Driving Innovation: Intellectual Property Rights in the Automotive Industry

Abstract

The automotive sector today is growing at a pace faster than ever. There are several intriguing features in an automobile that make it distinctive from the others such as Automatic Emergency Braking systems (AEBS), traffic signal recognition, vehicle-to-vehicle communication in case of high end cars and so on. The distinctive technology adopted by manufacturers is high end in terms of performance and its USP in the market. Hence, the automotive industry values Intellectual Property dearly as a protecting proprietary rights in automobiles encompassing all the aspects related to IP. The functioning parts are protected by patent law, the features that may be protected as designs, the protection of the brand and its logo by trademark and its distinctive designs and drawings that qualify for copyright protection.

Keywords

Automotive sector – distinctive technology — Intellectual Property – Patent law – trademark & copyright protection.

Introduction

India is the world’s fourth^[1] largest automotive market. Intellectual Property Rights play a significant role in the automotive industry since there is fierce rise in the innovation of new technology supported high-end cars in the market. IPR encompasses various forms of Intellectual Property, such as, patents, trademarks, designs and copyrights. These rights are essential for fostering innovation, encouraging manufacturers to develop instinctive automobiles and maintaining competitive advantage in the automotive sector ensuring fair business practices. With an increasing scale of automobile production and its rising popularity, there is a need to strike a balance between innovation and due credit being given to the innovators therefore IP Rights plays a major role in safeguarding the rights of the manufacturer.

Patents in the Automotive Sector

Role of patents in protecting technological advancements in the automotive industry:

With the integration of advanced technologies in modern vehicles, there is a rise in the counterfeiting of auto-components, this leads to the rise of patent litigation. Among the Indian Companies, TVS Group and tata motors have been among the top Indian applicants for patents whereas globally, the patent application is dominated by Toyota and Honda primarily^[2].

The patent litigation in the automotive industry includes^[3]:-

(i) Technology Integration and Patent infringement: With the vehicles becoming more autonomous and modernized in terms of software, connectivity, navigation systems and more, the increased complexity creates a higher chances of inadvertently infringing the existing patents, leading to potential legal disputes,

(ii) Non-producing Entities (NPE’s): Also known as patent trolls, these entities exist just to acquire and license patents rather than producing auto-components. They purchase the patents related to automotive technology and assert their rights against automakers, claiming infringement.

(iii) Defensive Patent Strategies: Inorder to counter claims made by NPE’s or other companies, many automakers acquire and hold patents which can be later on used as a leverage while negotiating.

(iv) Cross-Licensing Agreements: While collaborating, the automobile companies enter into an agreement to share their patent portfolios. This reduces the chances of patent litigation and gives way to collaboration in technical advancement in automotive sector.

For example: In 2021, Toyota and Suzuki have engaged into collaborations to develop and produce vehicles together. In such a case, the handling of IP can be involved in various agreements such as joint development agreements, licensing and royalties, Ownership and Control IP’s, Dispute Resolution Agreements, Product commercialisation, branding ans so on.

(v) Complex supply chains: The automotive industry has a plethora of complex chain that includes a number of suppliers and partners. This complexity increases the possibility of inadvertent use of technology without proper authorisation, leading to potential infringement claims.

Legal Dispute: FORD v. AVANCI; In this case, Ford was pulled into the court of Munich, accused of violating wireless-technology patents^{^[4]}. The American manufacturer faced a potential production ban in Germany, the lawsuit centered on microchips found in Ford cars. The petitioner in the headline grabbed a lawsuit against 8 owners of 4G mobile- communications patent. Since now Ford has joined the Avanci pool, a settlement had been expected and now the manufacturer has gained protection from future patent lawsuits.

Trademark Protection in the Automotive Industry

The registration and protection of Trademarks id governed by the Trade Marks Act, 1999^[5]. This act also states that the unregistered trademarks may be protected through a passing off action.

Regardless of the registration, India is indeed the ‘first to use country’. And in a case of dispute between two trademark owners, the use of mark always acts as a key factor. Trademarks in India can also be filed on an intent-to-use basis and threat of cancellation may arise if it goes unused for a period of 5 years post registration. Today, the leading automobile brands are well reputed, it is relevant to mention that well-known trademarks are recognised explicitly under the current Trade Marks Act,1999 with a procedure to have a trademark declared as ‘well-known’ and entered as such on the Trade Marks Register.

Examples of some Indian cases dealing with trademark infringement in the auto component industry^[6]:

In a recent decision of the Delhi HC, the Audi group of automobile company was issued an ex-parte interim injunction restraining the same from using the name ‘TT’ as a brand name for its goods in India. This verdict was passed after Rikab Chand Jain, the proprietor of TT Industries filed a case against Audi under the Trademarks Act, alleging the German firm of violating its Internationally known trademark.

