Dialogue with Avanci Vehicle President Laurie Fitzgerald

China IP 

Yes, my name is Laurie Fitzgerald. I am President of Avanci Vehicle, one of the patent platforms in the Avanci family of companies. I am delighted to be here in Beijing to speak with you. Thank you for the interview. Avanci is an independent patent platform operator, and we operate licensing programs for the internet of things (IoT). Avanci Vehicle, in particular, operates licensing programs for automakers and the holders of standard essential patents for the cellular standards.

China IP 

Yes, I think to answer this question, it's helpful to tell the story of how Avanci started and where the idea came from.

I did not found Avanci. It was founded by our CEO, Kasim Alfalahi. He was working in the telecom industry back in 2016 when it was becoming clear that the cellular standards were beginning to be used by things other than mobile phones and base stations and tablets. We were starting to see cellular connectivity at the time and be incorporated into, for example, vehicles.

And so what was going on was that telecom companies were starting to approach automakers about licensing. And this was the first time that an intersection of these two industries, telecom and automotive, occured. They had both grown up with quite different licensing practices and needed to find a way to work together. But something that complicated the situation was that there are dozens of companies around the world who own cellular standard essential patents. To sign all of the necessary license agreements, an automaker selling a connected vehicle would need to engage in individual license negotiations with dozens of companies all around the world. It is a very time-consuming and possibly expensive task to train individuals in your company to learn about the technology, and then to have all these individual negotiations could be quite an undertaking.

This is where the idea of Avanci came from--in conversations with automakers, our founder heard wouldn't it be nice to have a one stop shop where an automaker could go to get a license for all of the standard essential patents that it needs to implement the 2G, 3G, 4G standards in its vehicle.

And that is what we are doing. 

Today, for instance, in our 4G vehicle program, the automaker obtains a license to all of the global portfolios of 2G, 3G, and 4G standard essential patents of 59 licensors. And the  license covers every 4G connected vehicle sold by the automaker anywhere in the world. So it's very simple, and it's very efficient, and much less time consuming than serial bilateral negotiations. That's the difference.

China IP 

From the licensor’s perspective, without a one-stop shop, they would need to go and negotiate the license to their patented technology with many automakers in many countries. So it’s very efficient for a licensor to join Avanci. They will come and speak with us, and there is the requirement that we must verify that they do own a cellular standard essential patent. But once they've met that threshold, a requirement of owning (at least) one patent that’s essential to the standards, then they can join the platform, and Avanci does much of the licensing work for them.

They of course can always continue, and many licensors do continue, to engage in bilateral licensing outside of Avanci as well. But they're offering their patents through our program, which is a simple and efficient option for them to be fairly rewarded for the use of their patented inventions by the auto industry all around the world.

For a licensee, as I described, it can be very simple and efficient for them to participate in Avanci and obtain one license to dozens of portfolios rather than negotiating many individual licensors.

And the “predictability” comes on our pricing. An automaker who takes an Avanci 4G vehicle license, for example, obtains a long term license and they know that the price in their license agreements today is $20, paid once per vehicle for the lifetime of the vehicle. The price will not increase during the term of their license. It's a long term predictability on costs for an automaker, and they know that they'll have that comprehensive coverage at a fixed cost for a long term rather than with bilateral licensing, for instance, each time a license is signed, there's still uncertainty about what the cost of the next individual license would be.

China IP 

Yes, we do have a well established essentiality check process. This is part of our master agreement that we've entered into with all of the licensors. It sets how we check for essentiality of patents that are licensed through Avanci.

We have a network of independent patent evaluators all around the world. Licensors submit patent claim charts to Avanci, and we send those out for independent evaluation. All of the patent evaluators follow at the same set of criteria. We have quality control checking within Avanci so that we can ensure that patents are checked for essentiality by the network of evaluators in a consistent way over time and across geographies.

This is typical of many patent pools or platforms to have an essentiality checking system. This is also how we make sure that all of the licensors participating in Avanci do have essential patents in their portfolio. If all of those patents for a particular licensor  expire or are found to be invalid or unenforceable, that licensor becomes ineligible to share in future royalties collected in our licensing programs.

