Ownership and liability are central factors in the race to negotiate terms in supply and licensing agreements
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Ann Arbor, Mich. —November 25, 2019— James K. Cleland, a shareholder in the Ann Arbor office of Chicago-based Brinks Gilson & Lione, one of the largest intellectual property law firms in the U.S., said distinct changes in the automotive industry’s market structure are forcing it to pay close attention to whether the balance of power will shift from original equipment manufacturers (OEMs) to the companies in the automated vehicles (AVs) technology sector. The traditional pyramid, with OEMs at the top, is being displaced by a more circular shape in which new companies that supply AV technology are emerging as key players.
“This shift disrupts traditional notions of leverage when negotiating terms in supply and licensing agreements,” Cleland said. “As more deals are struck between OEMs and AV companies, critical questions weigh heavily on the industry’s mind, including who owns the new AV technology, and who is liable for problems that may result from new AV usage.”
For years, OEMs maintained considerable leverage over lower-tier suppliers in supply and licensing agreements—dictating the terms and controlling key components such as technology and intellectual property ownership, liability, and indemnification—but that is changing as companies that supply AV technology become more prominent. Adaptive cruise control, interactive navigation and telematics systems, and parking and lane change assist are AV features that are beginning to dominate vehicle operation and drive consumer demand.
“The physical vehicle itself is becoming less important, with the value lying instead in the technology and services within it,” Cleland said. “With new mobility tech predicted to drive 40% of the auto industry’s profits by 2035, OEMs and AV technology companies are striking more equitable supply agreements.”
While the liability question is still being debated, according to Cleland, it’s not yet clear which companies will occupy the top rungs of the AV supply chain.
“Will it continue to be the traditional OEMs such as GM, Ford, FCA, Toyota or Honda? Or will it shift to Waymo, Apple, Uber or Lyft? While that question continues to grab the headlines, the more meaningful debate is really about technology ownership and liability,” Cleland said. “Resolving those questions is crucial in determining how quickly AVs become a reality.”
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