In this presentation, members of Quarles & Brady's Autonomous Vehicles (AV) task force will discuss the impact that this new technology is having on the auto industry and beyond. Topics will include: legislative and regulatory updates, joint development agreements associated with AV technology, hot IP issues in the AV space, a look at testing grounds across the country, insurance insights and early litigation trends.

1. Business Law Training:
Who's Driving This? Overview & Impact
of Autonomous & Connected Vehicles
July 26, 2018

2. Agenda
•State and Federal Regulatory and Legislative Update
•Autonomous Vehicle Testing
•Joint Development Agreements in AV Technology Industry
•IP Issues in the AV Space
•Coming Distribution Issues
•Litigation Update
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3. State and Federal Regulatory and
Legislative Update
Kevin M. Long

4. Historical Regulatory and Legislative Roles
• Federal Role – NHTSA/US DOT sets and enforces safety
performance standards for motor vehicles and motor vehicle
equipment, such as regulating fuel economy standards
• State Role – Licensing drivers, rules of the road
• Overlapping roles -NHTSA conducts local highway safety
programs; FHA administers federal highway programs in
partnership with state and local agencies, to promote highway
safety and technological excellence
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5. In the realm of autonomous vehicles
•The Roles could be a bit more clear
•States passing laws and regulations quickly
• 27 States have enacted some form of AV legislation
• Seven states have issued executive orders
• Three states have done both
• Many states trying to "lead the pack" on these issues
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6. Taking it to the Next Level!

7. Automated Driving Systems 2.0
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8. Legislative and Regulatory Landscape
•NHTSA Voluntary Guidance Regarding ADS Safety Elements
• System Safety
• Operational Design Domain
• Object and Event Detection and Response
• Fallback (Minimum Risk Condition)
• Validation Methods
• Human Machine Interface
• Vehicle Cybersecurity
• Crashworthiness
• Post-Crash ADS Behavior
• Data Recording
• Consumer Education and Training
• Federal, State and Local Laws
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9. Feedback Solicited in Listening Sessions and Written
Requests
• NHTSA Requests Comments on ADS 2.0
• March 1, 2018 Public Listening Session
• Requests for Information on Integration of AD into the Highway Transportation System
• March 6, 2018 USDOT/NHTSA Public Meeting on eliminating ADS Barriers ("How do we
move quickly?" ... Theme is "We are Listening")
• Federal Transit Administration addresses AV bus technology research and barriers
• Federal High Administration addresses infrastructure technologies for the safe
integration of AVs
• March 16, 2018 meeting on Research Portfolios
• April 3-4, 2018 Stakeholder Meeting at USDOT: FMVSS considerations for ADS
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10. Six Basic Principles of DOT
1. Safety remains the top priority.
2. Approach will be flexible and tech neutral, not top down, command and control. We are not in the
business of picking winners and losers. The market will help determine the most effective solutions.
3. When regulations are needed, they will be as non-prescriptive and performance–based as possible. In
regulatory actions and policy decisions, we will not automatically assume that the driver of a vehicle is
a human.
4. Will work with States and other authorities to avoid a patchwork approach that could inhibit innovation
and make it more difficult for automated vehicles to cross state lines.
5. Will provide stakeholders with guidance, best practices, pilot programs and other assistance to facilitate
the safe integration of AV into our transportation system. Will prepare for complement technologies
that enhance the benefits of automation such as V2V and V2I communications.
6. Recognizes that there will always be the need for AV to operate side-by side with traditional vehicles, in
both rural and urban areas. We will not assume universal implementation of these technologies.
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11. Legislative Efforts
Federal Legislation has not been passed
• SELF-DRIVE Act (House) - passed
• AV-START Act (Senate) passed Commerce Committee, but has not been called for a vote
• Acts do not deal with Commercial Trucks
• Acts do not deal with Data Security
• Act (AV Start) deals with the MVSS by directing Volpe Center to propose elimination of standards that hurdles to
implementation of driverless cars. Once that is done USDOT has one year to amend regs or Volpe report is
implemented.
• Expands the number of "exemptions" to federal safety standards that USDOT can issue for self-driving cars
• Opponents cite the following concerns:
• Pre-emption of State safety regulations even if federal standards aren't implemented
• Act does not ensure the same level of safety as the current standards
• Act does not address cybersecurity and privacy protection
State Legislation
• Varies
• Look at National Conference of State Legislators website for helpful summary
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12. Legislative Efforts
State Law Examples:
• Arizona: Governor signed an executive order directing various agencies to “undertake any
necessary steps to support the testing and operation of self-driving vehicles on public roads
within Arizona.” He also ordered the enabling of pilot programs at selected universities and
developed rules to be followed by the programs. The order established a Self-Driving Vehicle
Oversight Committee within the governor’s office. In 2018, Governor updated the order to
keep pace with emerging technology, including advancements toward fully autonomous
vehicles, as well as requiring all automated driving systems to be in compliance with all
federal and state safety standards.
• Wisconsin: Bill defines "platoons" and creates an exception for platoons to the traffic law
requiring the operator of a motor truck with a gross weight of more than 10,000 pounds to
maintain a distance of not less than 500 feet behind the vehicle immediately preceding.
• Executive Order: Created a steering Committee who issued final report June 28, 2018.
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13. Legislative Efforts
State Law Examples (cont.):
• Michigan: Allows for autonomous vehicles under certain conditions.
• Defines automated driving system. Allows for the creation of mobility research centers where
automated technology can be tested. Provides immunity for automated technology
manufacturers when modifications are made without the manufacturer's consent.
• Exempts mechanics and repair shops from liability on fixing automated vehicles.
• Defines terms, expressly permits testing of automated vehicles by certain parties under certain
conditions, defines operator, addresses liability of the original manufacturer of a vehicle on which
a third party has installed an automated system.
• Limits liability of vehicle manufacturer or upfitter for damages in a product liability suit resulting
from modifications made by a third party to an automated vehicle or automated vehicle
technology under certain circumstances.
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14. Autonomous Vehicle Testing
Mark T. Ehrmann

