 3G and 4G technologies.
It’s using a carrot as well as a stick. Nokia, along with fellow patent holders including Qualcomm, Ericsson and Siemens have created the Avanci patent pool and are trying to strike licensing deals with carmakers. Having targeted German car makers, Avanci is understood now to be turning its attention to the big French groups: Peugeot, Citroen and Renault.
No one disputes the SEP owner’s right to make a reasonable return on the investments they have made, but firms including Nokia have gone too far. They are demanding arbitrarily high license fees based on value clearly not associated with the SEPs they hold. They are in effect trying to profit from others’ innovations in addition to their own.
If they are allowed to get away with that it will deter small IoT developers in preventing access to standards used as a baseline to innovate, slowing progress for everyone. The guidelines we have worked to draft through CEN-CENELEC are designed to avert legal disputes arising from SEP licensing negotiations.
But it is increasingly clear that antitrust authorities have to weigh in to clear this licensing traffic jam. Failure to ensure fair play won’t just be a roadblock to the car industry; it will hamper the uptake of IoT in Europe.