Archive for the ‘Wind Power’ category

Guest Post: US Leads, Europe Second as Wind Industry Spends $430M on Patent Protection

September 16th, 2013

Utility scale wind turbines have become so technologically advanced that they have improved the cost of energy (COE) of wind enough to compete with today’s conventional energy sources.  The ensuing reduction in COE has been the result of two governing forces: public policy and technological innovation.  

The technological trends which have emerged thus far and what might be in store for the future direction of wind turbine technology are explored here.  Policy and governmental R&D support will continue to be essential, and barriers to wind technology commercialization must be further broken down.

The patent landscape can shed significant insight into what technological trends have emerged thus far and what we might be able to infer for the future direction of wind turbine technology.  The patent landscape analytics, as well as extensive analysis of forward looking competitive intelligence, helps shape our view of future technology trends for the industry.

Figure 1 – Analysis Methodology

 

The patent search results comprise over 8,665 patent families and over 32,834 global filings from 67 different countries, dating back to the year 1916 when some of the first grid connected technology took root.  In addition to a component and technology keyword classification, an assessment of the relevance of each patent filing to the industry was performed and results were classified as Low, Medium, Medium/High, and High. 

The assessment of industry relevance indicates the degree to which the patent owner has asserted its patent rights in the past or would be able to seek licenses or otherwise enforce the patent due to usage of that patent protected technology by their competition.

Figure 2 – Industry Relevance Assessment

 

With the results grouped by assignee (or patent owner), it should come as no shock to industry watchers who are the top assignees for wind patent filings.  The list largely coincides with the top market share holders in the sector, and the chart below shows the number of patent families held by each company.

Figure 3 – Assignees (by Patent Family)

 

The industry relevance results indicate that only 0.8% of issued patents would have a high impact on the entire industry as a whole if those patents were universally asserted, with another 6.9% which may become relevant in the future depending on technology evolution and use.  The remaining 92.3% of filings are merely providing owners with basic defensive IP protection on technologies they use in their own product lines, but are not widely used in the industry.

Table 1 – Portfolio Evaluation and Industry Benchmarking (Top 10 Companies)

 

 All combined, the top 10 turbine OEM patent holders control 54.5% of patent filings.  Only 67 patent families out of 8,665 catalogued thus far comprise technology which is broadly applicable to products and services offered commercially within the industry worldwide.

General Electric Company (GE) controls not only the largest number of patent families, but the largest percentage of all wind-related IP with over 15% of patent filings.  While most companies are in-line with industry averages in terms of overall portfolio distribution of Low, Medium and High risk filings, GE’s High risk patents as a percentage of their overall portfolio is double the industry average at 1.8% vs. 0.8%.  Their portfolio also comprises over 35% of all High risk patents held by all companies throughout the industry.

Figure 4 – Global Wind IP Ownership Share

 

Also notable is that top-tier companies have a combined High and Medium/High set of filings which is above the industry average of 7.7%.  The top 10 control over 77% of Medium/High and 80% of High risk patent filings.  This confirms the strong correlation between investment in both R&D and IP protection and the commercial success of top-tier companies.  There is a strong link between the reduced CapEx and optimized energy production resulting from the development and introduction of those patent protected technologies.

The heat map of the filing dates for the patent filings confirms that the majority of filings have occurred in the past decade or so.  Comparison of this trend to turbine capacity additions worldwide is reflective of the shared influence of public policy on technology adoption and the subsequent cost efficiencies enabled by widespread deployment of wind turbines.

Please note that the 2012 – 2013 filings have not all yet published because of an 18 month window in which the patents are not made public.  Filing count up to 2011 is comprehensive.

Figure 5 – Wind Industry Patent Filing Trends (Patent Families)

 

Countries favored for filing include the US, Europe and China, with PCT applications being used heavily in the past few decades.  Collectively, the wind industry has spent nearly US$430M (in 2013 dollars) to date on patent protection across all jurisdictions since 1916.  Our projections indicate that the total will exceed US$1B by 2020 and $2B by 2030, with escalation of filing pace assumed to be consistent to that of the past 5 years.  Annual expenditure will top US$100M per year by 2022.

