November 28, 2009

Ford and Geely closer to agree on Volvo IPR

The talks between the Chinese car manufacturer Geely and Ford seems to have gotten a step closer to actually closing the deal on Volvo Cars. According to a press release on November 27 the key issue about how and in what form the technology is to be part of the transfer has been solved.

For acquired Volvo Cars from the Swedish automotive company Volvo some 10 years ago. Volvo AB still manufactures trucks and heavy vehicles under the same brand name.

Ford has for some time had negotiations with the Chinese car manufacturer Geely about selling Volvo, a deal estimated to be worth some USD 2 billion. Even though the brand itself probably adds up to a great deal of that price the actual technology to build up the cars have been one of the key issues in the negotiations. For one, Volvo has been tightly integrated in to Ford and as such most likely shared technology, and IP, across both companies. This has been an issue in the negotiations, since Chinese companies are not as highly regarded when it comes to respecting IP. The current integration in to Ford has therefore created some issues, now when it is assumed Volvo will operate independently as an own entity.

The press release yesterday stated that a solution might be close at hand.

"Volvo will retain ownership over key technologies and IP that it has developed and will retain access to all Ford IP that Volvo plans to use to implement its business plan," and that by owning Volvo Geely would get "access to a significant suite of IP, including Volvo's safety and environmental IP."According to Reuters.

I think this is interesting for two reasons.

1) The automotive industry is to a large extent driven by innovations and the IP portfolios and teams of engineers are key assets that Chinese companies have had a hard time keeping up with. By acquiring Volvo Geely will get access to many interesting technologies, possibly both to be deployed in vehicles with the Volvo brand but also in other brands.

2) That the IP owned bu Volvo will come with the purchase might not come as a total surprise and will possibly be quite easy to handle in the long run. The issue which to me is a bit less clear is that Volvo will get access to IP for the planned implementation of the business plan. What is included, for how long and to what extent. They will possibly/hopefully define it in a better way in the final contract, though one can not be too sure.

I recollect the now settled dispute between eBay and Joltid around the fundamental technology for Skype. It turned out that it was not included in the purchase of the company. I might not see as fundamental technology retention in this case, but there might be some core IP kept in Ford's control to surface in a couple of years time when the cars not planned in the business plan are a reality. Perhaps impeding Volvo and it's owner in efforts challenging established US companies (read Ford).

Johan Örneblad
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