Avanci’s new 5G Vehicle Program – A One Stop Shop?

Tim Pohlmann, IPlytics CEO, August 16th 2023

Patent platform Avanci today announced the launch of its 5G Connected Vehicle Program presenting in total 58 SEP licensors and a first named licensee: Mercedes-Benz. While Mercedes-Benz was one of the later joiners of the Avanci 4G program, fighting the rates in prominent litigations cases against Nokia, it now changed the strategy to become the first mover. The market was waiting for the launch of the 5G program for over a year as Avanci first hinted to launching the program in early 2022. While the wait was quite long, the list of SEP licensors is very impressive with one company joining that was maybe the missing puzzle piece to the one stop shop: Huawei. The Chinese tech giant is considered one of the largest cellular SEP holders while also being a supplier for the auto industry. For the past years Huawei operated its own SEP licensing program, also licensing bilaterally to vehicle OEMs and tier 1 suppliers. When Huawei just in July announced its SEP royalty rates, the rates for the automotive market were missing – which already indicated the move to join Avanci. While Huawei is now a platform member for both the Avanci 4G and 5G program, Oppo who was a 4G program member did yet not join Avanci’s 5G program. With all the recent SEP litigation cases of Oppo fighting other Avanci members (eg Nokia), it seems as Oppo wanted to wait and see first. However, the table below shows the Avanci licensor's share of all worldwide declared 2G-5G (including C-V2X) patents is at an all-time high between 80%-83%. For the analysis IPlytics Platform was used. Shares are based on INPADOC family counts and the LexisNexis Ultimate Owner data which considers worldwide patent reassignments and corporate tree structures. As to the data the Avanci 5G program gathers over 80% of all 2G-5G when considering granted and active patents in at least one IP5 jurisdiction and an even a higher share at 83% when only considering US and EP granted and active patents. A look at the ultimate owners of declared patents yet outside of Avanci shows that there are not many patent owners left that one would expect to actively license their SEP portfolio in the automotive market. That said, this new Avanci program looks set to become the one stop shop everyone was hoping for – where licensees seem to get access to all relevant SEPs without fearing to be approached by many other SEP holders. However, one must keep in mind also the 5G Avanci outsiders like Oppo/Vivo, Xiaomi, Apple, ETRI or others could change their bsuiness model or potentially sell their patents to PAEs, which leaves at least some potential risk for further SEP enforcement for the automotives. Also, the list of patent owners includes some PAEs such as Key Patent Innovations (portfolio acquired from Blackberry) or Advanced Standard Communication (portfolio acquired from ZTE), managing patent portfolios that were acquired from Avanci members before the launch, which means they are not covered by the pool program. Nevertheless, the Avanci 5G program will create a lot of efficiency in the SEP licensing market for both sides of the table.

Patents, especially when related to standards, vary in value. SEPs may protect core technologies spanning standards generations but also only minor improvements to existing standards features. Consequently, counting patents alone doesn't accurately reflect the value of a SEP portfolio. One market accepted approach is weighting patent family counts by the Patent Asset Index which represents a measure of the innovative strength of a patent portfolio. A patent family is more valuable when other innovations build on the technology protected by this patent family and by the scope of protection that the ultimate owner considers appropriate. The Patent Assent Index is obtained by multiplying the Technology Relevance (normalized forward citations) and the Market Coverage (weighted patent family size). It is stated relative to the other parent families in the same field.

We applied the Patent Assent Index to the declared patent portfolio of all Avanci members and compared it to all Avanci Outsiders. The result shows (figure 1) that the Avanci share of patent families granted and active in at least US or EP, when weighted by the Patent Assent Index, is even higher and above 85%.

While the 5G program launch is a step into the right direction, the biggest challenge will be the new royalty rate. The 5G program is targeted at automotive OEMs, who if they join within the next 6 months (or before they ship their first 5G vehicle, whichever is later) will get access to all members’ cellular SEPs for a discounted rate of $29 per vehicle. After the 6 months the rate increases to $32 per vehicle for late joiners. While the whole automotive market will be happy about a SEP market share of 80%-83% (table 1), the new royalty rates will likely be discussed with a lot more controversy. Compared to the initial $15 for the 4G program the new rates of $29-$32 for 5G seem like a stretch. However, one should not forget that Avanci in its initial 4G program started with only 7 licensors and a SEP share of below 30% of the 2G-4G declared patents at the time. With the increased number of SEP owners and thus increased share of declared patent families above 80%, the price increase which now also includes all 5G SEPs, maybe better explained. In any case, we can congratulate Avanci to this milestone. It will remain interesting to see how quickly Avanci manages to attract the automotive industry to join before February 16th 2024, when the rate for new licensees increases from $29 to $32 per vehicle.

The new Avanci Vehicle 5G program will also be discussed in next week's IPWatchdog webinar: Who is Leading the 5G Patent Race?

Joining the webinar will be Bob Giles , Senior Vice President, and Chief IP Counsel at Qualcomm, Tuomas Saukkonen , Head of Cellular Standards Patent Portfolio at Nokia, and Mang Zhu , Chief IP Strategy Officer, and Head of Patent Asset Management at ZTE USA to discuss:

• What is the current state of 5G SEP licensing?
• New 5G pool programs for automotive and IoT - What are the complexities of 5G SEP licensing through patent pools?
• SEP litigation and increasing PAE SEP portfolio acquisitions - What trends do we see?