Figure 6 – Global Wind Industry Patent Filing Costs

 

Figure 7 – Global Wind Industry Patent Filings (Top 30 Countries)

 

Clearly IP capture will continue to be an important consideration for top tier wind companies who are developing and commercializing new products.

 

*Philip Totaro is the Principal at Totaro & Associates, a consulting firm focused on innovation strategy, competitive intelligence, product development and patent search.  To find out more, or get in touch please visit www.totaro-associates.com.

Wind Turbine Case Not So Civil as Indictment Alleges Sinovel Conspiracy to Steal IP

July 25th, 2013

The AMSC- Sinovel copyright and trade secret dispute involving wind turbine control systems has been big news (see, e.g., previous posts here, here, here and here), but legally speaking, mostly civil. 

That changed recently when the U.S. Department of Justice filed an indictment in federal court in Wisconsin alleging that Sinovel, two of its employees, and a former AMSC employee conspired to commit trade secret theft and criminal copyright infringement.

The technology involved is AMSC’s source code, software, equipment designs and technical drawings that relate to regulating the flow of electricity from wind turbines to the electricity grid.  More particularly, the electrical control system includes the Power Module 3000 (PM3000) and the Programmable Logic Controller (PLC), both of which use AMSC’s proprietaryLow Voltage Ride Through (LVRT) sofware to keep wind turbines operational during temporary dips in electricity flow in the electric grid.

According to the indictment, AMSC took reasonable measures to maintain the confidentiality of its trade secrets and proprietary information such as restricting access to authorized personnel only, requiring a unique password to enter the computer system, and requiring employee certification of ethics and confidentiality rules.

The 11-page indictment states that the purpose of the alleged conspiracy was to:

obtain AMSC’s copyrighted information and trade secrets in order to produce LVRT compliant wind turbines, and to retrofit existing wind turbines with LVRT technology, without having to pay AMSC for previously-delievered AMSC software, products, and service or for AMSC’s trade secrets and intellectual property, thereby cheating AMSC out of more than $800,000,000 USD.

The remainder of the indictment lays out the details of the alleged conspiracy, which it says took place from about January 1, 2011 to about December 20, 2012.  The former AMSC employee allegedly copied or downloaded the PM3000 and PLC source code, adapted it for unlicensed use within Sinovel’s turbines, and emailed the modified software to one of the Sinovel employees.

In exchange, Sinovel allegedly offered the former AMSC employee an employment contract worth about double what he was being paid at AMSC, but the contract made it appear that he would be working for a different company – a Chinese wind turbine blade manufacturer - for a period of time.

The former AMSC employee allegedly traveled to China to work on adapting the proprietary and trade secret information for use in Sinovel wind turbines, and Sinovel allegedly conducted a successful “voltage sag” test using the updated LVRT technology.  One of the Sinovel employees allegedly wrote in a Skype chat with the former AMSC employee that the success was “all because of you.”

Sinovel also allegedly copied the AMSC PM3000 source code into some wind turbines commissioned in Massachusetts in 2011 and 2012.

There are so many things that could be said about this case, which began with several civil infringement and contract suits in China.  I will offer just a couple of observations. 

First, it seems an excellent case for the feds to pursue criminal charges because it represents the nexus of two of the Obama administration’s policy goals:  supporting the U.S. clean tech industry and dealing with IP theft in China.

Second, as eloquently explained by wind patent and technology expert Philip Totaro in this prior post, the case points up the critical importance of LVRT technology for the stability of wind energy in China and the economic viability of Chinese wind turbine manufacturers.

A2SEA’s Offshore Wind Turbine Installer Does the Heavy Lifting

May 2nd, 2013

One of the major trends in wind power is ever larger turbines for offshore use.  This raises many technical challenges, including how to transport and install such large components at offshore sites.

