OESA Conference Highlights Need for More Engineering Resources, Importance of Collaboration When Developing New Technologies

The 15th Annual Original Equipment Suppliers Association Outlook Conference, held Nov. 11 in Detroit, highlighted the lack of engineering resources needed to support the drive for new technologies required to compete in the 21st century. General Motors, for instance, has requisitions to hire 500 design release engineers to relieve the stresses their engineers are experiencing. As a former design release engineer at GM, I am quite familiar with that problem.

A number of strategies for developing new technologies in view of the engineering shortage were discussed at the OESA conference, including collaborating with engineering schools, developing training programs, and even revisiting vertical integration—a business model the OEMs and suppliers largely abandoned over the last two decades. The consensus was that improved collaboration and joint development along both spectrums of the supply chain is the only viable option in the short term.

The collaborations discussed at the conference underscored the need to change intellectual property strategy in view of new laws. In 2013, the U.S. became a “first to file country,” meaning the first person to file a patent application will establish rights on the technology. As a result, it is now more important than ever that suppliers establish background technology early and often by making use of the provisional patent application process through the U.S. Patent and Trademark Office.

For the past 200 years, the U.S. operated under a first to invent system: the first to invent a technology had rights in the technology, regardless of who filed an application first. Often, collaborators in the development of new technology fail to contemplate ownership of the technology until after it has been developed. Even worse, OEMs demand ownership of new technology, even if its development was financed by the supplier.

Clarity in ownership of technology can only be achieved through protecting the underlying concepts—by filing patent applications covering new technologies prior to beginning the collaborative development process. The USPTO accepts provisional patent applications, which is a low cost strategy to quickly protect developmental concepts. Once the underlying concepts are protected, a joint development agreement should be negotiated establishing rights in the new technology. Negotiations can be conducted from a position of strength once the background technology has been established by filing provisional patent applications.

Collaborative development projects are presently the best available option to meet the technology demands of the marketplace with limited engineering resources. Establishing a strategy to protect background technology prior to entering a joint development or collaborative effort is imperative to avoid losing technology that can give a business a competitive edge in a high-tech market.

Geeks v. Gearheads – The Emergence of a “New Big Three”?

There was a time when a flip-open “communicator” with a wireless device seemed entirely futuristic.  Now cell phones in our pockets and Bluetooth devices in our ears and cars are simply run-of-the-mill.  Not to mention that their abilities go well beyond what was imagined in the old days of Star Trek. 

There was also a time when cartoons imagined self-driving cars that would allow their passengers to socialize while the cars navigated busy thoroughfares filled with similarly autonomous vehicles.  Now we are on the precipice of the next big leap in our lives being altered by technology. 

On the doorstep of this new paradigm is the tension between what some have affectionately termed “geeks” versus “gearheads.”  The “geeks” are the major technology companies such as Google, Microsoft, and Apple.  The “gearheads” are the OEMs and auto suppliers.  Both sides are aggressively pursuing technology aimed at autonomous vehicle development.  Google has already put hundreds of thousands of miles of testing on fully autonomous vehicles and is currently manufacturing a fully autonomous vehicle.  The geeks’ aggressive approach towards the technology has raised the question of whether we might be witnessing the emergence of a “New Big Three.”  But OEMs are not far behind.  Nissan, for example, has publicly stated that it expects to produce autonomous vehicles by 2020.  And, of course, some lower levels of autonomous operations have been available and are becoming more commonplace on vehicles already on the road

As we head down this road towards a more autonomous drive home (which some companies claim will be free of traffic jams with use of autonomous vehicles), a review of the geeks’ and gearheads’ patent filings gives us a glimpse of what’s ahead.  OEMs and auto suppliers are focusing more on lower levels of automation (levels based on NHTSA’s statement of policy) and vehicle-to-vehicle communication that provide for evolutionary steps towards fully autonomous vehicles.  Geeks, on the other hand, are focusing on fully autonomous technology that would provide for a revolutionary leap towards autonomous vehicles.  This difference in approach is highlighted by the urban legend about barbs between Bill Gates and General Motors about how each industry approaches development of technology.  But there is no question that both sides are heading in the same direction even if through different paths. 

