Green Patent Blog is on vacation.
In February, three individuals filed a proposed class action lawsuit against BP Solar and Home Depot accusing the solar panel maker and retailer of greenwashing in connection with certain solar panels (see the complaint here).
Plaintiffs Michael Allagas, Arthur Ray, and Brett Mohrman alleged that there is a latent defect in the junction box of the BP solar panels that causes the box to fail and results in a total loss of functionality of the solar panels.
Specifically, the plaintiffs allege that the defect in the junction box and solder joints between connecting cables makes the solder joint overheat, which causes electrical arcing that generates temperatures of 2000-3000 degrees. According to the plaintiffs, the heat melts the junction box, burns the cables and solar panels, and shatters the glass cover of the panels.
The plaintiffs also alleged that BP’s advertising and marketing materials about the solar panels are false or misleading.
While the northern California federal court hearing the case previously dismissed some of the plaintiffs’ claims, a recent decision denied BP and Home Depot’s motion to dismiss the remaining claims.
The court found the pleadings sufficient to support plaintiffs’ express warranty claims for breach of the express defect and power warranties because they stated that a latent defect existed at the time the product was sold and that they relied upon BP Solar’s power warranty in purchasing the solar panels.
Similarly, the implied warranty claims were held to be sufficient because plaintiffs clearly alleged a latent defect in the solar panels that renders them unmerchantable and unfit for their intended use.
With respect to the advertising and marketing materials, the plaintiffs cited various sweeping representations made by BP Solar, including:
Promises that the solar panels will “drastically reduce or eliminate your electric bills . . . forever,” and will “increase the value of your home.”
A statement that “No other system can operate at a higher level of safety than those offered by BP Solar.”
BP Solar also made some specific representations about the output and life of the solar panels, including product data sheets warranting 80% power output for a 25-year period and a 90% power output for a 12-year period with a 5-year warranty of materials and workmanship.
The court held that plaintiffs’ claims under the Consumer Legal Remedies Act could go forward because the statements include “factual representations” that could be “likely to deceive a reasonable consumer.” The court concluded:
A reasonable consumer could have relied on these statements as descriptions of the quality and power capabilities of the solar panels.
The court maintained the plaintiffs’ fraud claims because they allege that BP knew of and concealed the defect:
The amended complaint also alleges BP’s knowledge of the latent defect in the solar panels, BP’s concealment of the defect, particular instances when information regarding the defect and risk of fire could have been revealed, and the warranties all three plaintiffs relied upon that failed to include the concealed information.
The court also denied the defendants’ motion to strike the class allegations, but left the door open for BP and Home Depot to contest those upon a subsequent motion by the plaintiffs for class certification.
There have been a few recent developments in Chinese eco-marks (my term for marks used in connection with green goods or services), both in China and in the United States.
Starting with by far the weirdest news item, a small Chinese electric car technology company called Hong Yuan Lan Xiang (HYLX) has filed a trademark application in China to register the name SNOWDEN for for its “top secret technologies and products” (see the Green Car Reports article here).
These include new removable batteries, technologies for increased charging speeds, and technologies for remodeling conventional cars into electric-capable models. Apparently, the company thinks the top secret nature of its technologies makes Snowden the perfect brand name for them.
Also in China, U.S. electric carmaker Tesla Motors has encountered what appears to be a cybersquatter and prior registrant of the TESLA mark. According to this Reuters story, Zhan Baosheng owns a Chinese trademark registration for TESLA, runs a web site using the Tesla China domain (www.teslamotors.com.cn), and operates a Tesla-branded account on the Chinese microblog site Sina Weibo.
Zhan’s web site includes a Tesla brand logo that is almost identical to that of Tesla Motors and shows a car quite unlike any of Tesla Motors’ vehicles. It seems likely that Tesla Motors will have to buy out Zhan to clear the way for its trademark rights and branding efforts in China.
Finally, an eco-mark infringement suit covered in a previous post has come to a close (at least in the trial court). This case pitted SunEarth (owned and operated by the Solaray Corporation since 1992), which manufactures and sells solar thermal collectors and related components, against Ningbo Solar Electric Power (Ningbo) and its U.S. subsidiary, which was selling solar photovoltaics under the SUN-EARTH (and Design) mark:
After filing a proceeding in the USPTO Trademark Trial and Appeal Board to cancel the ’941 Registration and trying to negotiate a settlement with Ningbo, SunEarth sued for trademark infringement, cancellation of the registration, and other claims in the Northern District of California in October 2011.
In a recent decision, the court held that Ningbo was liable for trademark infringement and ordered the USPTO to cancel the ‘941 Registration. Although Ningbo’s trademark registration was entitled to a presumption of validity, SunEarth successfully rebutted the presumption by demonstrating prior use of the mark, a fact conceded by Ningbo:
Plaintiffs have introduced evidence that they have used the term SunEarth as a trademark, trade name and service mark in the United States since 1978. Defendants have conceded that Plaintiffs have “common law prior user rights in several states of the United States to its SunEarth mark for solar thermal systems.”
Although Ningbo disputed the geographic extent of SunEarth’s common law prior user rights, the court found that SunEarth had established “legally sufficient national market penetration over their trade name and mark” prior to Ningbo’s first use of the mark.
From there, it was simply a matter of conducting a routine likelihood of confusion analysis, which favored SunEarth due to the similarity of the marks, the proximity of the goods (solar photovoltaics and solar collectors), and the similar trade channels such as solar product shows, specialty retailers, and trade magazines.
Ultrasolar Technology is a Silicon Valley startup that has developed a pyroelectric device to boost solar cell efficiency.
We all know what “pyro” means, but what is “pyroelectric” all about? According to this Greentech Media piece, which provides a helfpul overview of Ultrasolar’s methodology, “[p]yroelectricity converts heat to [an] electric field.”
One of Ultrasolar’s patents says this:
Pyroelectric materials may generate electrical energy (e.g., temporary voltage) when they are subjected to a change in temperature (e.g., heated or cooled).
More to the point, Ultrasolar’s technology draws “hot” electrons, which would normally lose their energy in the crystal structure of the solar cell, to the solar cell’s electrodes, thereby increasing the power produced from the cell (and the modules).
Ultrasolar owns at least five U.S. patents and applications relating to its pyroelectric technology. According to Cleantech PatentEdge™, the company also owns two international, or PCT, applications.
U.S. Patent Application Publication No. 2011/0232734 is entitled “Pyroelectric solar technology apparatus and method” and directed to methods of increasing solar cell efficiency by depositing pyroelectric film on a cell (‘734 Application).
In its basic embodiment, the ‘734 Application describes a solar cell (102) having a transparent pyroelectric film (104) on its front surface and an opaque pyroelectric film (106) on its back surface. The transparent pyroelectric film (104) may be applied onto a resistor (108) placed on the front surface of the cell, and an ohmic contact (110) placed on the transparent film (104).
According to the ‘734 Application, heating of the transparent pyroelectric film (104) and/or the opaque pyroelectric film (106) generates an electromotive force to bias the solar cell (102), thereby creating an open circuit voltage. Moreover, heat from the sun or waste heat can cause current in the pyroelectric material (104, 106), thus increasing the total current of the solar cell (102).
According to U.S. Patent No. 8,324,783, the pyroelectric material may produce electric charge when subjected to a change in temperature over time.
The ‘734 Application explains that a temporal temperature gradient may be generated on the solar cell (102) through a standing infrared wave through the pyroelectric films or using pyroelectric films of varying specific heats and conductivities at a front and/or back of the solar cell.
What are these pyroelectric materials that seem so promising? The ‘734 Application lists a bunch:
In one or more embodiments, transparent pyroelectric film 104 may comprise of a polyvinylidene fluoride, a tri-glycerin sulphate, a lead zirconatetitanate, a stannic titanate, a lithium tantalate, lithium niobate, aluminum nitride, titanium aluminum nitride, barium titanate, and/or barium strontium titanate. In one or more embodiments, opaquepyroelectric film 106 may comprise of a polyvinylidene fluoride, a tri-glycerin sulphate, a lead zirconatetitanate, a stannic titanate, a lithium tantalate, lithium niobate, aluminum nitride, titanium aluminum nitride, barium titanate, and/or barium strontium titanate.
The Greentech Media story says Ultrasolar is hoping to use these pyroelectric materials to boost solar module efficiency by 20 percent.
Incidents of greenwashing continue apace, increasingly in the realm of what I call Greenwashing 2.0, i.e., misrepresentations in business dealings relating to commercial clean tech equipment and services as opposed to marketing consumer products.
A Colorado company called Executive Recycling, Inc. (ERI) and some of its officers were recently sentenced to imprisonment and fines for fraud and international environmental crimes (see the DOJ’s Colorado office press release here). ERI was in the business of recycling electronic waste such as cathode ray tubes (CRTs).
According to the press release, ERI falsely represented that the company would dispose of all electronic waste in an environmentally friendly manner, in accordance with EPA, state and local laws and regulations, and would do so in the United States.
Contrary to its representations, the company sold the electronic waste it received to brokers for export overseas to China and other countries. ERI did this on a significant scale, being listed as the exporter of record on over 300 exports between 2005 and 2008, including exports of more than 100,000 CRTs.
U.S. Attorney John Walsh noted both the harm to the environment and the damage to ERI’s customers caused by the fraudulent activity:
The defendants in this case not only caused actual harm to the environment by shipping electronic waste overseas for dumping, they defrauded their customers by falsely claiming to be disposing of that waste in an environmentally safe way.
This Greentech Media story reports that the FBI is investigating a number of fraud complaints against a Missouri solar installer called U.S. Solar.
The central allegations involve abuses of the Missouri Public Service Commission’s solar rebate program, specifically, instances in which the installer allegedly pocketed rebate checks that were supposed to go to customers who had the solar energy systems installed.
In one case, U.S. Solar allegedly installed solar panels on a customer’s roof that an independent installer later assessed to be too shaded for solar energy production. The independent installer said the roof has “a significant amount of shaded panels and a lot of exposed wires” and the system should be reinstalled. The customer did not receive his rebate check.
U.S. Solar’s rebate abuses may have contributed to utility Kansas City Power and Light prematurely reaching the $21 million cap on solar rebates. According to a Solar Energy Industry Association representative quoted in the Greentech Media piece, there should be a full investigation:
We need to determine the extent of U.S. Solar’s bad practices and how much they might have impacted the rebate program.
In my opinion, these cases are properly viewed as a greenwashing because they involve false or misleading statements and/or deceptive activity relating to the environmental benefits of a produce or service.
Most discussions of greenwashing are unduly restricted to cases in which an individual consumer, a class of consumers, or a consumer watchdog such as the FTC challenges a company making false or misleading green claims about its products or services.
To put greenwashing in its proper context I think we should consider a wider range of cases, some of which are not immediately recognizable as instances of greenwashing, including civil cases brought by commercial consumers and criminal cases brought by governmental authorities.
From this broader vantage point, and keeping in mind the definition of greenwashing – making false or misleading claims about purportedly environmentally friendly products, services, or practices – we are able to recognize, observe and understand greenwashing in its proper context.
DuPont Tate & Lyle BioProducts (DPTL) is a joint venture between DuPont and Tate & Lyle which provides natural and renewably sourced industrial materials. In collaboration with Climalife, DPTL has developed and launched a new line of heat transfer fluids (HTF) under the brand name Greenway.
The Greenway fluids are marketed for use in solar thermal (AKA concentrating solar power) applications. The key ingredient in the heat transfer fluids is DPTL’s Susterra brand propanediol, a bio-based glycol.
DPTL owns several patents and pending applications relating to its bio-derived propanediol (Bio-PDO), including U.S. Patent No. 7,988,883 (‘883 Patent), specifically directed to use of Bio-PDO in heat transfer compositions.
Entitled “Heat transfer compositions comprising renewably-based biodegradable 1,3-propanediol,” the ‘883 Patent is directed to heat transfer or antifreeze compositions comprising biologically-derived 1,3-propanediol having a bio-based carbon content of at least 1%.
The independent claims of the ‘883 Patent include a recitation that the composition “has a lower anthropogenic CO2 emission profile” compared to 1,3 propanediol with no bio-based carbon. The Bio-PDO can be generated by genetically-engineered E.coli bacteria or other microorganisms.
