The increasing digitalization of automobiles due to the rise of EVs and autonomous driving has created opportunities for component manufacturers to propose new technologies and joint developments. Display component makers must enhance their technological skills and development capabilities to respond to the innovations of Tier 1 makers and OEMs, and actively develop new products to generate new demand. However, the automotive supply chain is going to require a new way of thinking about how display components manufacturers protect their IP.
The Automotive Supply Chain
The automotive supply chain is a complex network of companies that provide various components, parts, and services to automakers, the original equipment manufacturers (OEMs) in any other industry. The supply chain is typically divided into several tiers, with each tier representing a different level of the supply chain. The exact number of tiers may vary depending on the industry, but the most common model for the automotive industry consists of three tiers:
- Tier 1: These are the primary parts suppliers that provide parts and components directly to the OEMs. Tier 1 suppliers are responsible for the design and development of the parts they provide, and they typically have long-term contracts with the OEMs.
- Tier 2: These suppliers provide components to Tier 1 suppliers, rather than directly to the OEMs. Tier 2 suppliers are usually specialized manufacturers that provide smaller or more specific components.
- Tier 3: These suppliers provide raw materials and other basic components to Tier 2 suppliers.
Overall, the automotive supply chain is critical to the success of OEMs, as any disruptions can have significant consequences on the production and delivery of vehicles to customers.
The Merits of Display IP Licensing Strategies in Automotive Supply Chains
One of my hobbies is to make licensing lawyers even richer than they already are. It’s not but I have to use self-deprecation to deflect from any natural inclination to run a mile the other way when I see a lawyer. That didn’t stop me from wanting to know about the supply chain in automotive and doing some research, and in doing so, I found a pretty interesting piece by the firm quoted and referenced below. It’s a pretty good primer that should help a display component manufacturer tick off all the boxes with its legal department when it’s looking to make a deal in automotive.
Automotive suppliers and OEMs are some of the most prolific patent filers in comparison to other verticals or industries. As such, companies which operate within the automotive industry should be especially cognizant of the IP rights of others as they enter into supply agreements.
Foley and Lardner
Automotive Supply Chain Disruptions Echo Through Eternity
In a hypothetical scenario, a supplier is working with a manufacturer to produce a product that includes a component patented by a different supplier. However, a disruption occurs that prevents the component supplier from fulfilling their obligations, leading the primary supplier to seek an alternative supplier for the same component. The question arises as to whether the new supplier would infringe on the patent rights of the original supplier and whether the primary supplier would also infringe on those rights by manufacturing the infringing product.
Where it gets interesting for display components manufacturers is the fact that often there are patents assigned to the supplier from third parties, for everything from materials to actual components, and that while a lot of this is already addressed in existing display supply chains, the automotive supply chain works at a much faster pace of action and reaction than most. It also means that Tier 1 and Tier 2 suppliers are going to channel future display components as the automotive industry starts to coalesce around digital displays in a way that fully integrates all suppliers and directs them through existing suppliers.
For companies like Samsung and LG, this is not an issue. For manufacturers with fewer means, who have a great deal of opportunity to pursue in the nascent automotive market, it may create a great deal of complexity because the supply chain is overwhelmingly sophisticated. The issue of a licensing strategy only comes up because of the newness of this opportunity, and the hope that it opens doors for other companies, and not just the usual crowd. I also have a feeling that with the advent of heads-up display (HUDs) in automotive, and the fact that you’re not just installing a monitor or TV in a car, that there is a cluster of displays being deployed, the market opportunity for new vendors to rise is enormously hopeful. And one final thought, which led me down this path, when you think of the bill of materials (BoM) of a car, what may be considered an expensive display, as a standalone product, is a necessary component of differentiation for automakers who stand to make a hell of a lot of money from selling their cars. In other words, it may be the cockpit that sells the car, and then it’s worth going all out to make that interior blast the riders like a 70s disco.