15. Designated Sites
On January 19, 2017, the US Department of Transportation designated 10
sites as Autonomous Vehicle Proving Grounds to encourage testing of new
technologies
• Over 60 applicants
• Different types of facilities
• Designed to "...form a Community of Practice around site development
and testing"
• Goal to develop best practices
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16. The testing centers are
1
1. City of Pittsburgh and the Thomas D. Larson Pennsylvania Transportation Institute
2. Texas AV Proving Grounds Partnership
3. U.S. Army Aberdeen Test Center (Maryland)
4. American Center for Mobility (ACM) at Willow Run (Michigan)
5. Contra Costa Transportation Authority (CCTA) & GoMentum Station (California)
6. San Diego Association of Governments
7. Iowa City Area Development Group
8. University of Wisconsin-Madison
9. Central Florida Automated Vehicle Partners
10. North Carolina Turnpike Authority
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1 United States Department of Transportation
cms.dot.gov/briefing-room/dot/1717

17. Other testing grounds 2
• Arizona
• Fiat – Chrysler
• Ford
• GM
• Toyota
• Florida
• Michigan
• Minnesota
• Nevada
• Ohio
• South Carolina
• Texas
• Virginia
• Canada
172 www.centralfloridavpg.com/av-testing-grounds/

18. What is being tested and studied?
• Reliability
• Reaction to unknown events
• Effect of a variety of conditions
• Vehicle performance
• Fuel economy and efficiency
• Best driving practices
• Environmental
• Effect on other transportation
• Accessibility
• Data
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19. How will the vehicles work?
193 www.wiscav.org

20. Example of testing facility Mcity
4
• Located in Ann Arbor, Michigan
• Public/private partnership
• University of Michigan – land and research (engineering, law, energy and business)
• Industries
• Automakers – Ford, GM, Honda and Toyota
• Insurance companies – State Farm
• Technology companies – Aptiv, Denso, Econolite, Intel, LG and Verizon
• Other partners – suppliers, consultants and service companies
• Government
• Local
• State
• Federal
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4 www.mcity.umich.edu

21. Mcity Map
5
21
5 www.mcity.umich.edu

22. What questions will be tested in the future?
6
• How to deal with chaos - unpredictable events and conditions?
• Will the improvements in machine learning continue to allow a
faster adoption of the technology?
• Can the "handoff" process be improved – eliminated?
• Will the manufacturers be able to produce and operate cars on
an affordable and large scale basis?
• How will ethical questions be addressed – the "Trolley Problem"?
22
6 See "The Wired Guide to Self-Driving Cars" - Wired Magazine, February 1, 2018 - www.wired.com

