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Wind manufacturers act to defend intellectual property rights

WORLDWIDE: Intellectual property (IP) - especially patents relating to technological innovation - is at the heart of today's wind industry. It is a sign of the industry's age. Unlike in wind power's youth, innovation is no longer freely shared at conferences. And as the industry comes up with new inventions, the major players - GE, Siemens and Vestas - are spending millions of dollars building and maintaining IP portfolios to drive profit and gain the strategic upper hand.

But as wind globalises, the protection of these rights is becoming more difficult for companies entering emerging markets. This is especially true in China, where access to government equipment or technology orders can depend on patent and other IP transfer and where joint ventures are common and often required. In a 2009 EU survey, China remained the single most problematic country for IP protection and a joint EU-China project on protecting IP rights was launched in 2007. Experts note that the concept of IP is relatively new in China; its judiciary is not independent and corruption is widespread, with local officials pushed to bolster growth over IP enforcement.

Strategic thinking

Globally, a company’s IP strategy can encourage innovation and provide vital information for others — or it can hamper the free flow of information and technological development. "Some people forget what
a patent is — it’s a deal between an inventor and society, and each gets something out of it," says
Henrik Stiesdal, chief technology officer at Siemens Wind Power. "For the inventor, it is exclusivity for
up to 20 years for industrial application. For society, [patents are] published as a source of inspiration, and everybody is free to try the technology as long as it is not exploited commercially."

But since a patent is a legal monopoly, in liberal economies the abuse of rights can harm third parties, argues Guillaume Henry, a Paris-based IP lawyer at Gaultier, Lakits and Szleper.

Using patents as weapons

The strategy deployed by engineering giant General Electric (GE) illustrates a legal — and aggressive — use of IP. The largest turbine maker in the US, GE, holds 36% of the high-relevance US wind patents and is adept at "bracketing off" key technology by developing multi-patent "fences" around those technologies, says Philip Totaro of Totaro & Associates, an innovation strategist who has worked for GE, United Technologies and Clipper Windpower. This approach can hinder others developing their own technology, he says. In response to Totaro’s characterisation, Vic Abate, vice-president of GE Energy’s renewables business, says both IP and technology are core to GE’s wind strategy.

Eric Lane, a lawyer and author of the book Clean Tech Intellectual Property, notes how GE astutely bought the ‘039 variable-speed patent a decade ago. A rare so-called blocking patent that expired in February 2011, it was broad, covered vital technology and was costly to circumvent. "That [patent] put GE on a fairly clear path to being the industry leader" in the US, says Lane. "IP has shaped the [US] wind industry."

In fact, ‘039 is one of three patents over which GE sued Mitsubishi Heavy Industries (MHI) in the US in 2008 for alleged infringement by MHI’s flagship 2.4MW turbine. This escalated into an ongoing and multi-pronged fight, with MHI only clinching one US order for the turbine since the row started.

The ‘039 patent, originally filed by US firm Kenetech Windpower, was also central to the largest wind IP
clash of the 1990s, which led to some of innovative German turbine maker Enercon’s technology being blocked from the US until 2010. The fight even included allegations of industrial espionage involving the US National Security Agency.

According to sources, GE has made an estimated tens of millions of dollars licensing wind patent suites in the US for as much as $25,000 per installed megawatt. Totaro estimates that in 2011 GE spent some $17.4 million on just maintaining its US wind IP portfolio — and by 2020 those costs will be $31 million.
Questioned about this, GE’s Abate says: "I wouldn’t be surprised, but I don’t know the numbers." He adds that GE has filed more than 900 wind patents globally. Likewise, Abate does not refute the 2020 prediction: "We’re going to file more [wind patents]," he replies. "[The costs] are scalable."

The Chinese factor

IP’s importance is also evident in the ongoing fight between US-based AMSC and China’s largest turbine manufacturer, Sinovel Wind Group. AMSC is seeking $1.2 billion from Sinovel in various lawsuits in China for alleged theft of IP, breach of contract — for refused components shipments — and damages. At one point, Sinovel accounted for 75% of AMSC’s revenue. In Austria, a disgruntled former AMSC employee, Dejan Karabasevic, has already pleaded guilty and been imprisoned for selling trade secrets to Sinovel, including AMSC blueprints and software codes for turbine controls. AMSC says it has "hundreds" of emails between Karabasevic and "senior" Sinovel staff.