A2SEA is a Danish company that has expertise in precisely these challenges and has developed technology for it.  The company’s Sea Installer is a wind turbine installation vessel designed to operate in deep offshore waters.

A2SEA owns at least one U.S. patent and several international patent applications, including U.S. Patent No. 6,808,337 (337 Patent) and International Publication No. Wo2006/076920 (’920 Application).

The ’337 Patent is entitled “Vessel with vertically elevational support legs” and directed to a ship (1) which has a hull (2), a deck (3), and two auxiliary cranes (10) positioned on the deck.  A console (5) is mounted on either side of the hull (2), and support legs (9) are disposed in the console (5).

There are two support legs (9) at either end of the console (5), and they are connected to a winch wire (8), which provides for the right pressure on the support legs (9) via a hydraulic system.  A large crane (11) having a loading capacity of about 450 tons is positioned on either side of the hull (2).

During mounting of a wind turbine, the support legs (9) exert the proper pressure to lift the ship (1) and the winch is locked to maintain the stability of the elevated ship:

During the mounting of a windmill the ship will thus on all four legs exert a pressure of 300 tons, which will lift up the ship, whereafter the winch is locked such that a possible wave will not give rise to instability.

The ’920 Application is entitled ”Lifting device for a wind turbine generator” and directed to a lifting device comprising a yoke (5) connecting the hook of a crane (11) with a collar (17) on the tower (8) of a wind turbine (9).  The yoke (5) surrounds the nacelle (113) of the turbine (9) and is designed to lift and move a complete wind turbine.

According to the ’920 Application, the yoke (5)  provides a stable lift because it is attached at a particular point of the wind turbine (9) that represents the turbine’s center of gravity:

In a suitable crane 35, the lifting yoke 5 can be mounted and designed to lift the WTG 9, which is attached at a predeteπnined point near the top of the tower 8 and below the nacelle 13. By lifting the WTG 9 at the top of the tower 8, it will be conveniently close to the centre of gravity that will make the lift of the WTG 9 a stable but heavy lift.

 

Altenera Pitches Wind Energy from the Future

March 7th, 2013

Altenera Technology (Altenera), a Maryland company, was recently chosen as one of just eight finalists to present at the Future Energy Pitching session of the ARPA-E Innovation Summit last month.  Altenera achieved this honor due to its Oscillating Reed Wind Harvester technology.  

The company calls its technology BreezBee®, which uses vibrating reeds to harvest energy from the wind under “virtually all wind conditions.”

The BreezBee® technology is covered by U.S. Patent No. 8,258,644 (‘644 patent) entitled “Apparatus for harvesting energy from flow-induced oscillations and method for the same.”  The ‘644 patent describes “a device and method for harvesting electrical power from kinetic energy of a flow” where “the external gas or liquid flow causes a vibration of the assembly . . . producing electricity in proximity of a magnetic field.”

The ‘644 patent can be better explained with reference to Figure 1(a), reproduced here from the patent.  As the fluid (7) flows over the elastic element (3), the integrated conductive element (8) moves back and forth in the (9) direction with reference to the magnetic field (8) created by the magnetic field source (6), producing electricity. 

The magnetic field should be “fully or substantially perpendicular” to the conductive element.  The shape, form, and materials of the vibrating assembly can vary based on the application, and “are defined by the maximum conversion efficiency for a particular application.”

The BreezBee® represents a functional application of the ‘644 patent.  The LEGO-like hexagonal modules shown here allow for easy combination into arrays of various sizes, making them “easily customizable for any situation.”  

The ‘644 patent discloses a number of such situations: (1) attached to flying vehicles to capture high altitude flows; (2) used in confined flow passages such as pipes or HVAC ducts; (3) used as a flow sensor while simultaneously providing the power to transmit gathered flow information; and (4) implementation as roof panels, providing a more cost-effective alternative to solar cells.   

