Part II: Cost Estimation
Analysis and cost estimation of GE’s patent portfolio suggests a bubble… but will it break?
Part I of this article analyzed GE’s industry-leading wind patent portfolio.
Part II asks whether the pace of growth of GE’s patent portfolio is sustainable, since each application has a certain cost associated with it and the revenue generated from licensing must exist in order to justify the continued scope of the portfolio.
The spike in GE’s patent filings starting in 2003 after the Enron Wind acquisition and again in 2008 with a focus on future licensing is reminiscent of the huge increase in the pace of filings from Aloys Wobben, Chairman of Enercon GmbH, in 2002 – 2003 after the settlement of the International Trade Commission (ITC) matter in which Kenetech/Zond/Enron Wind/GE effectively denied Enercon entry into the US market.
The portfolio of Enercon patent filings proved to be unsustainable as is evidenced by the sharp drop-off in their number of filings per annum in the past few years, in spite of new innovation being developed on their liquid cooled generator.
Based on a patent budget calculator which we developed to assess the year-over-year costs for cultivation and maintenance of a patent portfolio, we have been able to determine the approximate costs for maintaining their portfolio. Certain assumptions had to be made in this analysis, so there is likely some variability in the cost, however we believe it to be accurate within an order of magnitude.
Even though the patent landscape we have analyzed covered only the US, we know GE uses the US as their primary priority filing locale and their foreign filing strategy can be inferred from a look at the family members of their US patents.
Assumptions are as follows:
- The majority of their filings are US, CN, and EP.
- Filings which were categorized as L or M will follow this protocol for cost calculation.
- Important inventions get filed in a broader scope of countries, specifically US, CN, EP (note: sometimes DK and DE are used explicitly instead of an EP filing, especially if the invention originated from their German R&D/Engineering center), IN, MX, JP, KR, CA, BR and AU.
- Filings which were categorized as M/H or H will follow this protocol for cost calculation.
- Filings per annum used in the calculation from 2001 – 2010 were actual numbers.
- Filings prior to 2001 were not very significant and were excluded from the calculation for simplicity.
- Filings from 2010+ were assumed at the same average rate per annum from 2008 – 2010 for filings out until 2020.
The results of this calculation based on the scope of GE’s portfolio and following the protocol outlined above shows that the cost is quite substantial particularly in the out years. In 2020 alone they will spend US$31M on prosecuting and maintaining their portfolio.
Continued turbine sales as well as licensing will clearly be necessary to support that size of portfolio.
With the expiration of a core patent in February of this year, US5083039 (‘039), which covered field oriented control of an induction generator as well as dynamic VAR control at the turbine, a new suite of technologies has emerged technologically, but not necessarily on the assertive license front.
GE’s recent acquisition of Converteam also adds to their portfolio of full power conversion and permanent magnet generator technology. This architecture is quickly becoming the most pervasively deployed platform amongst the wind turbine supply base.
It remains to be seen if this technology architecture will be part of the next wave of assertion and licensing. If history has anything to say, then you can bet on future licensing.
However, the scope of those efforts may be affected by the outcome of the ongoing Mitsubishi litigation. If GE is successful in upholding the validity of their patents against Mitsubishi then one will presume they will be emboldened to pursue licenses on the new technology platform.
If Mitsubishi prevails, then we could see another round of lawsuits from the licensees of ‘039 and the other DFIG related technologies demanding their royalty payments back. This could leave GE gun-shy to broadly license the way they did with ‘039 and other related patents.
Whatever the future holds, GE now holds a substantial lead while the rest of the industry struggles to catch up.
Philip Totaro is the Principal at Totaro & Associates, a consulting firm focused on innovation strategy, competitive intelligence, product development and patent search.
To get a deeper look into the patent landscape of the horizontal axis, utility-scale wind industry please visit www.totaro-associates.com and ask about Wind Patent Watch™, a subscription service providing a weekly digest and analysis of the published patents and applications from General Electric and the rest of the industry.