United States: Top Legal Issues Facing Automotive Suppliers In 2014 - Patents

Executive Summary

Patent litigation case filings by non-practicing entities (NPEs) against practicing entities (manufacturers of products) continue to increase. Although the legislature has enacted reforms in new legislation, businesses still face substantial problems. Various inexpensive methods exist that may be used by practicing entities to defend against and deter non-practicing entities. One method is to seek attorney's fees from nonpracticing entities in exceptional cases. Other patent litigation concerns include avoiding suit from subcontractors by obtaining appropriate licenses. We are at the forefront of developing innovative techniques to handle patent litigation issues, in a cost effective manner.


The number of patent litigation suits continues to increase. The chart below is data from a PricewaterhouseCoopers Patent Litigation Study released in 2013.

Given the proliferation of software in the modern automobile, and the frequency of NPE suits involving software-related patents, however, the increase in patent litigation is likely to accelerate further.

Some actions that automotive suppliers may take to stem the onslaught of patent litigation include clearing products prior to manufacturing or release. Other preventative measures may include increasing patent filings where the patent applications are published in 18 months. Further, each company should adopt innovative litigation strategies involving immediate actions to resolve patent litigation suits.


The Federal Circuit recently affirmed an award of $1.6 million in attorney's fees to the defendants in a patent suit in Taurus IP, LLC v. DaimlerChrysler Corp., 726 F.3d 1306 (Fed. Cir. 2013). Attorney's fees may be awarded to a defendant in patent cases when the ligation is objectively baseless and is in subjective bad faith. To be objectively baseless, the patentee's assertions, whether manifested in its infringement allegations or its claim construction positions, "must be such that no reasonable litigant could expect success on the merits." Id. at 1309.


In Taurus, the Federal Circuit ruled, "Taurus [the nonpracticing entity] improperly asserted and maintained its positions in the litigation." The Federal Circuit reasoned "no reasonable litigant in Taurus's position [after the claim construction] could have expected a finding that a web surfer accessing the accused external websites satisfied the requirement for a 'user,' as recited in claim 16." The court also stated, "when patentees have sought unreasonable claim constructions divorced from the written description, the Federal Circuit has found infringement claims objectively baseless." According to the Federal Circuit, "the specification and prosecution history clearly refute [the patentee's] proposed claim construction. Thus, the patentee's infringement claims were objectively baseless."


The Federal Circuit ruled that the patentee's proposed claim construction ignored the entirety of the specification and the prosecution history, was thus unsupported by the intrinsic record, was frivolous and supported a finding of subjective bad faith. The Federal Circuit reached a conclusion that Taurus subjectively knew that the DaimlerChrysler patent suit lacked a reasonable basis and was, therefore, pursued and maintained in bad faith.


When an automotive supplier negotiates intellectual property rights, the automotive supplier might not focus on obtaining rights from its subcontractors. Instead, the focus of intellectual property rights negotiations may be between the automotive manufacturer and the automotive suppliers. Automotive suppliers may use subcontractors to manufacture the parts for an automotive manufacturer or a parts store.

The subcontractor may develop various intellectual property rights (e.g., patents) as the subcontractor solves the problems related to assembling the manufacturing equipment and method for manufacturing a part. In particular, the problems that are solved in order to manufacture the part may be appreciated only by the subcontractor. In some instances, the subcontractors may file patent applications based on the methods and systems for assembling the part.

When the subcontractor fails to grant the automotive supplier the appropriate intellectual property ownership or licenses, the automotive supplier may be exposed to liability. For example, when the automotive supplier changes subcontractors, the original subcontractor may assert its intellectual property rights against the automotive supplier. The intellectual property rights may include patents that are directed to the method or apparatus of manufacturing the part. The method or apparatus may have been invented based on the requirements of the automotive supplier.

Accordingly, when negotiating with the subcontractor, the OEM may want to include contractual provisions that include an assignment or license for any intellectual property rights that are developed in connection with the subcontractor's work for the OEM. Moreover, an automotive supplier may wish to have the intellectual property licenses for a combination of all parts that are manufactured by the subcontractor in each contract.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions