As the sales of wind turbines increase, it is likely that the disputes between suppliers and purchasers will also increase. Wind turbines encompass a variety of tangible and intangible components, including the software necessary for operations and maintenance.
One contractual issue that turbine suppliers and purchasers may dispute is what the supplier believes is proprietary information, but the purchaser and now owner, believes is necessary to the turbine operation and maintenance and to protect its investment after the warranty period expires.
After the sale of a wind turbine, but during the warranty period, the supplier is responsible for ensuring the turbine is operating successfully and the purchaser of a wind turbine is often provided access to the wind turbine data necessary for maintenance and monitoring of systems.
This includes the software licenses utilized by the supplier for remote monitoring, which is typically referred to as the Supervisory Control And Data Acquisition (“SCADA”) system. Consequently, when the warranty period expires, and the supplier withholds the SCADA information, the purchaser is left in a bind.
Following the expiration of a wind turbine’s warranty period, the purchaser of the turbine should be granted unrestricted and full access to the SCADA system, software, and access codes for automated control capabilities in order to effectively and efficiently perform on-going maintenance and monitoring, to resolve and restore turbine operations following fault conditions to ensure wind turbines meet investment objectives, and comply with permits and grid control requirements.
Generally, SCADA systems allow remote access to a device to monitor and maintain the device. For example, the OnStar® system used by General Motors (“GM”) in its vehicles would likely be considered a SCADA system. For a monthly fee, OnStar® remotely monitors and accesses the vehicle, and includes features such as “automatic crash response,” where the system automatically sends information to a remote center in the event of a collision; vehicle diagnostic and maintenance information; and the ability to remotely shut down a stolen vehicle.
Now imagine you purchased a GM vehicle equipped with OnStar®. Assume the information provided by OnStar® was necessary to the vehicle’s operation and maintenance. You enjoyed all of the features of OnStar®, but after the OnStar® warranty expired, you wanted to switch to another (fictional) company, MonITor.
However, GM was unwilling to provide you, or MonITor, the information necessary to access the vehicle’s software system. And, without the access codes to the software, you were unable to use the vehicle. In other words, without OnStar®, you did not have a vehicle, but merely a nice place to sit. However, GM was willing to extend your existing OnStar® contract with them, for a fee of course.
Currently, some wind turbine owners face a similar situation. In these cases, the wind turbine purchaser is comparable to the vehicle owner. During the warranty period, the purchaser is (1) granted a limited right to use the software supplied; (2) provided access to the turbine data necessary for maintaining and monitoring systems; and (3) provided access to the codes and software licenses utilized by the supplier for performing services such as remote monitoring and reports.
If the turbine is not operating, or not operating efficiently, the purchaser needs access to the SCADA system to restore the turbine to peak operating conditions, and to ensure it’s meeting the regulatory requirements for operating the turbine or the owner will lose money on its investment.
Some SCADA systems for wind turbines are protected by patents. For example, GE owns U.S. Patent 7,013,203, which claims “[a] supervisory command and data acquisition (SCADA) system to manage a wind farm.”
SCADA system software should be protected under patent law and doctrine because the combination of patent protection and patent exhaustion would balance the rights of turbine suppliers and owners.
As stated in the Supreme Court’s Quanta Computer opinion, the patent exhaustion doctrine, “provides the initial authorized sale of a patented item terminates all patent rights to that item.”
In Quanta, the Court held that the doctrine of patent exhaustion applies to the authorized sale of a components that “substantially embody” a method patent and reaffirmed that “the right to vend is exhausted by a single, unconditional sale, the article sold being thereby carried outside the monopoly of the patent law and rendered free of every restriction which the vendor may attempt to put on it.”
This situation, in which the purchaser of a wind turbine was merely granted a non-exclusive license to use copyrighted SCADA software, is comparable to the Quanta case. First, for the sale of the wind turbine itself, the patent exhaustion doctrine “provides that the initial authorized sale of a patented item terminates all patent rights to that item.”
The sales of wind turbines as tangible products that incorporated method patents, such as the SCADA software, should exhaust the wind turbine supplier’s patent rights (or copyright) because the purchaser cannot practice the wind turbine, nor does it function at all, until the wind turbines are combined with a computer system. Thus, the wind turbines substantially embodied the SCADA system software because they had no reasonable noninfringing use and included all of the inventive aspects of the patented methods.
Secondly, the SCADA license should be comparable to the license of a method patent and patent exhaustion should apply, even if the software is copyrighted. Here, the SCADA system software is comparable to a method patent, and patent holders could avoid exhaustion by using copyrights, when they should use patents to protect the SCADA software.
Thus, the patent exhaustion doctrine should apply, and the sale of the software in the presumably patented wind turbine should exhaust the rights to the software, even if it is protected under copyright law.
The wind turbine supplier certainly has the right to protect proprietary information, but it is the purchaser who has the most to lose. The purchaser has a substantial investment in the tangible wind turbine itself, and needs the ability to continue operating and maintaining the turbine after the warranty period expires. Without access to the necessary information, the pruchaser might be unjustly forced to continue its contract with the supplier.
The patent exhaustion doctrine should be used for SCADA software purchased in conjunction with a wind turbine, which will necessarily change the type of enforcement of intellectual property rights available to companies for licenses of SCADA software sold in conjunction with wind turbines.
*Sara Kelley is currently in her third and final year at Thomas Jefferson School of Law in San Diego. She received her undergraduate degree in Civil Engineering from San Diego State University.
This is the third of three posts highlighting work by students who took my seminar class – Green Technology, Climate Change, and Intellectual Property Law – this semester at Thomas Jefferson School of Law. – Ed.