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Faced with the collision of the automotive and technology industries, many technology companies find themselves in an exciting but daunting position: they have to contract with established automakers. These contracts can have long-term effects on how the technology is built, on how risk is shared between the technology company and the parts manufacturer, and on the owner of the data collected by the end product .
Contractual choices that seem to give an inch can, if poorly managed, give a mile and can even condemn the most promising unicorn. Here are some strategic tips for companies entering into negotiations with established automakers:
Prepare when things go wrong
Outsourcing is about risk – hearing in advance about what will happen if all goes well, if everything goes wrong, or if the results lie somewhere in between. For technology companies that have contracts with car manufacturers, the final calculation is no different. Both industries, however, have developed widely opposing contractual defects with respect to liability and the obligation to determine who is to indemnify who in respect of a composite product.
Traditionally, car manufacturers were able to obtain indemnity commitments from component suppliers for damage traceable, in whole or in part, to the product generated by the supplier used in a composite vehicle. . However, technology manufacturers generally attribute this responsibility in the opposite direction. In the context of the software license, for example, liability is often clearly stated, which obliges the licensee to agree that the licensee can not be held liable for damages resulting from the use of its software. .
In terms of contractual strategy, this has a number of consequences for the technology company. First, the company should expect this discrepancy and prepare for it. This means paying particular attention to the liability and compensation provisions that the car manufacturer can include in a draft agreement; similarly, the technology company should expect the automaker to show some resistance to the language it inserts, completely relinquishing supplier responsibility or compensation obligations from the outset of the negotiations.
Perhaps most importantly, the technology company should develop a sufficiently nuanced language of accountability and compensation to be applied. Do not rely on traditional liability, indemnification and warranty provisions for software. They are unlikely to be applied in a context where a system failure could result in loss of life. Any agreement under which a technology company provides software or equipment for use in a pbadenger vehicle meets this criterion whether the vehicle is autonomous or not. That said, technology companies operating in the autonomous vehicle space must be extremely cautious in formulating this language, given society's extreme dislike of harm considered "caused" even in part, by AI.
Prepare when everything is fine
It is also imperative to allocate the risks correctly when everything goes well and that the value of a composite product and / or its products (especially data) increases.
A significant part of the value of a composite vehicle equipped with technologies will be in the badociated IP address. Car manufacturers, although very sophisticated, have always been much less focused on intellectual property and, when they are owned, have "played well" with cross-licensing. Technology firms, on the other hand, knowingly demonstrate the bulk of their value in their intellectual property portfolios (purchased, generated and protected) and, for this reason, are generally sophisticated when it comes to protect those rights.
This offers high-tech companies an opportunity when establishing the relationship: give the builder the authority over all the material it brings to (or develop) during the relationship, while ensuring ownership of the relationship. intellectual property badociated with "Brain" top margin electronic components) and system-oriented IP. Technology companies should use their knowledge advantage in this area to protect intellectual property rights brought and developed during the relationship.
In addition, high-tech companies should pay particular attention to the negotiation of all the ownership provisions of the "output" of the composite vehicle, ie all data generated. Vehicles become connected devices that serve as platforms for trade and data and, for audiovisual vehicles seeking true L5 autonomy, data generation will be important. When negotiating arrangements with manufacturers, technology companies should therefore: (1) protect themselves from the provisions implicitly or explicitly attributing ownership of the data to third parties, (2) add provisions protecting against such attribution in the future and, if possible, (3) declare that they own future data. Note that the data provisions are often implicit and can lead to an agreement and its supporting documents. So be sure to negotiate all the relevant provisions to your satisfaction.
As the automotive and technology industries continue to converge, not only new products, but new contract standards are being created to govern the resulting relationships. The advice here covers some strategies for handling them. Although technology companies are well placed to successfully engage automakers, they must be careful to be protected if things go wrong and, in the same way, if everything goes well.
Philippa J. Balestrieri is a lawyer with San Francisco-based Holland & Knight LLP, an international law firm known for her expertise in the transportation and technology sectors and their intersections.
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