Recently, Warner Norcross and Judd attorneys Greg DeGrazia and Matt Mowers presented a webinar discussing this geeks versus gearheads approach to autonomous vehicles and where the technology is headed.  In September, the Intelligent Transport Systems World Congress, being held in Detroit, will address the current state of autonomous vehicles, the future of such technology, and all of the various other issues that surround autonomous vehicles.  On Wednesday, September 10 at 3:30, Warner Norcross is privileged to present a panel discussion at the ITS World Congress on the legislative and legal issues on the horizon for autonomous vehicles.  We hope to see you there.

Washington Endorses Intelligent Transportation Technology

President Obama’s recent call for increased federal spending on smart auto technology—devices that prevent accidents, save lives and reduce traffic congestion—could bode well for automotive suppliers and research and development facilities in Michigan.

The president made his remarks July 15 at the Turner-Fairbank Highway Research Center in McLean, Virginia, where the federal government tests vehicle-to-vehicle and vehicle-to-infrastructure communication technology.

According to government data, vehicle accidents kill more than 33,000 Americans and injure 2.1 million more each year, and congested roads cost the country $120 billion annually in wasted time and fuel. The average car commuter spends one week each year stuck in traffic.  According to the U.S. Department of Transportation, vehicle-to-vehicle and vehicle-to-infrastructure communication technology could ease traffic congestion and dramatically reduce the number of accidents and the cost of commuting.

But, there can be limitations to technological advances that have little to do with innovation, including social, policy, and infrastructure considerations.  Such technology, and the limitations the industry and government face in implementing them into the everyday world, will be discussed at the upcoming Intelligent Transport Systems 21st World Congress that is being held September 7-11, 2014 in Detroit, Michigan, including, in particular, a session hosted by Warner Norcross & Judd on September 10, 2014 at 3:30 p.m.  For more information on Warner Norcross’s session, click here.

How Michigan’s Auto Industry Can Remain King of the Hill

The automotive industry is the foundation of Michigan’s economy and supports roughly one-quarter of all jobs in the state, yet it is treated in some circles like Rodney Dangerfield: It gets no respect.  State officials and business leaders say public, political support is critical to the industry’s future and Michigan’s economy.

That was one of the messages at Tuesday’s I-69 Automotive Suppliers Forum in Owosso. The event, sponsored by Warner Norcross & Judd, provided an update on emerging trends facing automotive suppliers, and was attended by business leaders, automotive suppliers and economic development officials.

Nigel Francis, Senior Automotive Adviser to Governor Rick Snyder and Senior Vice President of the Automotive Industry Office at the Michigan Economic Development Corporation, said Michigan’s resurgent auto industry faces a number of challenges: increased foreign competition, the growth of overseas markets and the trend toward smaller, fuel-efficient and alternative fuel vehicles. But he and other speakers at the forum said one of the industry’s biggest problems is its image among Michigan residents, business leaders and policymakers.

“Collectively we, the state of Michigan and the people of Michigan, have this gold in our hands and we need to be very acutely aware of what we’ve got and focus on it,” Francis said. “That doesn’t mean we shouldn’t try to diversify our economy, but our baseline business in Michigan is the automotive industry. That certainly isn’t clear in Lansing.”

Michigan leads the nation in vehicle assembly, parts production, powertrain assembly, research and development and automotive-related patents. Still, Francis and other presenters at the forum said the auto industry is viewed by too many in Michigan as outdated, irrelevant and expendable. “We are our own worst enemy when it comes to the image of the auto industry,” said Tom Manganello, co-chair of the Automotive Industry Group at Warner Norcross.