23. Joint Development Agreements in
AV Technology Industry
Stephen J. Gardner

24. Greater complexity -> More collaboration
•Autonomous driving capability alone may require:
• Radar, Lidar, Optical
• Image recognition and artificial intelligence
• GPS and route mapping
• Driver interface
•Driving autonomy allows for connected-car features:
• Entertainment
• Data collection/mining
• Office-like solutions
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25. Ride-Share and Fleet Operations
•Blurring the lines between customer and competitor
• GM's Maven app; also invested in Lyft
• Volvo collaborations with Uber on XC-90
• Lexus and FCA supplying vehicles for Waymo
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26. Ride-Share and Fleet Operations
•Established automotive supply chain companies
collaborating with tech companies
•Establishing technology standards
• Interoperability
• Driving safety
• Cybersecurity
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27. How to Play Fair and Avoid Being Left Out
•Understand collaborating and technology sharing is
necessary and inevitable
• Too rigid on guarding technology  missed opportunities or IP
leak, not enough data for QA testing
• Too lax  loss of competitive advantage and value proposition
•Models for success
• Joint Development and Collaboration Agreements
• Joint Ventures
• APIs and Open Source Sharing Models
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28. How to Play Fair and Avoid Being Left Out
•Joint Development Agreements
• Parse and identify background IP; impose confidentiality and
use restrictions
• May always still be some concern over loss of control...
• Coda Dev. v. Goodyear Tire & Rubber Co., No. 5:15‐CV‐1572, 2016 WL 5463058 (N.D. Ohio Sept.
29, 2016)
• Terms governing ownership of new IP
• Lay out who can use background IP and new IP in the future
•Joint Ventures
• More complex to initiate
• Can simplify IP ownership questions 28

29. How to Play Fair and Avoid Being Left Out
• Open Sharing Models
• Create a plan for what will be shared with other collaborators and co-
developers
• Tailor the shared software/resource to maximize balance between
sharing/collaboration and protection
• APIs and other limited access models
• Terms and conditions of use
• Ford example:
• Sync AppLink platform to open source
• Internal "open source"-light style sharing among divisions and suppliers
29

30. Takeaways
•Plan ahead for collaborations
• Be proactive and intentional
• Speed
• Consistency
• Maximum protection
• Avoid reactionary, ad hoc approaches to technology
collaborations
•Consider risks and benefits of giving away some
controlled access to your technology
•Always read the fine print! 30

31. IP Issues in the AV Space
Nicholas P. Schmidbauer

32. Types of IP That Will Be Affected
•Utility patents
• Expect to see an increase of utility application filings directed
to navigation systems and routing
• May be issues protecting software and algorithms
•Industrial designs
• Graphical user interfaces that receive and provide feedback
will be more prevalent in autonomous vehicles
• The way that users interact with the vehicle will change as we
move from "no automation" to "full automation"
32

33. Utility Patents
• Utility patent filings with "autonomous vehicle" in disclosure have
increased from 27 in 1997 to 2812 in 2017
33

34. Utility Patents
• Top U.S. utility filers with applications directed to "autonomous
vehicle(s)"
34

35. Utility Patents
•Three of top four Assignees are traditional automotive
companies
35

36. Utility Patents
•Top U.S. utility filers with applications directed to
"navigation systems" or "routing"
36

37. Utility Patents
•None of top assignees are traditional automotive players
37

38. Utility Patents – Patentability Issues
•The law surrounding utility patents directed to navigation
systems and routing patents continues to develop
•District courts and the Patent Trial and Appeal Board are
continuing to evaluate whether these utility patents are
patentable under §101
•The threshold patentability inquiry for these patents
became an issue after the 2014 Supreme Court decision in
Alice Corp. v. CLS Bank International
38

39. Utility Patents – Patentability Issues
39
•In two 2016 cases, Rothschild Location Technologies LLC v.
Geotab USA Inc. et al., and Peschke Map Technologies LLC
v. Rouse Properties Inc., district courts in Texas and
Virginia, respectively, found navigation-based patents
invalid under Alice

40. Utility Patents – Standard Essential Patents
•Technology claimed by standard-essential patents
directed to telecom-related standards, such as Wi-Fi, 3G,
and LTE/4G, are now being incorporated into vehicles for
communication
•These patents are held by mostly telecom companies,
which are requesting that licenses be obtained by
traditionally automotive industry players, which are
mostly original equipment manufacturers (OEMs)
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41. Industrial Designs
41