The patent makes the argument that its bio-based process is carbon-neutral. According to the ‘883 Patent, the compositions have less environmental impact because they take their carbon from plant feedstocks and release the carbon into the atmosphere to be used by plants again:
The biologically derived 1,3-propanediol (Bio-PDO) for use in the current invention, produced by the process described herein, contains carbon from the atmosphere incorporated by plants, which compose the feedstock for the production of Bio-PDO. In this way, the Bio-PDO used in the compositions of the invention contains only renewable carbon, and not fossil fuel based, or petroleum based carbon. Therefore the compositions of the invention have less impact on the environment as the propanediol used in the compositions does not deplete diminishing fossil fuels and, upon degradation releases carbon back to the atmosphere for use by plants once again. Thus, the present invention can be characterized as more natural and having less environmental impact than similar compositions comprising petroleum based glycols.
Like some of the patent litigation involving solar ovens and solar mounting systems, the Greenway HTF product containing patented propanediol is another example of green IP extending into downstream solar and penetrating the niche market opportunities offered by the clean tech industry.
A Greentech Media piece picked up an interesting item: a recently filed class action lawsuit accusing residential solar provider Sunrun of making deceptive statements about the rising cost of electricity to make its solar installations more attractive to consumers.
The complaint, filed in Los Angeles Superior Court, alleges that Sunrun’s central marketing message is that increases in electricity prices will result in cost savings for customers who have Sunrun solar systems installed at their homes. But, according to the complaint, Sunrun “deceptively states with certainty something that is inherently unknowable.”
Class plaintiffs quote the following excerpts from Sunrun’s web site:
You already pay a lot for electricity today. In the future, you’ll pay even more. Nationwide, electricity rates have been increasing 6% per year over the last thirty years. When you go solar, you take control of your electricity costs and opt out of utility rate increases. You’ll save money with solar by locking in a lower rate for your electricity than you will pay for the next thirty years. Many Sunrun customers start saving money right away.
How much money will I save with Sunrun? …your solar electricity rate is fixed and will rise very gradually. This means as your utility rate increases its rates over time, the amount of money you’ll save with Sunrun will also increase over the life of your agreement.
According to the complaint, the representations that consumers would save money due to increasing electricity prices was misleading because, for example, energy prices at Southern California Edison have leveled off in recent years. The complaint also cites a number of articles reporting that natural gas prices have fallen considerably recently due to increased shale gas production.
Perhaps most salient is this short piece on CleanEnergyAuthority.com, quoted in the complaint, in which Jeff Mayer, the CEO of UK company Soluxe Solar says:
Most leasing contracts are sold on the assumption that the consumer will save money because utility costs are expected to increase over the years. But, the truth is that utility prices have been flat to down and consumers are being misled.
According to the complaint, customers whose current electricity prices are not as high as estimated by Sunrun are already losing out, and those whose electricity prices do not rise as expected in the future will also experience this cost disadvantage. Ultimately, however, even if Sunrun’s customers do not end up paying more for solar, the company’s unequivocal marketing message is still false and misleading:
But whether the cost disadvantage is experienced or not, the promise of a system sure to result in cost advantage was false when made and likely to deceive consumers into leasing a system they otherwise would not have.
One difficult question is how to classify this case. At bottom, it’s really about economics, not environmental benefits, so greenwashing is not a comfortable fit. But to the extent the cost savings at issue flow from renewable energy equipment, perhaps it’s not unreasonable to label it as some form of greenwashing.
The alleged deception here relates to electricity prices generally, which are mostly driven by fossil fuel production. So the allegations are probably closest to reverse greenwashing, which I define as allegedly false or misleading statements not about environmental benefits, but about the negative environmental impact of certain products or services (keeping in mind the caveat, of course, that the adverse impact alleged here is economic, not environmental).
For more on reverse greenwashing, see my initial post on the ChicoBag case here.
As the number of green technology bankruptcies continues to rise, an important consideration for these companies, their business partners, and their creditors is the treatment of IP rights in bankruptcy.