We check for essentiality for three reasons. First, to make sure that a licensor is eligible to participate in our programs. Second, it's part of our royalty distribution methodology. It's one factor that goes into how the royalties are shared. Third, to ensure that all of the licensors are continuously eligible to participate. And when a licensor no longer owns essential patents because of expiration, for example, then they would no longer be sharing in the royalties collected.

China IP 

I think of this as a circular exercise. Attracting more licensors attracts more licensees and attracting more licensees attracts more licensors. This is something that I have learned based on experience now over the past 4 years since coming to Avanci. You have to think about what is going to attract licensors and licensees to the platform.

And my thinking on that is you have to have a set of licensing terms from the start that can be widely accepted by both sides of the program. Really, the key is finding the right balance and the right compromise. It’s not just about the pricing, but all of the terms and conditions of the license, including patent scope, the product scope, and all the other terms that go into a license agreement.

The way that we do that is before a program is launched, we spend a great deal of time, as long as it takes, talking individually to potential licensors and potential licensees, and to get their feedback and their input on, in their view, what set of licensing terms they could agree to. And this discovery process we engage in with market participants until we discover a set of licensing terms that can be widely accepted. For example, our 5G vehicle program that we launched last summer, the process took more than 2 years  of gathering feedback, of working on possible draft agreements, until finally we reached a set of terms that we felt confident in, and we had discovered the terms that the market could widely accept. We launched the program and we've seen that wide acceptance now beginning to happen.

But really the key, I think, is doing the work before you launch the program.

China IP 

Our 4G vehicle program, we announced the pricing back in 2017 on our website. At that time, we had our first licensee,  BMW, and I guess compared to today a relatively modest group of licensors. But over time, and since the end of 2017, the 4G Vehicle program has grown. Today, there are 59 patent holders participating as licensors, and almost 100 automotive brands are covered by an Avanci 4G vehicle license. The licensors are companies big and small and in between, from all around the world. We have a very diverse group of licensors. There are telecom companies, operators, and academic research institutions. There are non-practicing entities. It's so many different types of licensors from many different places, including many who are headquartered here in China. Those licensors have come together and agreed to offer their patents through Avanci 4G Vehicle. Over 160 million vehicles around the world are currently covered by an Avanci 4G Vehicle license.

And so I do think those licensing terms have now been widely accepted. We continue to sign up new licenses. We've entered into new 4G Vehicle licenses over the past few months and, new licensors also have continued to join the program. So although we have seen much growth over the past few years, the growth does continue. The price for Avanci 4G Vehicle license is $20 per vehicle, paid once for the lifetime of the vehicle.

Then our newest Avanci Vehicle program is Avanci 5G Vehicle, which launched last August. So just about 9 months ago from today. We currently have 66 licensors participating in the program. So already seven more licensors than our 4G Vehicle program.

Again, it's a very wide and diverse group of companies from around the world who are licensing their cellular standard essential patents through 5G Vehicle. And today, I believe there's more than 30 automotive brands who are participating. So we've already seen wide acceptance. Some of our 5G vehicle licensees include General Motors, Ford, all of the Volkswagen brands, Hyundai, KIA, and others. We've been really delighted with the wide acceptance of right from the beginning of 5G Vehicle.

The pricing there is $29 per vehicle paid once for the lifetime of the vehicle for earlier adopters. For OEMs who are not early adopters of the program, it increases to $32 per vehicle, again, paid just once for the lifetime of the vehicle.

China IP 

As I mentioned earlier in the interview, we spent a long time prior to launching the program, collecting feedback from the markets, regarding all the terms of the  5G Vehicle license, and including price, which is one of the key terms. We eventually landed on the price that you see on our website, the $32 based on all of the feedback that we collected.

In thinking about the price, we were thinking of some key considerations.Probably the number one consideration being the value that cellular connectivity is going to bring to a 5G connected vehicle. So today we see connectivity enabling so many different use cases in a vehicle. We have everything from emergency services and over-the-air updates to more immersive infotainment, in-vehicle payments, and many different connected services that can be offered by the OEM. We see enhanced safety and security features, and connectivity can help drivers of EVs connect to and locate charging stations. There’s remote driving, the beginning of autonomy and V2X functionality. There's so many different use cases and different values that connectivity brings to a vehicle. And that was a large part of our discussions.

