Henry Ford refused to play by the rules of the ALAM monopoly
http://www.bdlive.co.za/life/gadgets/2013/11/06/patent-war-fears-as-cars-go-hi-tech Patent war fears as cars go hi-tech by Henry Foy, November 06 2013 [image http://www.bdlive.co.za/incoming/2013/11/05/bmw-i3-electric-car-xxx/ALTERNATES/crop_400x250/BMW+i3+electric+car+xxx FIGHTING BACK: A new BMW i3 electric car is seen on the assembly line at the BMW factory in Leipzig, Germany. The i3 is BMW’s first mass-market electric car, and the company has invested €400m in its production line at the Leipzig factory. Pictures: GETTY IMAGES/JENS SCHLUETER ] IN 1911, Henry Ford won a patent battle that kick-started the US automotive industry, crushing a licensing cartel that had demanded royalties for every car he built. Just over a century later, as green engines, self-driving cars and interactive vehicles pitch the industry into a period of feverish innovation not seen since its birth, Big Auto is nervously eyeing another intellectual property (IP) battle that could shape the winners and losers for a century to come. The quest is on to find a successor to the combustion engine, to make cars more autonomous and safe, and to provide drivers with all the connectivity and entertainment they expect from a cellphone. That has opened a previously rather exclusive industry to the threat of the unknown outsider, the technological breakthrough or the crusading entrepreneur. "We are definitely seeing other players enter the field that was previously reserved for car manufacturers," says Felix Rummler, a partner at intellectual property law specialists Maucher Börjes Jenkins in Munich. "New players from outside the industry are possibly more used to enforcing patent infringement. They may be more aggressive. So this could certainly change the way the industry looks at IP." Sensing the danger, car makers have intensified patenting, particularly in areas such as electric vehicle systems, hybrid transmissions, safety features and connectivity. Patents granted in those areas were almost 80% higher in 2011 than five years previously. Patents for alternative engine technologies accounted for a fifth of all automotive patents last year, up from 14% in 2009, and the rate of patenting for hybrid and electric car technologies in the US has doubled in the past three years. When Henry Ford overturned the 1895 Selden patent in 1911, he was the upstart outsider who refused to play by the rules of the Association of Licensed Automotive Manufacturers, a licensing monopoly. Today, Ford’s company and its rivals are on the other side of the fence: the incumbents looking warily at the upstarts. Rocking the boat are smaller, more nimble innovators such as electric supercar manufacturer Tesla, or France’s Bolloré Group and its electric Bluecar urban vehicles, or traditional battery suppliers such as Panasonic and LG, which have become as important to the next generation of cars as the engine is in a standard petrol model. Technology giants such as Google and Microsoft are also starting to encroach on car makers’ turf. With far fewer moving parts and more focus on microchips than machinery, tomorrow’s cars will probably be easier to assemble using a lower proportion of internally built parts. Aside from the demands of brand building and customer perception, the barriers to entry will probably be lower. Car makers are worried that if technology advances faster than they can keep up, they could be forced to become simple assemblers of other companies’ products. "So much more of the technology in electric cars today is coming from outside suppliers," says Harald Hendrikse, head of automotive research at Nomura. "The worry for car makers manufacturing them is that technically, any of their rivals could put it together." The situation is similar to what happened in the smartphone industry about five years ago, when established brands such as Nokia and Motorola found themselves up against aggressive new players such as HTC and Apple, sparking a long and costly patent war that continues today. "For the last 80 years, all the innovation was done either in-house or by their traditional tier-one suppliers," says Nikolaus Lang, senior partner at the Boston Consulting Group. "Now they are suddenly confronted with a series of suppliers that they do not know … that they have never worked with before. That presents a big challenge. The OEMs (original equipment manufacturers) might get encircled in their car world," he says. That encircling is already starting to take place. Google shocked the industry with its prototype self-driving car back in 2010. Telecom companies such as AT&T are taking the lead in the development of systems to connect cars to the internet, and component manufacturer Continental signed a deal with IBM in September to develop car networking systems. "It is the emergence of disruptive technologies and new players who were previously not involved in the automotive industry that potentially threatens the relatively ‘peaceful’ status quo," says Rebecca Lawrence, a partner and intellectual property law expert at Powell Gilbert. "In this regard there are a number of parallels with the introduction of new technologies in the telecoms industry, and the resulting ‘smartphone wars’." Some litigation has already begun. Last month, Daimler won a case brought by a company specialising in patent litigation that had argued a system that monitored drivers for drowsiness in Mercedes-Benz cars infringed on a patent it had acquired. "The cameras, the radar detection, all the new features that we are seeing in these cars, many of them are now subject to lawsuits," says Scott Doyle, a partner at Shearman & Sterling, the US law firm that represented Daimler in the case. "It has really opened the door." For the car makers, the choice could be a stark one between allowing nontraditional rivals to increase their share of components and their slice of the profits, or a costly turn towards the courts. "Where we could face the smartphone wars of the future is that Apple wants to get into everybody’s cars; Microsoft would; Google feels the same way … if it’s done poorly, we could be sucked up into that patent war," says the head of innovation at a top-10 global car maker. "The only ones who will win are the lawyers." 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