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Patent Dispute: A minefield of patents

UNITED STATES: For all its drama, GE's turbine dispute with Mitsubishi is not the be-all-and-end-all of patent issues in the wind industry. The reality is that there is a global minefield of patent-related problems that can affect turbine manufacturers, wind farm developers, owners, operators and support companies. Wind businesses stay uninformed at their peril.

Looking at the US market as an example, during the past seven years the number of wind-related patents more than doubled. Patents relate to controllers, rotors, blades, generators, turbine systems, transformers, power trains, towers and countless other technologies. These patents have equivalents in Denmark, Germany, Japan, the Netherlands, Austria, France, the UK and Canada.

Controllers - the computers monitoring the condition of a wind turbine - are the most heavily patented main turbine components in the US, while tower-related technologies are the least. More than 70 companies own wind-related US patents and patent applications. Of these, the biggest holders include, in descending order, GE, Vestas and Clipper Windpower.

Hence, it is not only on GE's toes that prospective wind technology suppliers to the US must worry about treading. A potential pitfall awaiting any wind company entering the US market, whether it is to sell entire turbines or only components, is that the importation, sale or offer to sell the product in the US may be blocked by any owner of a patent covering that product, or, in some cases a licensee. Without prior authorisation, the chances of being accused of infringement are high.

A US patent gives the owner the right to exclude others from making, using or selling the invention in the US or importing it into the US. To enforce this, a patent owner can file a suit for infringement occurring within the 50 states and for certain acts occurring outside the country's borders. These include importing goods manufactured by a patented method and even actions that the patent holder says directly or indirectly lead to infringement.

In the US, patent owners can file a suit in federal court, where the case can be tried by a judge and/or a jury. The patent is presumed valid and a defendant bears the difficult burden of proving invalidity or unenforceability by clear and convincing evidence. Federal lawsuits can take several years to reach a conclusion. Patent holders can also file a suit at the US International Trade Commission (ITC). These can wrap up in one or two years.

The party that loses a federal court case may be required to pay damages. Those include: actual damages, damages for wilful infringement - which can rise to as much as three times actual damages - and payment of the opponent's legal fees. In addition, an injunction may prevent the installation and any future sales of the infringing product. Meanwhile, an adverse judgment in the ITC can result in a cease-and-desist order against imported goods. Called an exclusion order, this bars a product from passing through US ports.

Failure to understand and manage these risks from the outset can thus have devastating consequences. To analyse risks presented, a wind business looking to enter the US market can hire a US patent firm to conduct a "freedom to operate study" identifying any US patent infringement risk, including those associated with importing and installing wind technologies. If risks are identified, they can be managed in various ways, including through licences. Businesses can also secure so-called non-infringement/validity opinions from US patent lawyers. These are legal opinions vouching that a patent appearing to present a hurdle is, in fact, not valid or does not present an infringement problem. Should conflict over the patent occur, a wind business with this document in hand can demonstrate that it acted in good faith.

Certain wind-related patents on variable-speed technology - used to convert energy from a rotor running at variable speed into grid-compatible power - start to expire in 2011, bringing some relief to the industry. But many of these global patents will remain in force for much longer in jurisdictions around the world. So turbine suppliers and other wind businesses must continue to assess patent risk. Proactive diagnosis and avoidance of patent issues before they emerge are key.

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