Then also, when you're thinking about a platform price as opposed to your individual license price for just one portfolio, you really have to spend time and discovering the price that can attract the critical mass of licensors and licensees.

We were focused on finding the price that would be able to get to where we are today at 66 licensors, but then also continue to attract additional licensors. Because of course the royalty must be shared among dozens of companies. And then also we thought a lot about the patent scope -- what would be licensed. When you think about our 4G vehicle program, it's the complete portfolio of 2G, 3G and 4G cellular SEPs from the patent owners. In our 5G program, it's all of those patents plus 5G SEPs. The patent scope, we thought a lot about the larger patent scope and the additional value that brings.

China IP 

As I mentioned earlier, we launched the 5G Vehicle program in August 2023. We had Mercedes-Benz as our first licensee. Since that time the program has grown to have more than 30 automotive brands under license. So we're really happy with the acceptance from automakers. And in the first 9 months of the program, and we've grown to include 66 licensors who based on third party estimates, own more than 90 % of the 4G, 5G standard essential patents globally.

So the scope of the license and also now the acceptance by the automotive industry, this early on has been extremely promising. We are working to continue to grow the 5G Vehicle program by signing additional licenses and also welcoming additional licensors.

I think whenever you launch a new program or do anything new in business, you never know what the future will hold, it's impossible to predict. I hoped that we would see widespread acceptance of the program in the first 6 months. And certainly my expectations have been met and even exceeded. I really look forward to what the future holds.

The automotive industry, it's similar to what we saw in 4G, there's varying rates of adoption of the technology. In 4G we saw automakers incorporate 4G connectivity into their vehicles on different timelines. So something that was important to us in the 5G program was to launch the program early enough to where we were at the beginning stages of the 5G roll out into connected vehicles, so that automakers would know the pricing and know the terms of our license and have that certainty as they decided to begin to incorporate the technology, and have the certainty to know that the license would be available through Avanci if that was how they wanted to take the license. And I think we were able to do that.

And now, as more automakers begin to announce that they'll be selling 5G vehicles. I’m optimistic that we'll see more and more participating in the program.

China IP 

Let me start by saying that anyone in the telecom or the automotive industry who's interested in participating in Avanci, but has questions about how we're operating or how Avanci works should absolutely feel free to reach out to us. And we'll clear up any questions or any misunderstandings.

Perhaps two misunderstandings that I have personally encountered over the years and that I hope that we've been able to explain and correct are some characteristics of our platform.

The first thing I want to make clear is that Avanci is entirely independent. By that, I mean, we are not owned or controlled by any of the licensors who participate in Avanci, nor are we owned or controlled by any of the licensees, so none of the automakers who participate in Avanci. We are not a company that owns the patents that we license. We are an independent intermediary. We're working at the intersection of the licensors and the licensees. And this independence is what allows us to really discover those terms that can be widely accepted by both sides.

Second, I think sometimes there is a misunderstanding about whether or not Avanci is optional or mandatory for participation. I’m trying to be very clear with everyone I speak with. We are only an option. Participation in Avanci by a licensor or a licensee is a voluntary choice always. There's absolutely no requirement to either license your patents through Avanci or to take a license from Avanci. The point of our platform is that we're optional.

We see individual licenses going on outside of Avanci where licensors who license their patents either to one of our licensees or to another OEM and also to suppliers to the automakers. We have a well established system at Avanci where we identify any separate overlapping individual licenses. We have a credit system that ensures that no licensor has double collection both through a bilateral and an Avanci license.

We are a platform with a goal of promoting innovation and promoting inventions at both the telecom industry and the automotive industry. We want to be a convenient option for fair and simple licensing, so that the inventors of the patents we license can be fairly rewarded in an efficient way, so that our licensees can have efficient access to those inventions and so that they can continue to innovate rather than worry about standard essential patent licensing, they can focus their efforts on creating even more innovative vehicles than what we see now.

China IP 

I think all I can comment on here is our vehicle pricing at Avanci. It's hard for me to make a comparison, because I'm not aware of what the comparison would be in the smartphone space. But thinking about the Avanci pricing, as I described earlier, our license and our pricing on our website are completely transparent and an optional compromise.