In a bid to lure new investment, automotive-related companies and jobs to Michigan, state officials have spent the past two years traveling the world telling the story of our automotive industry to some 20,000 people. Francis and others at the I-69 Automotive Suppliers forum said building public support for the industry is critical to assembling the public-private partnerships needed to ensure that it continues to grow and remains a pillar of Michigan’s economy for decades to come.

Bottom line: “If you believe in the auto industry make sure the people in Lansing know it,” Francis said.

I-69 Automotive Suppliers Forum is Tuesday; Don’t Miss This Informative Event

Warner Norcross & Judd is hosting an I-69 Automotive Suppliers Forum in Owosso on Tuesday, July 15, that will help suppliers connect with government incentive programs, catch up on the latest OEM expectations and develop new contracting strategies.

The free program will run from 5:30-8:00 p.m. at the Comstock Inn Conference Center, 300 E. Main St., Owosso, MI.

Nigel Francis, Senior Automotive Adviser at the Michigan Economic Development Corporation, will give the keynote presentation. He will be followed by panel discussion of Michigan-led initiatives for automotive parts suppliers, the latest information on OEM expectations (including new contracting strategies) and how suppliers can find and secure economic development incentives.

Panelists will include:

  • Glenn Stevens, Vice President of MICHauto and Strategic Development at the Detroit Regional Chamber;
  • Justin Horvath, President and CEO of the Shiawassee Economic Development Partnership; 
  • John Aldrich, General Manager of Machine Tool & Gear;
  • Tom Manganello, Co-Chair of the Automotive Industry Group at Warner Norcross;
  • And Kurt Brauer, Co-Chair of the Economic Incentives Group at Warner Norcross.

The forum is a great opportunity to network with I-69 automotive supply executives and automotive-focused attorneys. It is designed to benefit company presidents, CEOs, CFOs, purchasing directors, sales directors and other senior executives. Automotive suppliers and other manufacturers are welcome to attend.

This is a complimentary event that includes cocktails and hors d’oeuvres, but space is limited. Learn more about the program and register at http://wnj.com/i69Auto2014.

Conflict Minerals and Speech: D.C. Circuit Strikes Down Part of SEC’s Conflict Mineral Rule on First Amendment Grounds

What Congress and the SEC did: In 2010, Congress enacted Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which required the SEC to adopt and issue regulations requiring companies using “conflict minerals” (i.e., tin, tungsten, tantalum and gold, and their derivatives) to investigate and disclose the origin of those minerals.  On November 13, 2013, the SEC issued rules pertaining to disclosure reporting of conflict minerals.  The rules require SEC reporting companies who either manufacture or contract to manufacture products containing conflict minerals that are “necessary to the functionality or production of” such products to comply with the conflict minerals rules, including conducting a “reasonable country of origin” inquiry as to the origin of the conflict minerals, performing additional due diligence (if warranted), and potentially filing a conflict minerals report detailing, among other things, whether the products have “not been found to be ‘DRC conflict free.’”  Companies that file a conflict minerals report with the SEC, are also required to publish the reports on their websites. 

How the courts interpreted it:  The National Association of Manufacturers, along with a number of other plaintiffs, filed a lawsuit in the U.S. District Court for the District of Columbia, challenging the conflict mineral rule under the Administrative Procedures Act, the Securities Exchange Act of 1934, and the First Amendment to the U.S. Constitution.  The district court ruled in favor of the SEC on all claims.  On appeal, the U.S. Court of Appeals for the D.C. Circuit upheld the district court’s rulings under the Administrative Procedures Act and the Exchange Act, but reversed the district court’s ruling on the First Amendment grounds.  The Court of Appeals held that the requirement in the SEC conflict minerals rule to label products as “not being found to be ‘DRC conflict free’” was a violation of the First Amendment to the U.S. Constitution. 