Further, because this technology has no moving parts, it is “a virtually maintenance-free source of electrical power.” 

While one blog has noted that the details on some of the specifics were limited during the presentation to investors, the modularity, low-maintenance, and customization makes the BreezBee® an attractive alternative to turbine power. 

And if the noiselessness claim (see ieee blog above) made by Altenera’s CBDO, Chase McCarthy, is accurate, BreezBee® would have a notable advantage over turbine power by side-stepping the noise pollution problem that has plagued turbine power.

 

*Cliff Brazil is a contributor to Green Patent Blog.  Cliff is currently in his second year at the University of Kansas School of Law in Lawrence, Kansas.  He received his undergraduate degree in Metallurgical and Materials Engineering from the Colorado School of Mines in Golden, Colorado.

Blade Dynamics’ Spar Assemblies Go to Great Lengths

February 11th, 2013

Blade Dynamics is a UK-based company that develops advanced rotors for utility-scale wind turbines.  The company focuses on modular assembly technology to enable longer blades and has developed and GL certified the world’s lightest 49-meter blade.

According to this TechnologyReview.com article, the Blade Dynamics makes blades entirely out of carbon fiber using smaller sections (12-20 meters) seamlessly spliced together.  The company recently received funding from the Energy Technologies Institute (ETI), a public-private partnership between the UK government and companies such as BP, Shell and Caterpillar, to build 80 to 100-meter blades.

Blade Dynamics owns at least one U.S. patent and at least eight pending U.S. applications relating to its wind turbine technology. 

U.S. Application Publication Nos. 2010/0260611 (’611 Application) and 2011/0103962 (’962 Application) are each entitled “Wind turbine blade” and are directed to, respectively, a load-bearing spar and a blade comprising an elongate spar.   

The ’611 Application is directed to a load-bearing spar (30) for a wind turbine blade (10).  The spar (30) is connected to a root subassembly (20) and supports frame members (40, 50). 

Skin panels (60, 70) are mounted on the frame members to form a continuous outer surface of the blade (10).

The ’962 Application is directed to a wind turbine blade having a sub-assembly including a spar (6) and a root (7).  Successive skin panels (1) are bonded to the spar (6) with flange (4) adjacent to an opening (5) and being bonded to the spar (6).

 

U.S. Application Publication No. 2012/0294724, entitled “Aerodynamic fairing for a wind turbine and a method of connecting adjacent parts of such a fairing” (’724 Application), is directed to methods for connecting the skin panels mentioned above.  The ’724 describes use of recesses (10, 11) and adhesive channels (14) defined in the skin panels (1A, 1B).

A bead of adhesive (17) is applied between the recess (11) and flange (16), which projects inwardly at an acute angle to form a hook-like structure.  The distal end of the first skin panel (1A) is located within the groove formed between the recess (11) and flange (16) to ensure lateral alignment between the two skin panels.  Spacers (12, 13) abut against the face of the recess (11), thereby precisely determining the dimensions of the adhasive channel (14).

Another bead of adhesive (18) is then applied to the outer surface of the assembled skin panels (1A, 1B) to seal the channel at the left-hand side.  The adhesive runs along the adhesive channel (14), assisted by the flow channels (15), ensuring even distribution of the adhesive along the channel.

According to the ’962 Application, this modular assembly structure eliminates the need for separate ribs used by prior designs, significantly reduces the number of components required to create a finished blade, and eliminates at least one alignment step in the construction process.

The TechnologyReview.com article quotes the company’s senior technical manager on other advantages such as enabling greater precision in aerodynamic structures and improving performance.  In addition, because the company’s blades weigh less than fiberglass ones, they can provide longer blades for existing wind turbine designs.

Groundbreaking Research Identifies IP Arms Race in Wind

February 7th, 2013

A new research report published at EWEA 2013 by consultancy Totaro & Associates has catalogued over 27,500 global patent filings related to horizontal-axis, utility-scale wind turbine technology.  Totaro & Associates CEO and Principal, Philip Totaro says that, “We estimate there are ~45,000 to 50,000 global filings in total, and we are continuing our research to catalogue and evaluate them all.”

