IP Considerations for Autonomous Vehicle Technology Startups and Automotive Suppliers

Many automotive suppliers and OEMs have announced plans to bring autonomous vehicles (AVs) – and related components, software and services – to market, often collaborating with technology startup companies to develop the underlying hardware or software. As these parties work together to develop technical solutions, the resulting intellectual property (IP) can become a key asset of the automotive supplier, the technology startup company or both. Failure to properly protect and capture IP around technical solutions can impede business goals, as well as delay the development and deployment of AVs.

This article outlines key considerations for automotive suppliers and technology startups to protect their IP.

1. What is an IP strategy?

An IP strategy that aligns with the company’s short and long-term business goals is essential to successfully bringing AV-related systems, components, software and services to market. A well-executed IP strategy allows the owner of the IP assets to leverage these assets during negotiations, increase their valuation, publicly promote their innovations in marketing materials, keep out competitors, and monetize their IP by generating a royalty-based revenue stream.

The IP strategy should include how and when the technology startup and automotive supplier will pursue and protect their joint or respective IP in a manner that fits the business goals, and also takes into account ownership of the resulting IP. The IP strategy should support the technology startup’s growth and exit strategy, while also supporting the automotive supplier’s goals for creating barriers to entry. An ideal IP strategy is one that creates value, reduces risk and is realistically achievable for both parties, thereby facilitating the successful deployment of AVs to market.

2. How does the IP strategy protect proprietary competitive information?

An IP strategy and plan leverages legal tools to identify and capture a company’s proprietary competitive information, and should account for any inherent challenges raised by the company’s culture, expedited development and deployment roadmap, and strategic goals.

A variety of cultural challenges can come about from early-stage AV technology startups, including the openness with which founders sometimes discuss their innovations with third parties. This can happen when they are operating in collaborative shared workspace environments where individuals bounce ideas off each other, or through initial discussions when recruiting new talent or potential partners.

Even as the company moves beyond early stage, additional challenges arise from its need to make public disclosures either to persuade potential customers or to inform regulatory entities of its AV-related innovations. Common scenarios for inadvertent public disclosure of IP include:

• A technology startup demonstrating a new hardware component or software algorithm to an automotive supplier
• The automotive supplier disclosing its AV deployment plans
• Experimenting with the AV on public streets
• Discussions that occur when raising capital or recruiting talent
• Publishing a white paper or thesis or presenting at a conference
• Selling or offering to sell a vehicle that embeds the new sensor for data collection purposes or a back-end process unbeknownst to the owner of the vehicle

Companies may also overlook protecting their IP around their software-related innovations, such as their Artificial Intelligence or algorithms used to enhance the AV’s safety, accuracy, reliability, robustness, efficiency or user experience.

Establishing and executing an effective IP strategy is essential to obtaining IP protection at an early stage before any public disclosures take place. In order to protect proprietary competitive information, the company should establish a plan and process for identifying the functional features of its solution that differentiate it from the competition, and the innovations that enable such features. The company needs to identify which individuals or parties contributed to the innovation, and then determine which tools in the toolbox of IP protection (trade secret, copyright, trademark, patent, or contractual) to deploy to protect the innovation.

Upon identifying the IP tools to protect the innovation, the company should take action or work with outside counsel to create the IP asset. Actions may include filing a patent application, executing confidentiality or non-disclosure agreements, registering trademarks and copyrights, and ensuring documents are marked and kept confidential.

3. How does the IP strategy account for ownership?

The ultimate goal of an IP strategy is to obtain ownership so that IP can be monetized. Therefore, it is not sufficient to merely create the IP asset without also having a plan to retain the appropriate ownership or rights.

In the absence of any formal agreement governing ownership of IP, the rights generated or derived from an individual’s employment or consulting relationship may inadvertently be waived or may be owned by another company. As part of an IP strategy, companies should take steps to ensure that they retain ownership in the IP prior to collaboration with other parties. Likewise, automotive suppliers that may not have historically collaborated with technology startups should be aware of potential cultural differences in how they operate, such as loose or non-existent non-compete clauses, and the ease and rate at which employees can switch from one technology company to another. Failure to take steps to retain ownership of IP may prove costly and may impede both capital formation and product development.

To mitigate these and other risks related to IP, technology startup investors usually perform due diligence to determine whether any IP ownership issues exist. If the startup has not taken steps to protect and retain ownership of its IP, it may be inhibited from commercializing its innovations with other companies.

A comprehensive IP strategy can play a pivotal role for both automotive suppliers and technology startups in successfully developing and deploying AV solutions, while avoiding pitfalls and challenges that come with IP protection and ownership.

For more on this and other trending topics in the automotive industry, click here to download Foley’s white paper, Top Legal Issues Facing the Automotive Industry in 2019.