How this affects the industry:  Because the Court of Appeals’ decision did not strike down the disclosure or reporting requirement under the SEC conflict minerals rule (as the decision only applies to the requirement to label products as “not being found to be ‘DRC conflict free’”), SEC reporting companies are still required to comply with the SEC’s conflict minerals rule and publicly disclose all products that are not DRC conflict free.  What companies ARE now able to do is LABEL those products differently – not deceptively, but differently.  However, the Court of Appeals did not provide guidance on what labelling would be acceptable and what would not.

Moreover, the Judge writing the concurring (in part) opinion, reminded us that there is another case currently pending in the court of appeals that is scheduled to be heard en banc in May, 2014, which could arguably affect the standard applied by this court of appeals in rendering its decision.

What does this mean to you? If you are an SEC reporting company that is subject to the SEC’s conflict minerals rule, and even if you aren’t directly subject to the rule but are indirectly impacted by it (such as through your customers), the best advice right now is stay tuned for any changes that may come in the near future.

Always Feel Like Somebody’s Watching You? Hacking Comes to Connected Vehicles

As automakers focus on making vehicles more “connected,” consumers find themselves focusing on the potential negative implications of this new technology.  Consumers are reportedly afraid that the new “connected” technology in vehicles will give hackers a new application for their skills.  These fears are not wholly unsubstantiated, as results of an independent study by the U.S. Department of Transportation suggested that automobiles are susceptible to hacking, which could become more serious as manufacturers add new features to vehicles that will, for example, permit someone to reprogram a vehicle’s engine control system to correct a software problem.

Researchers from the University of Michigan’s Transportation Research Institute (UMTRI) polled 1,600 motorists about connected vehicles.  Survey results reveal that nearly thirty percent of the respondents are “very concerned” about potential security breaches from hackers and data privacy issues, as new technology would allow tracking of vehicle speed and location.  Another thirty-seven percent are reported to be “moderately concerned” about the same issues.  Respondents to this survey also expressed concerns over system failure and performance, as well as drivers relying too much on technology, or being distracted by it.

To address the first category of concerns, automakers such as Daimler and Ford have invested heavily in implementing security systems in their vehicles.  It remains to be seen, how, if at all, the remaining concerns are addressed, or whether consumers will ever find full comfort in connected technology. 

For more information on this topic, click here.

False Advertising Claim Does Not Require Direct Competition: Replacement Parts Manufacturer Can Sue OEM

For years, federal courts have been split on whether a false advertising claim under the Lanham Act required that the plaintiff and defendant be in direct competition.  Last week, the United States Supreme Court answered the question with a simple and straightforward response:  “no.” 

LexMark International manufactures laser printers and toner cartridges.  In order to prevent “remanufacturers” from being able to refurbish used LexMark toner cartridges, LexMark gave customers a discount on new cartridges if they agreed to return empty cartridges to the company.  In addition, LexMark installed a microchip in each cartridge that disabled the empty cartridge unless the chip was replaced by LexMark. 

Static Control made and sold microchips that mimicked Lexmark’s and allowed remanufacturers to refurbish used LexMark toner cartridges that were equipped with the LexMark microchip.  It is important to note that Static Control did not manufacture or remanufacture toner cartridges.  Rather, it simply sold the replacement microchip to remanufacturers, who used them to refurbish and resell the used LexMark cartridges.  Upset at Static Control’s product and the inevitable results, LexMark not only sued Static Control, but went on the offensive in the marketplace.  Specifically, LexMark “sent letters to most of the companies in the toner cartridge remanufacturing business” and advised them that it was illegal to sell the refurbished LexMark cartridges and that it was illegal to use Static Control’s microchip to refurbish those cartridges.  These claims, and others, were the basis of Static Control’s false advertising counterclaim against LexMark.