 

Arms Race

The top patent holders in wind are no surprise.  GE, Vestas, Siemens, Mitsubishi, Enercon and Gamesa control almost 50% of all global patent filings.  Totaro goes on to say that, “Other Tier 1 global turbine manufacturers, such as Sinovel and Goldwind are gaining ground, but historically, they have filed their patents exclusively in China.”

Patent filings are up sharply across the entire industry since 2006, largely due to increased spending on research and development as well as intellectual property (IP) protection. “It seems like there is an IP arms race currently underway in wind,” says Totaro.  The IP ‘Cold War’ has turned hot over the past 10 years with legal proceedings throughout the world over intellectual property rights between AMSC and Sinovel, GE and Mitsubishi, GE and Enercon as well as Enercon and Vestas, plus other non-public IP license and cross-license arrangements.

 

Risky Business

According to Totaro, “Our analysis has shown that only about 1% of issued patents are a high impact on the products and services currently offered by the industry as a whole, with another 7% which may become relevant in the future depending on technology adoption.  The remaining 92% of global patent filings are merely providing companies with basic defensive IP protection on their own distinct technologies, products and service offerings.”

While most companies appear to be in-line with industry averages in terms of overall patent portfolio distribution of low, medium and high risk filings, GE seems to stand out.  GE’s high risk patent filings as a percentage of their overall portfolio, are double the industry average at 1.9% vs. 0.9%.  GE’s patent portfolio also comprises over 36% of all high risk patents throughout the industry, showing a concerted effort to gain a tactical advantage through capturing and aggressively enforcing IP rights.  Meanwhile, the rest of the industry is trying to catch up.

 

Technology Trends

In assessing the technology trends apparent from the research, the report indicates that component developments have historically been directed towards blades, gearboxes, generators and electrical systems, with newer filings directed towards controls and a continuing focus on blade performance enhancements.  Totaro says that, “The blades, drivetrain and electrical systems were the problem children in terms of component reliability in the past, so they needed the most attention; the most improvement; the most innovation.”

Technology developments have historically been directed towards component reliability, torque / speed control, frequency / voltage regulation, performance optimization and load mitigation, with newer filings directed towards manufacturing, construction and O&M.  Totaro continues, “The manufacturing revolution, particularly with the move towards longer blades for both on and offshore has driven a substantial amount of innovation.”

Looking towards the future, the report offers several areas to watch out for including blade manufacturing automation, materials such as hybrid fabrics for blades and graphene for power electronics, anticipatory and load mitigating controls, energy storage integration, VAR and ancillary services support, HVDC technology as well as condition monitoring / SCADA data analysis for predictive maintenance and spares scheduling.

Totaro states that “Out of all the future technology trends, we have long said that materials science will have the single greatest impact on further reductions in wind turbine and sub-component CapEx.  But, as O&M costs have continued to escalate, the industry is shifting focus to services, particularly since turbine sales have dropped as of late.”

 

Technology Deployment Gap

Although, when it comes to deployment of these new technologies, Totaro cautions that a gap exists, “We presently see a commercialization gap amongst technologies being investigated and those actually being deployed.  We believe this is due to project financiers not incentivizing the development and introduction of new technologies and products because of associated technical and commercial risks.  These risks can now be better quantified and mitigated through tools which have been recently developed in the industry; such as the patent infringement risks which can now be mitigated through our IP risk profiles.”

Totaro concludes, “Protection of intellectual property rights will continue to be a hot-button issue for years to come, and the deployment of new technology will be crucial for the industry to achieve sustainable cost parity with other energy sources.”

The full report is available at http://www.totaro-associates.com.

