SEP Automotive Patent Pool is expected to issue patent licenses to Tier 1 suppliers!?

Author: Yellow Warbler

December is called "Automotive Patent Pool Avanci Month", and it was thought that according to Avanci's previous mention of the licensing rate of 5G by the end of this year, a series of new solutions for the patent licensing model of the automotive industry will be introduced.

However, the 5G licensing rate has not yet arrived, and just over half a month after December, there have been a number of patent lawsuits by Avanci members, which has also attracted the attention of the global automotive industry.

Among the many focus of attention, one is that after "solving" Daimler, Avanci members mainly npe continue to "contain" Ford in the United States, and the other is to lead to another focus: Acer sued Volkswagen to bring out the LNG issue of the licensor negotiation organization floating under the water, is LNG a monopoly or anti-competitive behavior? It is believed that the united states, the European Union and several major judicial regions of China should have a good discussion on this issue, and this topic will be the hottest focus of global intellectual property, anti-monopoly and anti-competitive integration in 2022.

Another hot topic in the auto patent pool in 2022 is the 5G licensing rate, according to the CEO of IPlytics in Germany, who participated in the discussion with a vice president of Avanci last week, Avanci's 5G licensing rate will be launched in 2022. It has not been launched as expected before the end of this year, and it is estimated that the interests of rights holders will need to be coordinated, or consideration of the current situation.

This may be a good thing for auto companies, because Avanci's rate benchmark is likely to become a comparable reference for patent licensing fees in the future automotive industry, perhaps now domestic auto companies do not feel at all, but if you stand in five or six years and look at it, you will feel that this period should not be a time to remain silent, but should actively participate in the golden age of patent licensing rules in the automotive industry, including what is FRAND's licensing rate. Unfortunately, there are still few people in China who calculate according to international rules and China's national conditions.

At present, the biggest problem of Chinese car companies is the lack of crisis awareness, feeling that the charges are still far from themselves, and "waiting" is actually to give the best rules and bargaining opportunities to foreign companies.

Some of the operations of Avanci members will indeed cause alarm in the automotive industry in various countries, I don't know whether it is to clarify Avanci's mission or to make a vision for 2022, Avanci CEO, Kasim Alfalahi, revealed some information in an interview with IAM yesterday, and some views are still worthy of attention to the domestic industry, especially the "ambiguous" answer to whether the licensee can be a parts supplier such as Tier 1, which is worth looking forward to.

Point 1: Kasim is very optimistic about 2022, and the automotive industry has reached a turning point

Kasim summarized Avanci's achievements in 2021, adding 7 out of a total of 47 licensors this year, including Chinese companies, and 10 of the 25 licensed auto brands that were licensed this year.

Perhaps for the above reasons, Kasim believes that although there is still some controversy over the licensing of patents in the automotive industry, the automotive industry has reached a turning point. I understand that the turning point he is talking about should be an important step in cultivating the automotive industry on the long learning curve of paying patent royalties.

Point two: How are negotiations with U.S. or Japanese automakers to obtain an Avanci license compared to Europe?

From the current European market point of view, from the first BMW to obtain Avanci license, to volkswagen, Volvo, until Daimler signed an agreement with Nokia, European traditional car companies are moving towards the patent pool model, the rest of the French and Italian car companies are estimated to be difficult to save the overall situation, although the French parts and components leading enterprises are fighting with Avanci on anti-monopoly grounds.

So as the reporter said when asked Kasim, the next one will be the US and Japanese automakers (implicitly, China is a special market, but it does not mean that it will always be the same in the future).

In answering this question, Kasim believes that the decisive factor comes from car companies, and region is not the main factor. He believes that some car companies can agree with Avanci's model, like BMW, it will be easy to sign a contract, but some companies need to take longer, from the efficiency and business point of view to consider Avanci's solutions, and consider whether it is good for their own company.

This is what has been said before, for most auto companies, it is necessary to have a long cycle of "learning curve".

Point Three: How do you think that in the past period, three Avanci members have sued Ford?

Kasim argues that Avanci is not speaking on behalf of these members, Avanci is simply providing licenses. He thinks this may be related to the learning curve and management of some companies, some are being educated in the SEP environment, some need management approval, and some are studying these agreements.

I think what he said is the truth, just like many domestic car companies, perhaps only in the past two years have been in contact with SEP things, and have not experienced litigation and licensing negotiations, so it is very difficult for these domestic car companies to accept the licensing model that has been popular in the communications industry for more than a decade. The automotive industry is still in the literacy phase of SEP.

Point 4: How to look at the supply chain license level controversy, and why does Avanci license to the vehicle (OEM) rather than the component supplier?

Kasim mentioned that when creating a 4G licensing program, it was mainly discussed with vehicle companies. The implication is that at that time, there was no discussion of the authorization plan with the parts and components companies.