LexMark filed a motion to dismiss Static Control’s Lanham Act claim, arguing that Static Control lacked standing.  The District Court agreed, stating that Static Control’s injury was “remote” and that Lexmark’s intent was to “dry up spent cartridges at the remanufacturing level” rather than at Static Control’s level.  The Sixth Circuit reversed the dismissal of Static Control’s claim, which led to the appeal to the United States Supreme Court.

The Supreme Court rejected all of the various tests articulated by the litigants and the previous courts for determining whether a party had standing to bring a false advertising claim under the Lanham Act.  Instead, it developed essentially a two-part test:  (a) do the plaintiffs fall within the statute’s “zone of interest”, and (b) are the plaintiffs’ injuries proximately caused by the unlawful conduct?  Using the language of the Lanham Act, the Supreme Court determined that the “zone of interest” for the Lanham Act was “injury to a commercial interest in reputation or sales.”  As for proximate cause, the Supreme Court found that this requirement was met when “deception of consumers causes them to withhold trade from the plaintiff.”  With this test, Static Control clearly had standing to bring a claim against LexMark.

The lesson from all of this?  Be careful what you say out there.  If your actions in the marketplace could proximately cause an injury to another’s “commercial interest in reputation or sales” then your actions may trigger litigation, even if that party is not a competitor.

It’s a Bird… It’s a Wave … No – It’s Just Driver Convenience!

We have all seen use of hand gestures in everyday driving.  More likely than not, those hand gestures communicate some immediate emotional reaction to another driver.  Soon, those hand gestures may not have anything to do with someone else’s driving.  Hand gesture control of vehicle electronics is on its way.

Automakers like Mercedes-Benz and Ford are exploring installing gesture sensing systems into their vehicles; other automakers like Honda and Hyundai have already applied for gesture patents.  And, companies like Microsoft, Apple and Google have likewise filed for related patents and have reportedly purchased gesture-system companies.

With gesture systems, a driver would be able to control certain aspect of the vehicle with body movements.  For example, Ford has already started using gesture technology by allowing a person carrying a key to open the rear hatch for a Ford Escape by wagging a foot under the rear bumper.  Potential uses being considered include gestures to control volume for the car’s audio system and other such functions.  The goal of this technology, like most technology, is to provide an additional level of convenience for drivers.  These systems would likely be used to compliment the already available voice command features. Pretty soon, you’ll be able to turn the volume up and communicate with your fellow driver all in one wave!

For more information on this up and coming technology, please click here.

Watch Out, Suppliers! Counterfeiting Is Not Only For the Fashion Industry Anymore.

You may have heard of counterfeit purses, watches, and other designer products.  But counterfeit products have infiltrated industries well-beyond the fashion market.  Counterfeits can now be found in all industry sectors, from cosmetics and pharmaceuticals to automotive. 

The very nature of counterfeits makes them difficult to detect.  A consumer may drive to his or her local auto parts store, or with the click of a mouse online, unknowingly purchase counterfeit parts like brake pads, bearings or airbags.  Such products, while bearing the supplier’s trademark, are inferior in quality and may pose a risk to the public’s health and safety.  Counterfeits can also take a major financial toll on automotive suppliers.  In 1997, the Federal Trade Commission estimated that counterfeiting in automotive parts cost automotive suppliers $12 billion annually, including $3 billion annually in the United States alone. 

Solving the counterfeit problem may seem like a daunting task for any single auto supplier.  But, if each supplier considers the following steps, such efforts may help to curb the counterfeiting epidemic plaguing our nation:

 1.  Educate your employees on the value of your intellectual property and the goodwill associated with it;

2.  Meet with your local United States Attorney and let him or her know of the impact counterfeiting has on your business;

3.  If you find that counterfeit products are being distributed on the internet, notify the domain owner, website advertisers, and carriers;

4.  File a civil action to recoup the damages your business has suffered;

5.  Consider publishing positive enforcement actions or issuing a press release to inform the public that you value your intellectual property and will not tolerate counterfeiting; and

6.  Consider creating product labels using new technology that is difficult to replicate.

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