All vehicles will be connected in a network – but now Daimler is held hostage by the mobile phone industry

Contrary to the change in propulsion I wrote about last week, our vehicles being kitted out with increasingly more sensors and possibilities, both aimed at increased driver comfort and aimed at safety, has been a rather gradual one over the past decades. The step of enabling all vehicles being connected in a network, therefore, is already yesterday’s news. In fact, Daimler is ready to hit the market with vehicles having 5G-technology on board as we speak, were it not for Nokia and Sharp stopping them from doing so (at least in Germany).

How our vehicles became connected

These days, most people around the world already own at least one mobile phone, most even a smart phone. From the arrival of the first mobile phone onward, the possibilities and our demand for personalized information requests and experiences have brought us to where we are now, for example next to calling and texting, enabling us to navigate wherever we are to wherever we want to be and play our preferred music at a voice request. This technology appeared not only useful in our mobile phones, but has also transferred to our houses, allowing us to adjust our electrical appliances such as heating and light at the touch of a button, even when we are not at home.

The automotive industry also picked up on these trends, which saw the interior of the average family car transform as depicted above, from having a dashboard covered in mechanical buttons for making manual adjustments in heating, airflow and radio channel in the 1990’s to today’s dashboard with touchscreen and electrical dials, storing driver preferences and automatically switching on windscreen wipers, lighting and adjusting heating and fan to keep a steady climate indoors.

Following this “natural” line of progression, the next step is to integrate 5G-technology into the vehicles, allowing the user to communicate with his/her vehicle via their mobile phone’s even when not near the vehicle and providing enhanced safety features enabled by vehicles autonomously recognizing one another and send updates to a general network to update navigation systems real time and provide safety alerts. To show a few examples, here are links to what Volvo and Ford are currently or soon offering.

The achievements and recent problems for Daimler

Daimler has already integrated connectivity technology in all Mercedes models since 2016 and is now switching to 5G-technology, thereby demanding future high-speed network coverage along all traffic routes (at least in Germany) to make the technology useful nationwide.

However, by integrating this technology, Daimler (and possibly other carmakers as well) has utilized standard telecommunications technology which falls under patented technology from a patent pool held by companies such as Nokia and Sharp. As a result, both Nokia and Sharp at least, felt that Daimler should take out licences on patents from their pool. Initially Nokia tried to settle this dispute out of court, but mediation was unsuccessful.

Last month, the court decided in favor of Nokia, and later also in favor of Sharp, enabling both companies to stop Daimler from selling their current line of Mercedes’ in Germany. Daimler still may have these rulings overturned by a higher court in the coming months. Therefore Nokia and/or Sharp need to pay collateral if they decide to enforce this ruling now, at the hefty sum of 7 billion Euro in the case of Nokia and “a mere” 5.5 million Euro for Sharp.

At the moment it is not known if, but seems unlikely, that either Nokia or Sharp is enforcing their given right. They might want to await the final court ruling. Should that ruling also be in their favor, Daimler is left with two options: either agree with whatever licence deal is still on offer or redesign and remake the connectivity system of all their vehicles.

Whichever way this is going to unfold, I do not think it will derail the trend of connectivity of vehicles, but it is a nice public example of how (not) to adopt technology from another field/industry.

I am currently unaware of similar issues with other car manufacturers. They may very well have taken out the required licences in time, or at the results of Nokia’s case against Daimler quickly agreed to whatever terms were on the table in their private negotiations/mediation.

A little background on management of the cost of innovation and technology licences

When aiming for technological progress, investment in new technology is required in at least one of the following ways:

-      Buy-in existing (proven) technology and adapt to own needs, or

-      Invest money in R&D to develop own technology from scratch.

Being a patent attorney, I must tell you that the term “at least one” in the above sentence should not be understood as a free choice one always has.

A smart way of ensuring return on investment in innovation is to simultaneously invest in one or more patents to ensure your newly developed technology cannot be used by someone without your permission. If someone looking to buy-in existing technology to adapt to ones own needs, he can take out a licence on or buy the patent(s) covering that technology, allowing them production (and sales, etc) of that technology, rather than having to buy ready-made products. In return, the buyer of the licence or patent, may save on development risk and costs.

Alternatively, one can handle the development of their new technology entirely themselves. However, more often than not, one will still use known technology as a starting point for their development. And as a result, their development could also fall under someone else's patent which is still valid and therefore enforceable (meaning:  the patent owner can stop you from using your technology for business purposes). This is why we (patent attorneys) often advice to have a freedom to operate check done before rolling out this new technology, so that the risk of so called infringement is known and potential disputes can be prevented by timely negotiation of licence deals.

When a new technology is so beneficial for consumers that it becomes the standard in a specific field (think MP3, DVD-technology and now also mobile networking technology), competition law dictates that so called FRAND-licences (Fair, Reasonable, and Non-Discriminatory” licensing) must be made available for that technology. This prevents one company from obtaining a monopoly position, whilst still providing a fair compensation for investment in R&D in that particular field.