But on the flip side, Kasim mentioned that if there is a need, or if the market requires Avanci to implement a licensing program where tier 1 suppliers are interested, and they want us to create a licensing program – and if the patentee is also active – Avanci will be more than happy to do so. Avanci has no reason not to do so, Avanci is just looking for common ground. （Whenwe created the 4G [licensing programme], the discussion was with the OEMs. Now, if there is a need or the market is asking us to do a licensing programme wherethe Tier 1 supplier is interested and they want us to create a licensing programme– and the patent owners are also positive–we are more than happy to create it. We don’t have any reason not to. We are only looking forcommon ground.）

Opinion five: Some automakers don't want to get a license and want to say their suppliers should get a patent license

Kasim's answer I didn't understand too well.

According to Kasim's answer, it should be that the above statement is the idea of the vehicle company, but from the supplier's point of view, there is no supplier and he said: "My customers told me that they don't want to get a license because they want the supplier to get a license." I am a supplier and I will get a license. ”

So, for Avanci, if it's just a vehicle enterprise (OEM) saying to Avanci, "I want my supplier to be licensed," Avanci doesn't have to create licensing rules for suppliers who don't want to be licensed.

My question is, how to explain the current struggle between Continental Group and Nokia?

Conclusion: How to see Kasim's statement

Judging from the content of this interview, Avanci should be the first time to explain to the outside world the position of several key issues that the industry is very concerned about: including the negotiation with car companies on various continents, the situation of the member group suing a certain vehicle manufacturer, and the issue of who the license is issued.

It can be seen that Avanci is actually a "loose" organization for patent aggregation and management of patent owners, and the "power" that can actually be used is still limited, on the one hand, it is necessary to coordinate the relationship between right holders, prevent right holders from withdrawing from the group, and formulate reasonable licensing rates, on the other hand, to ensure that the licensee can recognize this model. This was analyzed in detail in the previous Avanci Trilogy Iii.

However, the interview on the parts suppliers, such as the Tier 1 supplier can obtain the license of the patent pool, actually sends a signal, it seems that as long as the SEP patent holder agrees, as the organization to manage the patent pool, Avanci, there is no reason not to establish this model, in Kasim's words, for both sides to "find common ground".

I don't know if there will be a breakthrough in this issue in 2022, and if it works, it will be one of the biggest changes in Avanci's automotive patent pool. However, how this business model of licensing parts is constructed, and what kind of "butterfly effect" it will bring, will be of concern to the industry.

For example, if a license can be provided to a Tier 1 vendor, how should the rate be calculated? There are very complex business models involved. So don't think that by delegating it to the vendor, the license fee will definitely come down.

My guess is not to rule out a situation where the price is higher than the previously authorized to the vehicle company. It depends on the contribution of SEP patents to the supplier's communication module, assuming that there is a communication module priced at $60, if there is no SUCH patent, how much can it be worth? So, it is very likely that these SEP patents contribute more than 30% or 50% to the communication module, so is it reasonable to charge you $18-30? (Note: Only in extreme form is a simple example)

If the plot is really developed in accordance with this trend, it will make the contradiction between the vehicle enterprise and the parts company grow larger and larger, and if the parts company gets the license, it is likely to pass the price to the terminal vehicle company, in fact, the wool is out of the sheep. Therefore, the vehicle company will face a choice, whether to directly sign $15 with Avanci, or let the supplier sign $18-30 with the other party and then pass the cost on to the vehicle company.

Therefore, I would think that Avanci will use all the solutions, let the vehicle companies to calculate the accounting, and even later find that it is the most efficient and the lowest cost to sign with Avanci.

There are always positive and negative sides to everything.

If Avanci opens up the precedent that can be licensed to Tier 1 suppliers, will it raise another long-standing question: Why does the automotive industry choose to authorize both parts suppliers and vehicle companies, and why can't other industries? Especially in the smartphone industry, it is worth looking forward to whether the controversy over the whole machine license model and the minimum saleable unit license model will return.

Therefore, don't look at the pattern of the automotive industry, but from the result, it may even affect the charging model of the mobile phone industry outside the automotive industry. Will the rights holder let the mature mobile phone market with tens of billions of dollars of license revenue per year fall into the "scuffle" again because of an immature car licensing market?

Perhaps these results will all have a clearer outline in 2022, or Avanci's postponement of the introduction of 5G licensing rates is not considering the option of Tier 1 to obtain a license?

Although this is only a guess, we can see the depth of the difference between the right holder and the implementer behind it, and may not be the direction that Avanci, a patent pool management organization, can sway the direction, like the article we just published, "IP Europe: Whether FRAND's non-discrimination standard means that there are licenses at all levels of the supply chain", which is about the debate between the two camps about who is licensed, and it is foreseeable that this debate will become another major focus in 2022.

Anyway, 2022, it's worth looking forward to.