Judgment: Audi lost the battle owing to the plaintiff’s well known mark, registered under most of the classes of the Trade Mark Act, 1999 and having its long standing usage.

Such counterfeiting issues can be overcome by implementing the following Brand Protection Measures:

(i) Authentication technologies: Holograms, QR codes, RFID tags and security labels on automotive parts enables consumers and dealers to verify the authenticity of products.

(ii) Supply Chain Management: Ensuring transparency in tracking and tracing mechanisms at all levels on manufacturing can help in identifying and preventing counterfeiting at all stages.

(iii) Collaboration with law enforcement: Collaborating with law enforcement agencies can help in identifying and prosecuting counterfeiters and disrupting the counterfeit networks.

(iv) Certification in auto components: Developing certification programs that verify the authenticity of automotive parts can build trust among consumers and industry stakeholders.

(v) Tamper-proof packaging: ensuring tamper-evident packaging and seals helps prevents unauthorised opening or tampering with products during distribution.

Counterfeiting is a serious threat to the manufacturers in automotive industry. Effective branding and protection measures involve a combination of technological, legal, educational and collaborative strategies to prevent the proliferation of counterfeit or duplication of automotive parts that include: engines, shape, external features of a vehicle, colours, software system and more.

Design Protection and Auto Aesthetics

It’s true that visual appearance plays a significant role in shaping our perceptions of a vehicle’s value and performance. Aesthetic appeal is a well-known marketing strategy in the automotive industry. As a result, registered designs can be a crucial component of an automotive company’s intellectual property (IP) portfolio.

Here’s an original take on the importance of registered designs in the automotive sector:

The visual allure of an automobile often holds the power to sway our judgments on its overall worth and capabilities. In the automotive industry, leveraging aesthetics as a strategic marketing tool is an openly acknowledged practice. One of the avenues through which automotive manufacturers safeguard their design-driven advantages is by securing registered designs as part of their intellectual property arsenal.

Section 2 of the Indian Patent law^[7] governs vehicle design patents in India.

These registered designs represent more than just an attractive exterior; they encapsulate the embodiment of a brand’s identity, innovation, and craftsmanship. By officially registering their designs, automotive companies gain legal protection for the distinctive visual features that set their vehicles apart. This protection extends to various elements such as the body shape, contours, lighting arrangements, and overall visual configuration.

This form of protection isn’t a closely guarded secret but a well-recognized strategy to safeguard a crucial facet of a brand’s uniqueness. Through registered designs, automakers establish a fortified position against imitators and copycats, enabling them to showcase their design prowess without fear of replication. The section 3(f)^{^[8]} of the Indian Patent Act states that minor modifications in the previously registered models running independently are not patentable. This safeguarding of design innovations contributes not only to maintaining brand integrity but also to fostering a culture of continuous creativity within the industry.

In essence, registered designs in the automotive sector serve as a shield against the dilution of a brand’s visual distinctiveness. By preserving the aesthetic appeal that often serves as an initial point of engagement for consumers, these registered designs play a pivotal role in securing a competitive edge in a visually driven marketplace.

Furthermore, a design patent is a valid reason to restrict other manufacturers from using similar features as that of the registered design patent of an automobile. However, it is important to understand that a design patent only protects the design and not any other component. In India, Toyota Motors and Tata Motors are two manufacturers with the most car design patents nationwide.

One of the most famous design patent worldwide is The Tata Nano, also refereed to as the ‘world’s cheapest car,’ it has a distinctive design that drew attention. Its compact size, unique proportions and price suitable to modest purses made it a notable design patent.

Trade Secrets and Proprietary Information

The use of trade secrets to protect sensitive automotive technologies:

Trade Secrets play a vital role in the automotive industry as a means of protecting sensitive technologies, processes and information that provides competitive advantage.

The maintaining of trade secrets requires stringent internal procedures, security measures, and employee training in order to prevent intentional breaches or information leaks. With the advent of technologically advanced vehicles, trade secrets continue to play a significant role in safeguarding valuable innovations in the automotive industry.

Case Law: Waymo LLC v. Uber Techs., Inc.(2017)^{^[9]}

Legal Proceedings:

Waymo LLC filed a lawsuit against Uber in February 2017, claiming patent infringement and misappropriation of trade secrets. The case went into trial in February 2018.

During the trial, evidence emerged indicating that Levandowski had indeed taken confidential files from Waymo’s servers. The trial concluded with both the companies reaching a settlement in February 2018. As part of the settlement, Uber agreed to pay Waymo around $245 million in equity.

Uber also agreed to ensure that none of Waymo’s confidential information was used in its self-driving technology and confirmed that no Waymo intellectual property had been incorporated into Uber’s autonomous vehicles.