For example, with companies engaged in new research and development, often through collaborations with other companies, how does the bankruptcy process effect the estate’s IP rights? And how might the bankruptcy effect the rights of its licensees and development partners?
The topic recently came to mind, with reports regarding the bankruptcy of Konarka Technologies, Inc. (“Konarka”).
I. The Konarka Bankruptcy
Konarka, which declared bankruptcy in June, was a pioneer in the area of thin-film organic photovoltaic materials, which might be used in any number of ways, including for clothes or bags, textiles for curtains, and even building materials.
Konarka’s technology web page explains its technology as follows:
[a]t the heart of Konarka’s technology is a photo-reactive polymer material invented by Konarka co-founder and Nobel Prize winner, Dr. Alan Heeger. This proprietary material can be printed or coated inexpensively onto flexible substrates using roll-to-roll manufacturing, similar to the way newspaper is printed on large rolls of paper.
With respect to its bankruptcy, Konarka’s press release noted the company’s assets include a lot of IP in addition to its manufacturing facility:
Among the Company’s assets are over hundreds of owned and licensed patents and patent applications in the field of solar energy and a state-of-the-art manufacturing plant in New Bedford, Massachusetts.
Press releases and articles suggest that Konarka made a serious and continued effort to develop and commercialize its innovative materials.
For example, Konarka had taken exclusive licenses on IP concerning photovoltaic applications and photoactive polymers from (respectively) DuPont Displays (in 2007) and Université Laval (in 2008).
Further, Konarka’s polymer-based, organic photovoltaic (OPV) technology had been incorporated into a number of products, including solar energy bags (with Neuber’s Energy), curtain walls (with Arch Aluminum & Glass), as well as roofs, skylights, and facades (with ThyssenKrupp Steel Europe).
II. Protection for IP Licensees
Normally, bankruptcy raises red flags for any company that’s in business with the company seeking bankruptcy protection.
Generally speaking, a bankruptcy trustee has the right to accept (and thereby assume) or terminate (and thereby reject) the company’s executory contracts. An executory contract is a contract that has on-going performance obligations, such as a business lease, a service contract, equipment leases, development contracts, and intellectual property licenses.
So while the other party has to keep performing, the bankruptcy trustee has the option of terminating an agreement that might be very important to your company’s well-being. (And if the trustee does terminate, the other party is left with an unsecured bankruptcy claim for breach of contract, which is likely a poor alternative for a material lease, equipment rental, license, or some other right.)
Fortunately, there is some measure of relief for IP licensees. In a 1985 decision called Lubrizol Enterprises v. Richmond Metal Finishers, the Fourth Circuit Court of Appeals confirmed that non-exclusive licenses are executory contracts, which a bankruptcy trustee may reject.
The Fourth Circuit also held that the former licensee didn’t have any right to seek specific performance under the license.
In response to the Lubrizol decision, Congress adopted Section 365(n) of the Bankruptcy Act, which provides that a licensee may elect:
(A) to treat such contract as terminated by such rejection if such rejection by the trustee amounts to such a breach as would entitle the licensee to treat such contract as terminated by virtue of its own terms, applicable nonbankruptcy law, or an agreement made by the licensee with another entity; or
(B) to retain its rights (including a right to enforce any exclusivity provision of such contract, but excluding any other right under applicable nonbankruptcy law to specific performance of such contract) under such contract and under any agreement supplementary to such contract, to such intellectual property (including any embodiment of such intellectual property to the extent protected by applicable nonbankruptcy law), as such rights existed immediately before the case commenced, for—
i. the duration of such contract; and
ii. any period for which such contract may be extended by the licensee as of right under applicable nonbankruptcy law.
Section 365(n) is quite remarkable, in that it is a significant exception from the bankruptcy trustee’s typical authority and is an important protection for IP licensees.
There are some important caveats to consider, however, before relying on the protections of Section 365(n). First, the Bankruptcy Act’s definition of “intellectual property” does not include trademarks (it does include trade secrets, patents, patent applications, plant variety, copyrights, and mask works).
Second, Section 365(n) presumably does not prevent the termination of related rights or obligations, such as enforcement agreements, technology transfers, and service agreements.
