As we pass the fourth anniversary of announcing our first Avanci licensee, it seems appropriate to reflect on how much has changed, for Avanci and the auto industry, during the last four years.
We launched Avanci in September 2016, as an independent marketplace with a vision to transform how patent licensing is done. In previous roles and at other companies, our team had experienced the ‘smartphone wars’ and believed things should, and could, be different for the burgeoning Internet of Things industry. It was a lofty ideal, building a more efficient approach to licensing essential connectivity patents for an era which would see the convergence of several different industries, including automotive and telecommunications. But we also believed that we had the right team of experienced, industry professionals to make it happen, and were encouraged by feedback from patent owners and auto makers alike.
The inclusion of 4G connectivity to vehicles has benefitted both consumers and automakers. For the consumer, this incredible technology powers their vehicle’s infotainment and emergency call systems. For the vehicle maker, the technology enables wireless diagnostics, data collection, and over-the-air updates to the vehicle’s systems. Automakers can also offer a range of connected services which can enhance their customer experience while earning them incremental revenue. Connected vehicles are an undeniable win-win for consumers and OEMs and serve as the precursor to tomorrow’s autonomous vehicles.
All of these connected features are underpinned by communications standards such as 3G, 4G and soon, 5G. These open standards are the result of billions of dollars invested in research and development over many years by dozens of innovative companies, largely from the telecommunications sector. They contribute their inventions to the standardization process to enable the widespread adoption that we have already seen in the smartphone world. In return, they seek a fair return from companies which utilize those standards in their products and who reap further benefits from that groundbreaking R&D. Automakers and others have then been able to create their own innovations, leveraging the communications technologies but without having had to invest in the R&D to develop them.
When BMW became our first licensee in December 2016, we had 11 patent owners in the Avanci marketplace and we published our fixed licensing rates of $15 per car, a one time payment for the lifetime of the car, to cover all of the current and future 2/3/4G essential patents of all of the patent owners in the marketplace.
Since then, I’m pleased to say that much has changed for Avanci. We’ve grown to have 25 automotive brands under license for their connected vehicles, which include not just cars but trucks, buses and even construction equipment. Our original patent owners have expanded their portfolios, and more patent owners have joined our marketplace, which now spans 47 patent owners, collectively responsible for the vast majority of 2G, 3G and 4G essential patents.
But over those years, one thing has remained constant. The 4G licensing rate of $15 per vehicle, paid once for the lifetime of the vehicle. Avanci’s value proposition is as straightforward now as it was then, but arguably even more compelling. An independent, one-stop marketplace for standard essential 2G, 3G and 4G connected car patents from many of the world’s most innovative companies, made available efficiently under one license at a low, fixed prices. Already, automotive brands responsible for more than 25 million connected vehicles have taken an Avanci license, recognizing the value the technology brings and the efficiency and affordability of the Avanci model.
It’s important to note that the Avanci rate represents a market driven solution, the result of lengthy engagement between patent owners and auto makers when we established the marketplace. Unlike a traditional licensor-run pool which typically sets rates unilaterally, Avanci worked with both licensors and licensees to arrive at its rates. I suspect that if we asked some of our 47 licensors, they might say that $15 is a little too low, and perhaps some of our 25 licensed brands would say the price is a little high. But, having been involved in hundreds of deals and many mediations, I can tell you that when both sides acknowledge that compromises were indeed made, the sweet spot has been found.