Impact and Significance of this case:

The Waymo vs. Uber case shed light on the importance of trade secrets and intellectual property rights protection, particularly in the rapidly evolving field of autonomous vehicles.

The case highlighted the potential risks associated with hiring employees from competitors, especially those with access to sensitive information, and the importance of enforcing non-compete and non-disclosure agreements.

The settlement marked a significant outcome, preventing a lengthy legal battle and allowing both companies to focus on their respective self-driving initiatives.

This case serves as a prominent example of how trade secrets and proprietary information can be central to legal disputes in the automotive industry, particularly in the context of cutting-edge technologies like self-driving cars. It underscores the need for companies to establish robust measures to protect their intellectual property and prevent unauthorized use or misappropriation.

Another notable example includes Tesla protecting its information by requiring all employees to sign the Tesla Inc. Employees Non-disclosure and inventions Assignment Agreement^[10]. Such agreements are drafted inorder to prevent more players into the field of automotive industry and to reduce the number of counterfeit lawsuits in the existing industry.

Licensing of Automotive technologies and Components

Licensing of automotive technologies and components is a common and strategic practice in the automotive industry. It involves granting permission to other companies or manufacturers to use specific technologies, designs, or components that have been developed by a former company. This arrangement can be mutually beneficial, as it allows technology creators to generate revenue from their innovations, while licensees can access and incorporate advanced technologies without the need to develop them from scratch, thus saving a significant resources used in R&D.

Various types of licensing includes:

(i) Patent Licensing: Patents play a vital role in protecting new and innovative technologies in the automotive industry. Companies that hold patents for automotive-related inventions may choose to license these patents to other manufacturers. This licensing agreement grants the license holder the right to use the patented technology within specific applications and under predefined conditions. This enables the license holder to benefit from the technology’s advantages without the need for extensive research and development.

(ii) Component Licensing: In the automotive sector, various components, such as engines, transmissions, safety systems, and infotainment systems, are critical to a vehicle’s performance, safety, and user experience. Automobile companies that specialize in manufacturing these components can license them to other automakers.

(iii) Software Licensing: The significance of software in modern vehicles holds a great importance. Software powers advanced driver assistance systems (ADAS), infotainment platforms, connectivity features, vehicle-to-vehicle communication, auto emergency braking systems, signal detection, drivers drowsiness detection and more. Software licensing in the automotive industry involves allowing other companies to use proprietary software solutions. For example, Tesla, Inc. has licensed its electric vehicle patents in an effort to encourage the adoption of EV’s and to promote sustainable transportation i.e. to prevent pollution and save cost on fuel and energy resources.

In the automotive sector, many manufacturers license safety technologies, such as airbag systems, from a specific supplier.

Amid this fierce competition prevailing in the automobile industry, it is noteworthy that VOLVO never patented its three-point seatbelt^[11] because they thought that this innovation so significant, it had more value as a free life saving tool rather than something to profit from. Hence Volvo opened up the patent so that any car manufacturer can use it in their design.

Role of IPR in Autonomous Vehicles and EV’s

Vehicles are undergoing a profound transformation as they have evolved into sophisticated computers on wheels, incorporating an array of new functionalities that have the potential to unknowingly infringe upon a multitude of patents spanning various sectors. To understand in detail, forward-thinking companies must consider novel strategies when entering contracts with component manufacturers and technology providers. They should also embrace innovative legal approaches aimed at mitigating the potential impact of this transformed industry landscape.

Research Methodology

To examine the role of IPR in automotive industry, a mixed-method research approach will be employed. This approach will involve both qualitative and quantitative methods to gather comprehensive data and insights. The research will encompass the following steps:

(i) Research Objectives:

To analyze the functionality of IPR in the automotive industry and to understand the role of IPR, analyzing challenges, or assessing the impact on innovation in the automotive industry.

(ii) Data Collection:

Identifying sources of data such as legal documents, patent databases, industry reports, case studies, interviews, and articles.

Collected primary data from Bare Acts interviews, surveys with industry experts and secondary data from legal cases and published literature.

(iii) Case Studies:

Selected relevant cases involving IPR in the automotive industry that provide valuable insights.

And analyzed these cases thoroughly, examining legal disputes, licensing agreements, its impact and relevance.

(iv) Data Analysis:

Presented research findings, including relevant data, examples, and key patterns. Interpreted the findings in the context of research objectives and the existing literature.
Discussed the implications of the findings for the automotive industry and IPR convergence into the same.

(v) Limitations and Future Research:

Acknowledged the limitations of the study and suggested potential areas for future research.

Review Of Literature

The review of literature demonstrates the significant role of IPR in shaping the automotive industry’s innovation landscape. Patents, trademarks, deign rights, copyrights, and trade secrets safeguard technological advancements, incentivize R&D, and contribute to industry competitiveness.

