Sharp and Daimler Co. enter into licensing agreement after Sharp wins patent suit

Introduction

Automotive companies are looking for the next breakthrough in their industry. They have already done everything that a consumer would expect out of an automobile. From delivering more power with more fuel efficiency to adding luxury features such as massage seats, entertainment consoles and high-quality audio systems. All of this, however was becoming too mainstream, and the industry leaders wanted to incorporate state-of-the-art tech that no one could have imagined, in their cars. With the rise of electric cars, the trend of cars becoming computers-on-the-go is on the rise as well. Take for example, a Tesla Model S, which is literally a computer running on a set of wheels. The commercial vehicles (vans and trucks) of Mercedes now come equipped with remote connectivity features, which mean that the status of the vehicle, including its current fuel level, tyre pressure level, estimated time of arrival at a destination, etc. can all be monitored remotely. With integrated communication technologies, features such as real-time monitoring, base station control and remote monitoring have become possible, which are the way forward for commercial vehicles.

Automotive companies, however, are not the ones that develop this technology for their use. They are usually developed by technology companies and are used by automotive companies under a license agreement. Some companies, in order to save costs, do not enter into licensing agreements and use technology without authorization. This technology is developed after years of development and is patented by the companies that develop them. The use of such patented technology without authorization results in infringement of the patent.

Patent infringement cases cost companies a fortune. Both monetarily and in terms of reputation. For Daimler AG, the well known German automotive company and the parent company of Mercedes-Benz, things have been rocky since the past few months. It lost a few patent infringement cases against communication technology companies for allegedly using their technology without permission or license. Before Daimler could recover from the setback, another jolt was delivered to it, when a German Court held it liable for using Sharp’s patented technology without authorization. However, this time, the German automotive giant breathed a sigh of relief when the litigation proceedings were brought to an end by a license agreement, with benefit to both the parties.

Background

In September 2020, Sharp, an electronics company from Japan, won a patent infringement suit against Daimler AG. Sharp alleged that Daimler had used communication technology belonging to Sharp which had been granted a patent by European Patent Organization (EPO) (Patent no: EP2667676). The same patent had already been granted to Sharp in Japan, in 2008. The patent was granted to Sharp for a “base station, mobile station device and uplink synchronization requesting method”, a technology that Daimler has used in its connectivity services “Mercedes Me”, “Connect Business” and “Mercedes PRO Connect”.[1]

The District Court at Munich passed a decree in favor of Sharp, giving them the option to enforce a sales ban against Daimler, on the payment of € 5.5 million. This payment serves purpose in case the decision of the Court is reversed at appeal, to cover the losses incurred by Daimler. Daimler filed a nullity action against the decision, but before the proceedings could take place, both parties entered into a licensing agreement, ending all pending legal proceedings between the two companies.

The licensing agreement was the least damaging way out of the legal proceedings for both the parties. Patent litigations are costly, and of course they take a lot of time. There are immense benefits that both the parties may secure. Not only do both  companies save a huge amount of money by not going to the Court, they also secure their flow of income. In this case, if Sharp had enforced the sales ban against Daimler, it would have incurred huge losses, both in terms of money and reputation. Going by the rate Daimler was losing case after case, a world-wide ban of sales would not have been very far. For Sharp, apart from saving costs on legal proceedings, they gained extensively by earning the licensing fee. This was the only amicable solution available to both the parties.

The suit in discussion is a part of larger proceedings taking place against Daimler by several communication technology companies, such as Nokia, Conversant and Huawei, all of which belong to the Avanci pool. It has been a tradition in the car industry that digital suppliers like Continental and Bosch indemnify them from any patent royalty issues.[2] However, the technology makers belonging to the Avanci LLP patent group want to collect royalties directly from auto manufactures.

The technology companies are now interested in making profits directly from auto manufactures by collecting royalties without the interference of intermediaries. Earlier, the technology companies got a small portion of the fortune themselves, which was considerably cheaper for the automotive companies.

Conclusion

The main objective behind granting a patent is to encourage innovation and technological advancement. There are sanctions for using a patent without authorization, as can be clearly seen in the dispute discussed above. Parties that are interested in using technology developed by some other party, can do so by obtaining a proper license or authorization and paying a certain fee to the patent-holder. No one can be allowed to use someone else’s patented goods and profit by using such technology. 

Sharp and Daimler in their dispute have taken the logical route out of the costly proceedings. Both of these companies are the leaders in their respective industries, and both of them realized that court proceedings would harm business of both the companies. They upheld the spirit of intellectual property laws, and carried on their business by arriving at a mutually benefitting decision.

[1] Konstanze Richter, Daimler signs SEP licensing deal with Sharp, JUVE Patent (October 7, 2020). Accessed at: https://www.juve-patent.com/news-and-stories/people-and-business/daimler-signs-sep-licensing-deal-with-sharp/

[2] Michael Taylor, Daimler Risks Sales Stop After Tech Lawsuit Losses to Sharp, Nokia, FORBES. Accessed at: https://www.forbes.com/sites/michaeltaylor/2020/09/11/daimler-risks-sales-stop-after-tech-lawsuit-losses-to-sharp-nokia/?sh=33c6c22e2651