How a Supreme Court Case Could Transform AV Ownership

The Supreme Court may be in temporary recess, but a recent decision, yielded on May 30 in a patent case, may have reverberating effects for years to come.

The case, Impression Products, Inc. v. Lexmark International, Inc., centered on a dispute about the exhaustion doctrine in patent law, in which the Court held that after the sale of a patented item, the patent holder cannot sue for patent infringement relating to further use of that item. For instance, if you decide to repair your iPhone outside of Apple, the tech company could not sue you for doing so.

Because of the high-level technology used in autonomous vehicles, repairs made outside of an approved vendor from General Motors, for example, means the OEM could have a huge liability on its hands if an individual owner replaced or altered the software and/or hardware and then ended up in a crash, Sam Abuelsamid, a senior research analyst at Navigant Research, told Mobility Finance. Therefore they may want to only have autonomous vehicles available in their own ridehailing services.

“In order to minimize that risk, [carmakers] will want to maintain control over vehicles to make sure [the vehicles] are properly serviced and maintained and kept up to date,” Abuelsamid said.

But this isn’t necessarily the case, according to Van Lindberg, an intellectual property attorney for Dykema Cox Smith law firm.

“When you think about a cellphone, you can get that repaired,” he told Mobility Finance, but added the caveat, “On the other hand, if you fiddle with the underlying software, you cease to have a claim on the cell phone.” This means that an automaker could free itself of liability if an individual replaced or altered the components of the autonomous vehicle, thereby violating the warranty.

But, because the Lexmark case essentially removed patents as a control point for automakers, those companies may be encouraged to exhibit control by licensing the software, while people own the vehicle itself, he said. Much in the way that people own a computer, but have a subscription to Adobe Photoshop, for example.

“[A] way in which autonomous vehicle manufacturers are going to exercise long-term control would be to have those updates conditioned upon the underlying software maintained,” he said. “And [we could] see subscription style models say, ‘Your car needs to be kept up to date,’ and then there’s a fee associated with receiving updates.”

This idea already exists to a certain degree, according to Cameron Krueger, managing director at Deloitte Services LP, told Mobility Finance. There are parallel industries, including IBM Global Financing — IBM’s own captive organization — which finances non-IBM products. In this scenario, dealerships could also play a role by providing financing for the software — if they’ll be willing to finance non-OEM products.

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