Looking Back at the Top Green IP Stories of 2012

January 13th, 2013

 

Before we start fresh with the new green IP issues as they unfold in 2013, here is a look back at some of the top stories from 2012.

 

No. 8:  With Pilot Past, How to Get Green Patents Fast?

The U.S. Patent and Trademark Office’s Green Technology Pilot Program came to end in February, prompting questions such as why? and what do we do now?  I offered some answers in this post, and laid out my vision of a harmonized international green patent fast track program here.

 

No. 7:  Falsely Over 40? 

One of the largest greenwashing class action cases exploded in the fall of 2012, with a host of complaints filed against Korean automakers Hyundai and Kia.  The plaintiffs alleged that the automakers built advertising campaigns around representations that a number of their vehicles achieved gas mileage in the 40 mile per gallon range when they knew or should have known the actual mileage was signficantly lower.  According to the complaints, an EPA investigation prompted by consumer inquiries found the gas mileage was overstated in seven Hyundai models and six Kia models, with as much as a 6 mpg discrepancy in some models.

 

No. 6:  Honeywell Targets Nest with Thermostat Control Patents

In February Honeywell sued Nest Labs, alleging that Nest’s trendy learning thermostat (pictured above) infringes seven Honeywell patents relating to thermostat control technology.  Nest requested that the U.S. Patent and Trademark Office initiate reexamination of all the asserted patents, and each patent was initially rejected in the proceedings.  The suit could have wider ramifications for the energy management industry as some of the features of the Honeywell patents are already being used by other companies.

 

 No. 5:  Class Action Charges Nissan with LEAF Greenwash

 

Hybrid electric vehicles have been targeted by greenwashing class actions in recent years, but 2012 saw the first such case against an all electric plug-in.  In October, a proposed class action complaint accused Nissan of making misleading representations and inflating the LEAF’s battery capacity and driving range.  The plaintiffs also alleged that the LEAF’s battery system lacks an active thermal management system to circulate cooling fluid through the battery array, a design defect that leads to battery damage and loss of capacity.

 

No. 4:  GE Wins Big in Wind Patent War

The year saw a major victory for GE in its large and long-running wind patent war with Mitsubishi when a Texas jury found that Mitsubishi infringed a key GE wind turbine patent and awarded GE about $170 million in damages.  The patent-in-suit was U.S. Patent No. 7,629,705, which relates to methods of facilitating zero voltage ride through so the turbine can remain online during voltage dips down to zero volts.  GE had other wins in 2012, including a Federal Circuit ruling that breathed new life into its ITC dispute with Mitsubishi.

 

No. 3:  With Fast Track Launches, Two BRICs Fall from the Anti-Green Patent Wall

In an apparent policy 180 (at least with respect to prior rhetoric), two of the BRICs joined the green patent fast track bandwagon in 2012.  In April Brazil’s Institute of Industrial Property launched a pilot program to accelerate green technology patent applications, though it appears to offer limited opportunity for non-Brazilian applicants to participate.  China’s State Intellectual Property Office launched its own prioritized examination program for green patent applications in August. 

As discussed here, these launches arguably are significant developments in view of the countries’ stance on IP protection of green technologies in the UN climate change treaty talks and could represent an inflection point in green IP thought and policy in emerging markets and developing countries.

 

No. 2:  Burgeoning Biobutanol Battle

The Gevo-Butamax litigation was a major story of 2012, notable both for its size and as the first foray of big oil into biofuels patent litigation.  There are at least 17 suits and 14 patents at issue in the various actions brought by both parties.  The patents relate to methods of production of biobutanol and enzymes used in the production processes.  The post on Butamax’s opening salvo can be found here, the latest on the complaints filed here, and coverage of the appellate decision denying Butamax’s bid for a preliminary injunction here.

 

No. 1:  Chinese Supremes to American Superconductor:  We’ll Hear You

(1)  In one of the most significant and closely watched IP cases of the year, American Superconductor (AMSC) filed several lawsuits against Sinovel in China, testing the Chinese wind turbine manufacturer’s home court advantage.  This litigation, involving charges of copyright infringement and misappropriation of trade secrets in connection with software code for turbine control systems, has implications for the clean tech industry and beyond. 