(i) Functionality of IPR in the Automotive Industry: The protection of the IPR rights fosters innovation, encourages investment, and enhances competition within the industry.

(ii) Patent Litigation and legal disputes: patent litigation often causes delays in R&D and increases the costs for the company. Effective disposition of such disputes is important inorder to maintain a conductive environment for technological innovation.

(iii) Collaborative strategies: Collaboration within the automotive industry speeds up the innovation process, saves resources on R&D and improves connectivity among the companies.

(iv) Licensing of auto components: Licensing involves granting permission to other companies or manufacturers to use specific technologies, designs, or components that have been developed by a former company.

(v) Safeguarding Trade secrets: With the advent of technologically advanced vehicles, trade secrets continue to play a significant role in safeguarding valuable innovations in the automotive industry.

Method

(i) Research Design: This Research paper includes mixed- method approach which is used to collect various kinds of data including observation of relevant IPR laws, case laws and analysis of IPR in the automotive industry.

(ii) Research Approach: The research has explanatory, exploratory, descriptive and analytical approach towards assessing the role of IPR in the automotive industry.

(iii) Data Collection Instruments: This includes case laws across the industry pertaining to infringement of Intellectual Property Rights.

(iv) Validity of study: This research has been done only after thoroughly assessing the functionality and the limitations of the IPR rights in the automotive sector. The information stated is backed by authentic sources, hence it is reliable.

Analysis of Harmonisation efforts and Challenges of IPR Implementation in the Automotive Industry

Efforts to harmonize intellectual property rights (IPR) standardization within the automotive industry are of paramount importance, given the intricate interplay among innovation, technology, and legal factors. The goal of such harmonization endeavors is to establish uniform norms for IPR-related practices, patents, and licensing across the industry. This ensures that innovation is appropriately protected while minimizing legal complexities and potential disputes.

Challenges in the IPR Harmonisation in the automotive industry includes: (i) Diverse Stakeholders: with a multitude of stakeholders including manufacturers, tech companies, suppliers and investors, achieving consensus on an IPR standards requires the aligning of interests of all entities.

(ii) Global Nature: the automotive industry operates largely on a global level, with differences in legal norms and filing process of patents, it becomes a very tedious task in standardizing the IP Rights.

(iii) Rapid Technological Advancements in the Automotive Sector is making it very difficult to standardize IPR practices that are flexible to accommodate emerging innovations.

(iv) Patent Thickets: The technical complexity of modern day vehicles requires numerous patented technologies. Untangling the thickets to streamline licensing and to avoid counterfeit is in itself a challenge.

Therefore, harmonizing IPR standards in the automotive industry is a complex endeavor with far-reaching benefits. While challenges persist, successful harmonization efforts can lead to more streamlined innovation, reduced legal complexities, and enhanced collaboration, ultimately contributing to the continued advancement of the automotive landscape.

Conclusion

To summarize, automobiles are multifaceted creations that encompass not only technical features but also brand identity and exceptional design. Consequently, adopting an effective design and trademark registration, patenting its technology and encompassing a stringent licensing agreement strategy is crucial to thwart potential counterfeiters from exploiting the registered designs and capitalizing on the registered automobile company’s investments and efforts. Vigilantly monitoring for instances of infringement and diligently enforcing intellectual property (IP) rights serves not only to safeguard essential revenue streams but also to uphold the integrity of the automotive products and the reputation of the automobile enterprise.

Name: MOSAM DHARMESH PATEL

College: SVKM’s Pravin Gandhi College of Law

^[1] https://www.managingip.com/article/2a5cz6bban3oviv924yyo/how-robust-is-automotive-brand-protection-in-india

^[2] https://auto.economictimes.indiatimes.com/news/auto-technology/connected-tech-becomes-hotbed-for-patent-wars-in-automotive-industry/75103441

^[3] https://www.financierworldwide.com/upward-trend-in-patent-litigation-relating-to-automobiles

^[4] https://autovista24.autovistagroup.com/news/carmakers-patent-strategies-to-avoid-litigation/

^[5]

TRADE MARKS ACT, 1999 [Act No. 47 of Year 1999 dated 30th. December, 1999]

^[6] https://www.bananaip.com/ip-news-center/trademark-disputes-in-the-automobile-industry/

^[7] https://ipindia.gov.in/writereaddata/Portal/ev/sections/ps2.html

^[8] https://corpbiz.io/learning/how-to-get-a-vehicle-design-patent-in-india/#:~:text=Furthermore%2C%20the%20design%20patent%20is,and%20not%20any%20other%20component.

^[9] Waymo LLC v. Uber Techs., Inc., No. C 17-00939 WHA (N.D. Cal. Jan. 29, 2018)