42. Industrial Designs
•Design patents, which protect the ornamental design of
an article of manufacture, can be used to protect how any
aspect of the vehicle looks, from the cup holder to icons
on a display screen
42

43. Industrial Designs
•Car manufacturers will continue to obtain design patents
directed to traditional parts of a vehicle, i.e., hoods,
fenders, grills, bumpers, headlights, spoilers, and valve
assemblies
•However, increased attention may be paid to GUI-based
design patents in light of the recent Apple v. Samsung
case, where Samsung's infringement of Apple's GUI-based
design patent led to >$500 million in damages
43

44. Industrial Designs
•Between January 1, 2017 and December 31, 2017, 1,827
design patents issued in the U.S. directed to GUIs
•The number of design patent applications directed to
Graphical User Interfaces (GUIs) have increased from 40
filed applications in 2006 to 2580 filed applications in
2016
44

45. Industrial Designs
•Some traditional car manufacturers have begun to
leverage GUI design patents
45

46. Industrial Designs
•Creative filing strategies can be leveraged to protect the
appearance of display screens, including how a display
screen may be animated when engaging with a user
46

47. Autonomous Vehicles: How Will
They Be Sold?
Randall L. Oyler

48. Autonomous Vehicles: How Will They Be Sold?
 Today, new vehicles are sold through well-established channels of
distribution
o Dealer Sales: Sales to retail consumers through dealers
 80-85% of vehicles sales
 Full dealer participation
 Significant revenue stream for dealers (vehicle and parts mark-ups; manufacturer incentives)
o Dealer Sales: Sales to fleet operators (for fleet use) through dealers
 15-20% of vehicle sales
 Nominal dealer participation
 Minimal revenue stream for dealers
o Direct Sales: Sales directly to retail customers
 Very low percentage of sales
 No dealer participation
 No revenue stream for dealers
 Highly contested
48

49. Autonomous Vehicles: How Will They Be Sold?
 In current system, the role of the dealer is...
 Paramount
 Protected by comprehensive state laws
49

50. Autonomous Vehicles: How Will They Be Sold?
 But...this system is already coming under stress
o Consumers want to buy vehicles...
o The same way they buy other products
 Where they are located (their homes; online)
 Through bargaining processes they control (clear established prices)
 On terms they want (subscriptions; non-traditional ownership methods)
o Consumers also want to use vehicles, but not necessarily own them...
o Consumers want mobility, not necessarily cars
 Ride sharing services (Uber; Lyft)
 Car sharing (Zipcar)
 Vehicle subscriptions
50

51. Autonomous Vehicles: How Will They Be Sold?
 As a result, tensions (and innovation) currently exist in the
distribution chain
o Manufacturers want to make vehicles and mobility available to
consumers in new ways...
 Online sales
 Fixed prices
 Subscription services; partial ownership
o Dealers want innovation, as well, but would prefer it occur at the
dealership level
51

52. Autonomous Vehicles: How Will They Be Sold?
 Enter "Autonomous Vehicles"
o They will arrive in convergence with other new technologies...
 Vehicle connectivity
 Vehicle electrification
 Vehicle service through over-the-air updates
o They will appear in an increasingly digital world
o They will arrive when "sharing services" have become commonplace
o And they will offer something fundamentally different than a
traditional vehicle
 A mobility method, rather than a transportation device?
 A service, rather than a thing?
52

53. Autonomous Vehicles: How Will They Be Sold?
 So . . . will there really be a need for a consumer to own an
"autonomous vehicle"?
o Why own a vehicle when you can . . .
 Get on your phone,
 Locate a fully-charged autonomous vehicle already in your neighborhood,
 Use the vehicle to "mobilize" you to where you want to be,
 And not pay for any vehicle upkeep or downtime in your garage?
53

54. Autonomous Vehicles: How Will They Be Sold?
 What does this mean for how vehicles will be distributed and sold?
o Vehicles will still need to be owned or leased . . .
o But will the sales and leases be made to fleet companies rather than to consumers?
 If so, what would this mean for the role of the traditional dealer?
o Commercially, will dealers adapt to new business models to preserve their relevance and
profitability, and become . . .
 Mobility hubs?
 Upfitters?
 Fleet operators?
 Providers of services, rather than sellers of things?
o Legally, will dealers seek statutory protections to preserve their current role in the
distribution chain . . .?
 Amendments to state laws?
54