IP protection in China is a huge issue, and for technology companies of all stripes seeking to do business in China this case may be a barometer of whether outsiders will receive a fair shake in enforcing their IP rights in China.  In a promising development, the Chinese Supreme People’s Court (pictured above) agreed to hear AMSC’s appeal of an appellate court dismissal of its copyright infringement action on jurisdictional grounds.

Shaping IP Rights in SCADA Systems to Benefit Wind Turbine Purchasers

December 21st, 2012

 

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.

Integration Conflagration: The Tragicomic Case of Wind Wire’s Greenwash

November 19th, 2012

Wind Wire is a South Bend, Indiana, installer of residential wind turbines.

In August 2010 Roger and Patricia Finney sued Wind Wire in Indiana state court for alleged greenwashing in connection with a residential wind turbine system.

The Finneys’ central charge was that the company fraudulently induced them to purchase a wind turbine for their home by knowingly making false or misleading statements as to cost savings the turbine would provide.  After a trial court judgment for the Finneys Wind Wire appealed.

In a recent opinion the Court of Appeals of Indiana affirmed the judgment for the Finneys.  At issue in the case was a Wind Wire brochure making a number of representations about the cost savings of the wind turbine, including the following:

the average household would save “approximately 75% to 100% of current electric service”;

the customer would see a return on investment or ”payoff span of 3-4 years”;

the wind turbine system could “generate an average of 700 K wh (sic) per hour”; and

the homeowner would receive a “substantial refund” on taxes by installing the wind turbine system.

Apparently, through its representatives, Wind Wire echoed all of the claims from the brochure in its communications with the Finneys.  A sales rep repeated the cost saving claims to the Finneys.  Wind Wire also erroneously told them that AEP, the Finneys’ utility, would purchase the excess energy produced by their wind turbine.

The company also told the Finneys that they would be entitled to a tax credit, the amount of which would be based on a percentage of the purchase price of the turbine when, in fact, the credit was fixed at $900 for the Finneys.

Since the Finneys’ wind turbine was installed, it has produced no excess power and has had no effect on their electric bills.  According to AEP, it typically takes not 3-4 years, but 25 years for a residential wind turbine to pay for itself.  Instead of the advertised 700 kWh, after about one year of use the Finneys’ turbine has produced a total of only 134.2 kWh of electricity.

In perhaps the most tragicomic manifestation of greenwashing here, the wind turbine actually consumes energy when it is idle.  Similarly absurd was the revelation that the sales rep dealing with the Finneys had no prior wind turbine experience and “the extent of [his] formal training was a one-hour ‘webinar.’”

The trial court held that Wind Wire had breached its contract with the Finneys, in particular both the express warranties and the implied warranty of fitness of the turbine, and that it fraudulently induced the Finneys to enter into the contract by knowingly misrepresenting its experience and expertise and the cost savings of the turbine.

In view of all the egregious evidence on record, perhaps it’s no surprise that Wind Wire’s strategy on appeal was to steer away from the facts of the case and instead rely on a purely legal argument based on a provision of its contract with the Finneys.

In particular, Wind Wire contended that the Finneys could not justifiably rely on any of its representations about the wind turbine because their contract contained an “integration” clause.  An integration clause is a provision stating  that the contract contains the parties’ entire agreement to the exclusion of any outside statements or representations.

The appellate court disagreed and affirmed because it found no clear error with the trial court’s judgment.  As to Wind Wire’s argument, the appellate court noted that under Indiana contract law a party can overcome the effect of an integration clause if it shows it had a right to rely on the alleged misrepresentations and did rely on them in executing the integration clause.

An interesting side note is that Southwest Windpower, the manufacturer of the turbines Wind Wire installs, placed the installer on six months’ probation because of concerns over Wind Wire’s marketing materials and customer satisfaction.

