Patent filings in the automotive space have nearly continuously increased over the past decade. While the automotive space as a whole has experienced this constant growth, deeper data from the automotive space indicates an industry on the cusp of major upheaval. This upheaval is manifest in stark differences in patent strategies of large players in the automotive space as well as in a shift in technology focus in patent filings. This upheaval presents opportunities to entities willing to embrace the automotive industries’ shifting technological landscape. However, this upheaval also presents risks, including rash action taken by companies for short-term benefit but that endangers their long-term viability.
Following a dip in filings in 2009, patent filings in the automotive space are up 96%, with several segments in the automotive space far outpacing the growth rate of the overall automotive space. These increases in patent filings vary significantly among technology segments in the automotive space, with software-based segments experiencing significantly higher growth rates, while growth in patent filings in many traditional automotive technology segments has stagnated. For example, growth in filings for battery, electric vehicle, vehicle propulsion, and vehicle safety have plateaued or decreased since 2014. In contrast to this, patent filings in the segments of ancillary vehicle systems (205%), vehicle control systems (225%), vehicle navigation systems (280%), and AI-integrated vehicles (520%) have rapidly expanded. These trends are shown in the chart below.
As with all change, this shift towards software-based automotive segments creates both opportunity and risk for companies and products in the automotive space. In contrast to more traditional automotive technology segments that are very developed and crowded, software-based segments provide open space that will allow for broader patent protection. Because of the newness of the software-based segments, the possibility of patenting foundational technology providing significant competitive advantage is higher than in the traditional automotive technology segments. And, a company with patents for such foundational technology will have opportunity to leverage those patents into increased market dominance.
In addition to this overall shift towards software-based technologies, patent strategies vary significantly between peer companies in the automotive space. These differences in patent strategies are most clearly illustrated in the different percentages of design patent filings as a part of the total patent portfolio of different companies. Across the industry, it is estimated that approximately 9% of all patent filings are design patents. However, several companies, especially multiple high-profile German automotive companies, are greatly exceeding this rate, with design patent applications estimated as making up approximately 43% of patent filings by one large German automotive company. In contrast to this, peer companies are filing design patents as a smaller percentage of their overall patent portfolio. For example, design patent applications are estimated to make up approximately 5% of Toyota patent filings, 14% of BMW patent filings, and 7% of GM patent filings. While it is unclear which strategy will best serve automotive companies, the disparity in strategies will likely lead to winners and losers, with winners increasing their market share.
Regardless of the source of the upheaval in the automotive industry, automotive companies seeking to maintain a competitive advantage should address the risks of the shifting market with a forward-looking patent strategy that embraces the shifting market by emphasizing and expanding protection of software-based technologies. This forward-looking patent strategy will require a change in patent practitioners in the automotive space from individuals with heavy mechanical engineering competence towards individuals with software and hybrid mechanical/software competence.
Based on the expansion of patent filings, the automotive segment remains a strong space for investment and development. The shift towards software-based innovation in the automotive space creates opportunities for high-value patents providing broad patent protection. This increased value of patents, combined with the vastly divergent patent strategies, will likely result in a change in the leading companies in the automotive industry. While the upheaval in the automotive industry may be inevitable, smart companies will take advantage of new opportunities to secure their future relevance.