Open patents and automotive innovation

My twin-passions of intellectual property and motor vehicles were recently explored, following a relentless search for a seven-seater vehicle that wouldn’t be referred to as a ‘people mover’¹.

One of the vehicles I test-drove was a Mercedes Benz (Mercedes) S-Class² GLS400D. From the massaging seats and interactive ambient lighting, to the “Hey Mercedes” voice-activated-everything, it was awesome.  Unfortunately, given the economic uncertainty of lockdown and the ludicrously small sum of money offered for the trade in of our existing car³, it was also out of reach.

A safe competitive advantage

Mercedes has traditionally used its mass-produced S-Class range to showcase its innovation, the majority of which is safety related. Many now-common features were first introduced to production cars in an S-Class model including: crumple zones; interior padding; a windscreen rain management system; airbags; anti-lock braking systems (ABS); seat belt pre-tensioners, jam protection on electric windows, pre-emptive braking, night vision assist, and traction control.

Presumably recognising that the least-safe aspect of any motor vehicle is the person controlling it, Mercedes also built the world’s first driverless cars in 1980 using the S-Class. In 1995, they followed this up with an autonomous S-Class Munich to Copenhagen round-trip. The car reached speeds of over 175 km/h on the autobahn and even overtook other vehicles. The experiments’ success is said to have heavily influenced other manufacturers’ robot car research and funding decisions.

Mercedes has actively used patents to protect its numerous innovations. In fact, founder Karl Benz patented what is regarded as the world’s first production automobile in 1886 and even named it the Benz Patent-Motorwagen (or “patent motorcar”). That patent document is now part of UNESCO’s Memory of the World Programme, which also includes the Gutenberg Bible, the Magna Carta, and Johann Sebastian Bach’s Mass in B Minor.

While patenting safety innovations can provide a technical or marketing advantage, others have acted more altruistically. In 1959 Volvo patented the three-point seatbelt and famously released the design into the public domain. Volvo estimates that over a million people have survived a car accident due to this innovation. New Zealand can lay claim to its own altruist, Colin Murdoch, who invented the disposable hypodermic syringe, patented it, then released it into the public domain where it went on to have significant health outcomes.

Monopolise or don’t monopolise, there is no try

So, it seems there are two choices: patent and monopolise for commercial advantage, or make the innovation available for all to use? Not quite. As automotive manufacturers like Toyota have recently demonstrated, there is a (pardon the pun) ‘hybrid’ option known as open patenting.

Toyota is a leading producer of petrol-electric hybrid vehicles, like the Camry and Prius, and over the past 20 years has amassed almost 20,000 related patents. In 2019 Toyota made these ‘open patents’ – meaning they are freely available for use provided the company is informed first. Justifying the decision to open its patent book Toyota Representative Shigeki Terashi said, “Based on the high volume of inquiries we receive […] from companies that recognize a need to popularize hybrid and other electrified vehicle technologies, we believe that now is the time for cooperation”.

Securing and maintaining all these patents is a big investment and without the 50-odd royalty revenue streams Toyota previously received from companies which had licensed the patents, how does Toyota benefit? The reality is that in the short term they might not; but Toyota is playing the long game. Whilst Toyota does offer fee-based technical support for adopters of the technology, it’s likely that a more important factor in its decision is regulatory. Currently, Toyota’s technology can only travel short distances solely on electric power. Proposed changes to European Union legislation threaten to rule its hybrid technology out of existence. By making the technology freely available, Toyota presumably hopes to improve its uptake, making it more difficult for legislators to render it redundant. Terashi puts it more neutrally, “If the number of electrified vehicles accelerates⁴ significantly in the next 10 years, they will become standard, and we hope to play a role in supporting that process.”

This approach to intellectual property is contrary to that employed by another Japanese technological pioneer, Sony, in the ‘video tape format wars’ of the 1980’s. Sony believed the superior picture and sound quality of its Betamax format would dominate the market, so declined to license its patented technology. Meanwhile competitor JVC licensed its VHS format to any eager manufacturer. JVC’s VHS went on to dominate the home video market for nearly 40 years and made billions in royalties⁵, largely due to consumer brand loyalty to the companies that held a license. Sony had to wait until 2008 to gain the upper-hand by inventing (and licensing) its Blu-Ray DVD format.

It’s not how big your patent portfolio is, but how you use it

While patenting innovations can provide a competitive advantage, these examples demonstrate that broadening the reach through licensing or open patenting may create further value. All of this requires critical thinking around where patents fit in to a commercial strategy – something which many companies, even large ones, fail to do.

One thing is certain though, if the technology is a flop it won’t matter which path you choose – a fact that the owner of UK Patent No GB1058853⁶ “Ice block as a substitute for vehicle wheels” is likely well aware of.

PS: if you are from Mercedes, Volvo, Toyota, Sony or JVC and are looking for top shelf patent representation in Australasia we would love to hear from you. We’d also love to hear from you if you’ve invented a car that slides on ice blocks – if only to give you some sound commercial advice about the wisdom of patenting that idea.