55. Autonomous Vehicles: How Will They Be Sold?
 And, what would this ultimately mean for consumers?
oWill they be able to obtain mobility in ways they obtain other
services and products?
oOr will they find themselves in a more restrictive system. . .
 That limits how they obtain mobility?
 That imposes costs on them to preserve the profitability of past
distribution methods?
55

56. Autonomous Vehicles: How Will They Be Sold?
 Some predictions . . . ?
o Manufacturers simultaneously will pursue different approaches for selling
autonomous vehicles
 Sales to autonomous vehicle technology providers, who then will operate their own
fleets or resell to fleet operators
 Sales to fleet providers (existing and new)
 Sales to consumers through new methods and "ownership" forms (with varying
degrees of dealer involvement)
 Sales to consumers through existing dealer networks
o Many dealers will begin experimenting with new business models
 Local partnerships with national fleet providers
 Profitability based on service, rather than sales
 Becoming holistic customer mobility centers
56

57. Autonomous Vehicles: How Will They Be Sold?
o Other dealers will fall behind due to a failure to adapt or innovate
commercially
o Legal battles will occur
 In Courts: lawsuits seeking to determine rights under existing state dealer laws
 In State Legislatures: legislate efforts to preserve status quo in distribution
chain
o Process will begin gradually . . .
 Because millions of non-autonomous vehicles will remain in service for years to
come
 But could speed up unexpectedly and dramatically, as forces of disruption
converge
57

58. Litigation Update
Kevin M. Long

59. © 2018 Quarles & Brady LLP - This document provides information of a general nature. None of the information contained
herein is intended as legal advice or opinion relative to specific matters, facts, situations or issues. Additional facts and
information or future developments may affect the subjects addressed in this document. You should consult with a lawyer about
your particular circumstances before acting on any of this information because it may not be applicable to you or your situation.
Questions?
59

60. © 2018 Quarles & Brady LLP - This document provides information of a general nature. None of the information contained
herein is intended as legal advice or opinion relative to specific matters, facts, situations or issues. Additional facts and
information or future developments may affect the subjects addressed in this document. You should consult with a lawyer about
your particular circumstances before acting on any of this information because it may not be applicable to you or your situation.
Autonomous & Connected Vehicles Team
60
Kevin M. Long
Milwaukee
kevin.long@quarles.com
Tel: (414) 277-5163
Mark T. Ehrmann
Madison
mark.ehrmann@quarles.com
Tel: (608) 283-2479
Stephen J. Gardner
Madison
stephen.gardner@quarles.com
Tel: (608) 283-2476
Nicholas P. Schmidbauer
Chicago
nick.schmidbauer@quarles.com
Tel: (312) 715-5072
Edwin J. Broecker
Indianapolis
ed.broecker@quarles.com
Tel: (317) 399-2828
Heather L. Buchta
Phoenix
heather.butchta@quarles.com
Tel: (602) 229-5228
David T. Cellitti
Tampa & Chicago
david.cellitti@quarles.com
Tel: (813) 384-6719
Lucy R. Dollens
Indianapolis
lucy.dollens@quarles.com
Tel: (317) 399-2815
Linda C. Emery
Milwaukee
linda.emery@quarles.com
Tel: (414) 277-3038
Randall L. Oyler
Chicago
randall.oyler@quarles.com
Tel: (312) 715-5070
Raymond D. Jamieson
Milwaukee
raymond.jamieson@quarles.com
Tel: (414) 277 - 5353
Joy N. Johns
Chicago
joy.johns@quarles.com
Tel: (312) 715-5118
Brandon M. Krajewski
Milwaukee
brandon.krajewski@quarles.com
Tel: (414) 277-5783
Walter J. Skipper
Milwaukee
walt.skipper@quarles.com
Tel: (414) 277-5119
Jeffrey K. Spoerk
Milwaukee
jeff.spoerk@quarles.com
Tel: (414) 277-5337
Jennie Dedolph
Senior Legal Research
Specialist
Milwaukee
Kyle Williams
Legal Project Assistant
Milwaukee
Larah K. Tannenbaum
Chicago
larah.tannenbaum@quarles.com
Tel: (312) 715-5107
Justin D. DeAngelis
Chicago
justin.deangelis@quarles.com
Tel: (312) 715-5168