Third, Section 365(n) does not automatically apply to licenses by foreign licensors (even if it’s a license of U.S. patents).
Fourth, and lastly, Section 365(n) does not say IP licenses aren’t terminable. It instead says that, if the bankruptcy entity seeks to terminate the license, a licensee may elect to retain its rights. And since this implicates an affirmative action, it’s important that a licensee monitor its licensor’s bankruptcy, to determine whether it becomes necessary to make an appearance to protect its rights.
With respect to Konarka, we’ll continue to monitor the bankruptcy proceeding and report back here, as the bankruptcy plan is published and we learn whether and how Konarka plans to dispose of its substantial patent portfolio (and whether licensees step in to preserve any rights).
Adrian Mollo is a Partner in the Washington office of McKenna Long & Aldridge. Mr. Mollo’s practice focuses on patent licensing, strategic patent planning, intellectual property due diligence, related corporate counseling, and intellectual property litigation.
Blue Sunny Skies and Sun Energy Partners f/k/a McConnell Energy Solutions and d/b/a SolarDock is a Delaware company that makes solar module mounting systems.
SolarDock owns U.S. Patent No. 6,968,654, entitled “Solar panel mounting structure, solar panel system, and methods of making and installing thereof” (‘654 Patent).
In a recent complaint filed in federal court in Delaware, SolarDock accused, inter alia, PV Thermal Solar, MJM Fabrications (MJM) and Dave Lewenz (a former independent contractor for SolarDock) of infringing the ‘654 Patent.
According to SolarDock’s Complaint, Michael Moulder, a co-inventor named on the ‘654 Patent, assigned the patent to McConnell Energy Solutions (which subsequently assigned it to Blue Sunny Skies) and later formed MJM, which is making infringing SolarDock systems.
SolarDock also alleges that PV Thermal Solar, co-founded by Lewenz and Moulder, is selling infringing solar racking systems:
Further upon information and belief, PV, through its division SR2, used SOLARDOCK’S proprietary and confidential information to create racking systems that compete directly with the SolarDock system and fall within the scope of one or more claims of the ‘654 patent. Such racking systems include SR2’s SolarRac2 system.
The frame (12) of the mounting structure (10) includes a front wall (20), a bottom wall (22), and a back wall (24) forming an elongated chamber (26). First and second panel supports (30, 32) support the panel (P).
The front wall (20) of the mounting structure (10) is arranged to face a direction of the predominant supply of sunlight, and the inclination angle (α) of the mounting structure (10) can be preselected according to the latitude of the installation site.
According to the ‘654 Patent, the panel unit’s simple design confers several advantages. First, it makes the unit easy and inexpensive to manufacture. In addition, installation is quick and easy and requires minimal skill. Finally, the mounting structure is very light in weight and can be transported easily by a single technician.
This case is another recent example of solar patent litigation moving downstream to disputes over mounting systems. A major patent war between Zep Solar and Westinghouse Solar (formerly Akeena Solar) recently settled.
Previous posts (here, here and here) discussed the patent litigation between Zep Solar and Westinghouse Solar over solar panel mounting technology. The contentious dispute involved at least three patents, three forums, two reexaminations, and back and forth cross claims of infringement and invalidity.
Recently, Zep and Westinghouse announced that they have reached a comprehensive settlement to end their patent battles.
In a joint statement, the companies said the agreement would result in dismissal of all actions, which included proceedings in federal courts, the U.S. International Trade Commission, and the U.S. Patent and Trademark Office. The statement also indicated that the settlement extends to all customers, suppliers and licensees of both Zep and Westinghouse that were named parties in any of the legal actions.
The asserted Westinghouse patents were U.S. Patents Nos. 7,406,800 (‘800 Patent) and 7,987,641 (‘641 Patent). Both cover what Westinghouse refers to as the “Andalay System,” a solar power system which includes solar panels with integrated racking, wiring and grounding (DC solar panels), and integrated microinverters (AC solar panels) for residential and commercial customers.
Zep had asserted U.S. Patent No. 7,592,537, entitled “Method and apparatus for mounting photovoltaic modules” and directed to an interlocking PV module array.