So it represents a compromise of many views across licensees and licensors. And that compromise reflects the information we collected about the value that the license technology will confer on the vehicle. A vehicle, with respect to whether or not it has more or less communication functionality than a phone, I think we've seen over time, vehicles become more and more connected and more and more like a smartphone. A vehicle can have multiple connectivity modules incorporated in it and all the time we're seeing more and more use cases for connectivity in vehicles around the world.

And someone who purchases a vehicle today will in many cases drive it for 10 or 20 years. Over time, because of connectivity, additional features can be added to the vehicle that can increase its value. And also OEMs can stay in constant contact with their customers and open up additional revenue streams through, for example, connected services.

So I think that our Avanci pricing, it's a compromise price, but  it really reflects the ever increasing value of connectivity to the automotive industry.

China IP 

I cannot ever speak about any individual automotive company, regardless of where they are based. But what I can say is that we have reached out to automakers all around the world, and we are certainly offering our optional license to automakers here in China. We have lots of information about our program on our Chinese website, and we really encourage Chinese automakers who are interested in learning more about Avanci to talk with us if they're not already doing so. We hope to see uptake of our solution here in China on the licensees side of the platform going forward.

We've been really happy that I think all of the major Chinese standard essential patent owners have joined Avanci as licensors.They are now being fairly rewarded for their inventions through our program and receiving a share of the Avanci royalties. And those royalties that are coming into China to those licensors can then fuel additional innovation here in China.

So I think that we are offering a very good solution for the Chinese licensors who are participating to be rewarded for those inventions, and hopefully we'll see participation by Chinese automakers in the future.

China IP 

First, I'll say that I can't speak for any Chinese vehicle company, and I think that's a good question for them. I wouldn't want to speak for someone other than myself. But what I can say is that automakers outside of China have adopted our solution and found that it offers an efficient way to license standard essential patents.

And I think we can offer all the same benefits to Chinese OEMs as well.

And we can offer them a way to secure licenses in many licenses in a single agreement, then to not have to undertake dozens of bilateral licensing negotiations, and to also secure long term predictability on the price of licensing. Hopefully, we'll see more Chinese automakers reach out to Avanci to find out more about us going forward.

China IP 

I think that our vision and goals for the vehicle market here in China are aligned with our goals for the vehicle market generally.

The first goal is to offer Chinese OEMs the most comprehensive license possible. That means continuing to grow the license on the licensor side. As I mentioned earlier, we believe we already have the critical mass of standard essential patents in the program under license, but of course we're always hoping to see additional participation by standard essential patent owners.

Already today, many of the Chinese SEP owners are participating in the Avanci vehicle programs, Huawei, ZTE, China Mobile, China Telecom, and DATANG (Mobile), TCL and others. And and we're grateful for their participation. And we hope to see the Chinese SEP owners who are not yet participating, also join the program and make us an option for licensing their patents to the auto industry.

And then on the automaker side, the goal is to see Chinese OEMs participate in the program in the future. We believe that we can offer Chinese automakers all the same benefits that we are currently offer to our existing licensees and to automakers outside of China. A very straightforward and efficient way to obtain a license under the vast majority of cellular SEPs worldwide, and freedom to operate worldwide, a very effective risk reduction tool all around the world. And hopefully we'll see the program continue to grow here in China. I'm excited about the future.

China IP 

I think that over the past few years, we've really seen patent pools and platforms being talked about much more than ever before. 

I remember, maybe 10 years ago, this is before I came to work in Avanci. A patent pool was something that I was aware of, but it wasn't something that I heard people talking about and thinking about and writing about that the level they are today. But I think over time, as connectivity has been included in more and more types of devices around the world, the benefits of a pooling-together of patents for communication technologies, in particular, has started to become very clear.

Avanci is not just vehicles. We also have programs for Smart Meters, for Aftermarket automotive programs. There's Avanci Video, Avanci Broadcast. One of our latest programs in the IoT space is Avanci EV Charger, for EV chargers, for electric vehicles. And so we are continuing to grow into different vertical beyond automotive. My hope and my prediction is that we'll see greater adoption of patent pools and platforms, whether they are Avanci programs or other pools.

And over the next couple of years, I do think that in China and outside of China, there will be a growing recognition about the simplicity and efficiency and the savings on transaction costs that pools and platforms can bring.

Article contribution & marketing cooperation：

jane.jiang@chinaipmagazine.com

18911449529（WeChat the same number)

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