Thanks to the DSV Construction Law Blog’s post on this, which brought the story to my attention.

 

 

 

Guest Post: Are Wind Project Financiers and Developers Underestimating the Risk of Patent Infringement?

November 7th, 2012

Totaro & Associates has completed the second phase of a study which began in December 2010 on the patent landscape of the horizontal-axis, utility-scale wind industry.  We have now read and classified over 23,100 global patents and applications, with over 3,200 issued patents in the US alone.

As we have highlighted in previous posts (here and here) on our wind turbine patent landscape, the analysis looks at the breadth of patent claim coverage and the use of that patent-protected technology within the industry.  Close to 11% of patents in any given country can be classified as high risk patents, or those which have broad claim breadth that covers technology which is being used by at least one other turbine vendor besides the patent holder.

This analysis, and the creation of risk profiles for each turbine OEM product offering, has provided clarity on the scope of potential patent infringement risks of any turbine topology or drivetrain architecture, regardless of turbine OEM. 

The OEMs are far and away the largest holders of all these patents and the overwhelming majority, more than 95% of high risk patents are held by the turbine OEMs and key sub-component suppliers.  These patent holders are keen to protect their intellectual property rights in the current market climate.

Presently there are some turbine OEMs who are not willing to provide full indemnity to turbine purchasers in the supply agreements, even though the OEMs receive full indemnity from sub-component suppliers when they buy a generator or a blade or even a tower.  Vertically integrated OEMs have even more work to do themselves when it comes to ensuring they have freedom to practice, since they retain more liability due to an increased scope of supply.

Proactive companies as well as most of the larger OEMs are willing to allocate resources to evaluate patent infringement risk and undertake mitigation strategies such as licensing or even a freedom to practice analysis prior to product launch.  The cost of licensing can be prohibitive to competitive cost of energy, so most of the smaller OEMs and those who do not have a large presence in a given market will not opt to undertake a freedom to practice project.

Patent infringement risk is shared by all (see Table 1), especially in cases where the OEM is not engaging in appropriate risk mitigation activities on its own.  Even those who do may only pay attention to the hot button issues at the urging of financiers or outside counsel, especially those patents in active litigation.  Hundreds of relevant patents are often missed leaving a veil of ignorance covering a gaping whole.

Table 1

The cause of the gap lies in the search protocol typically used by most IP professionals.  Taking an example of a patent database search in the US for issued patents related to the keywords (“wind turbine” and “power factor control”) nets 118 results.  The same search conducted in the Totaro & Associates patent landscape not only yields more comprehensive results with 156, but provides an analysis of patent infringement risk:

The generic keyword based search also turns up numerous false-positive results including: 

  • US7580777    Modular aircraft control system and method
  • US6936947     Turbo generator plant with a high voltage electric generator
  • US6894416     Hydro-generator plant

While ignorance of the patent rights of a competitor may avoid treble damages in patent infringement litigation, such ignorance is not the best way to quantify and mitigate risk.  It can still create a PR and sales issue if assertion and/or lawsuits arise.  Even though it can seem like there are an infinite number of patents out there, the numbers are actually finite, albeit substantial.

During market conditions where revenue from turbine sales is diminishing, everyone needs to be cognizant of the OEMs willingness to make up for those shortfalls by enforcement of intellectual property rights.  Developers and financiers need to ask for more in the way of indemnity in a turbine supply agreement, and seek independent verification of patent infringement risks. 

If insurance is used as a risk mitigation strategy, the providers need to be cognizant of the scope of work performed by the turbine suppliers and the potential shortcomings of those efforts.

It may be a mountain to climb, but the summit can be reached and in this case having a guide can make all the difference.

*Philip Totaro is the Principal at Totaro & Associates, a consulting firm focused on innovation strategy, competitive intelligence, product development and patent search.  To find out more, or get in touch please visit www.totaro-associates.com.