Automobile expert Toshio Nakajima says that “automakers can’t fully innovate, grow, and prosper” due to all the patent wars that is going on in the industry.
This sounds like Apple, Google, and Samsung. The auto industry is mimicking the tech world which in this case is not appealing nor beneficial for human kind. But let’s not make any confirmations yet.
After analyzing the data for the year 2014, he asserted that the patent trolls for the year grew to over 100 lawsuits in a single year which is more than likely resulting in settlements amounting to 6-7 figures. This money can be better invested on research and development. This type of development only makes corporate lawyers happy.
The Counter Argument
However there is a second side to every story and this is no exception. If you take the litigation expenses of 6-7 figures settlements, the total amount would come to about $100 million for the year 2014 which is hardly 0.01 percent of the total $1.1 trillion sales in the automobile industry for the same period.
But is still a lot though right? Perhaps we could already have flying cars around if patent trolls were not busy at work.
It is argued that the growth in number of lawsuits is simply a result of the automobile industry turning away from traditional incremental improvement to adopting new innovative technologies. Some examples of these technologies can be sensors, radar, navigation, GPS, smart displays, batteries, electric propulsion, and AI.
Seldan Patent War
Years ago, when the automobile industry was still in its infancy, a fantastic patent war took place which effectively stalled the growth of the industry for several years. This litigation took place between Seldan patent assignee ALAM and Ford Motor Company. Nakajima cites this patent war as an example of what could happen to the industry when patent wars are fought year after year.
Industry leaders such as Henry Ford have to shoulder the responsibility and the potential liabilities of launching new and innovative products in the market. On top of this, companies have to learn and acquire new knowledge which is necessary to eliminate the uncertainties by assessing whether the patentee statements about claims are truly justified or not.
The process of assessing the situation is the same as it was in those days and it was proved that the threats of patents never had a negative effect on the mindset of innovators who wished to enter the industry with new and innovative products.
Importance of Patents
Almost 6 years after Ford Motor Company was founded, Henry Ford learned the importance of patents, how to file and prosecute them, and worked closely with the company’s attorneys. He knew that patents were necessary to attract investors and funding was integral for growth and expansion. The Seldan patent was later deemed commercially irrelevant by Parker, the patent attorney for not only Ford Motor Company but also as a whole for the automobile industry.
When Ford Motor Company was fighting the patent war with Seldan, the litigation cost from the books of accounts show a similar story to that of today. The expenses were 0.9 percent of the automobile sales which is comparable to the current scenario.
This shows that litigation and patent wars are not having a significant effect on the growth of the automobile industry, particularly in the area of innovation, research and development. The expenses are very trivial when compared to the sales and it is merely a side effect of adopting new technologies and bringing it to the forefront of the industry. The automobile industry understands this and is moving forward with new breakthroughs and innovations.
So the automobile industry is not being plagued with patent trolls like the tech industry is but it is something to keep your eyes on.