A patent protects intellectual property, whether it belongs to a business or a human being, from being manufactured by another company. A recent example is the Porsche GT RS' active rear wing with DRS, which gives it the upper hand over rival products. The situation is more convoluted when it comes to technology and connectivity.
A case between Mercedes-Benz and Nokia serves as the perfect example. Mercedes used Nokia's telecommunications technology to build connected vehicles but without paying licensing fees. Nokia dragged Mercedes to the German court, and won. As a result, Mercedes agreed to pay a standard fee per car that uses Nokia's technology instead of a one-off payment.
Several manufacturers kept an eye on the proceedings at the time, which set the new golden standard for licensing connectivity features.
Automakers are now getting around the problem by paying a flat fee to Avanci, a patent licensing marketplace specializing in this sector. Instead of a patent holder like Nokia negotiating with each manufacturer individually, Avanci represents it and many others. And instead of a considerable fee, manufacturers pay roughly $20 per car for access to the intellectual property of 51 licensors.
An anonymous insider spoke to Reuters, explaining the situation. "The auto market is just too splintered for it to be worth it for patent owners to negotiate with each individual player," the source said. "It's s a matter of efficiency."
"Usually suppliers handle patents in the development process - telecoms is the one area where they don't," said the source. Avanci is already working on a new product to cover 5G patents, which many autonomous features will require.
We use the $20 fee as an example, but it's not set in stone. Royalties vary according to the application. "The royalty will be different when the licensed product is a vehicle that continuously provides a hotspot, navigation data, streaming entertainment, enhanced safety, warranty services, and remote performance monitoring, rather than a rental bike stand that only sends intermittent signals of bike availability," states Avanci.
The money is collected via Avanci, taking a small fee off the top. What remains is then distributed amongst the patent holders.
Avanci seems to be making weekly announcements about major manufacturers using its services. Licensees include volume producers like Hyundai, Kia, Toyota, Volkswagen, Honda, Stellantis, and GM Groups. Smaller manufacturers like Lucid, Fisker, Lamborghini, Aston Martin, and Bentley have signed on.
A car with basic connectivity features like the Kia Seltos will likely cost significantly less than a Lucid Air, which requires permanent connectivity to function correctly.
On the licensor side, we find all the big players in the tech segment, including Acer, Nokia, Sony, Panasonic, LG Electronics, and Vodafone.
Avanci's vice president, Mark Durrant, estimates that 80-85% of vehicles with 2G technology are currently licensed via its services.