Sinovel denies the charges and has filed a $12 million counter-claim alleging that AMSC’s goods failed to meet contract requirements for technology and quality, a charge that AMSC is contesting. Michael Zakkour, who advises companies on China for Shanghai-based Technomic Asia, says if AMSC loses the Chinese market could be chilled for foreign wind companies for several years.

Justin Wu, lead wind analyst at Bloomberg New Energy Finance, however, says the impact will not be so large within China but will mostly hit Chinese companies exporting or making wind equipment elsewhere. In November, Irish developer Mainstream Renewable Power halted a 1GW supply deal with Sinovel over the dispute. And at the recent US-China wind conference in San Francisco, officials with rival Chinese turbine makers said they could end up being "collateral damage", with potential foreign customers questioning their IP integrity.

China’s IP protection is improving, says Edward Chatterton, a partner with DLA Piper’s IP and technology legal team in Hong Kong. But the perception of China’s handling of IP has lagged behind improvements, he adds, with many people still regarding the country as an IP "black hole". However, Simon Zhang, the Shanghai-based head of clean tech at InterChina Consulting, says a change in perception of China is evident in responses to surveys by the US-China Business Council. In a 2010 survey, more than half of respondents said China’s IP enforcement had improved.

Still, although China has laws to protect IP, enforcement can be selective, say other experts, And Chatterton admits that many western companies do not patent inventions in China — which would mean disclosing technological details publicly— if the end product is not sold in the Chinese market. Instead, they may protect IP as a business secret with non-disclosure agreements.  

Some companies feel that the current arrangements are sufficient. "We feel well-protected by the Chinese patent system," states Stiesdal of Siemens, which in December signed two joint ventures with Shanghai Electric Group. "Of course, we need Chinese patents," he says, adding: "You need to take reasonable precautions, as you do in any market."  

But IP will be increasingly crucial as more patents are filed, technology is transferred to developing nations and the financial stakes grow in a larger industry. The Clean Energy Patent Growth Index, compiled by IP law firm Heslin Rothenberg Farley & Mesiti, shows new US patents increasing more than threefold since January 2010. Trends include patents for power factor control and VAR support; sensor-system accuracy and availability; and reliability, including of towers, says Totaro.

Competitive edge

In a downturn too, patent-holders leverage their portfolios aggressively with the rollout of edgy products, by licensing or by buying IP-rich rivals, as seen in GE’s recent purchase of Converteam, a move that bolsters GE’s technology for full-power conversion and permanent-magnet generators. In addition, companies with large patent portfolios may try and thwart rivals during crucial windows of opportunity in a market.

Or as Victor Cardona, the IP lawyer who oversees the patent growth index, puts it: "In tough times, you look at anything you can do to get ahead of the competition."

BATTLE OVER ENERCON'S INDIA PATENTS CONTINUES — By Sara Knight

The importance of nailing down exactly what innovation a patent is designed to cover is a lesson turbine maker Enercon seems to have learned in India the hard way. In a series of decisions in 2010, the Intellectual Property Appellate Board (IPAB) in Chennai declared 12 out of 19 patents held by Enercon in India invalid.

Enercon’s patent problems in India are unusual, being part of a larger, longer-term and still ongoing battle with its local business partner, the Mehra family. Apparently aimed at dispensing with the obligations of an intellectual property licensing agreement with Enercon, the patent revocation applications had been lodged by Enercon India Limited (EIL), a joint venture in which Enercon holds 56% and EIL’s managing director Yogesh Mehra and his family 44%. The applications were signed by Mehra.

The joint venture was set up in 1994, but after some years of business, co-operation between the two shareholders deteriorated. Their differences reached boiling point in 2007 when Enercon filed a complaint against Mehra group members before the Companies Law Board on grounds of oppression and mismanagement of EIL under the Indian Companies Act.  

Mehra told Windpower Monthly on 16 January that "any person in India can use the processes covered by the 12 revoked patents". EIL produced 650MW of the Enercon 800kW turbine type in 2011, 200MW more than in 2010. EIL "has not contemplated producing a new turbine type, at this moment", Mehra continued. The main grounds for revocation were non-inventiveness and prior knowledge, he said.


Mehra may have a point. One of the IPAB revocation orders, handed down on 2 December 2010, is for patent application 199045 with the title "A wind power installation". The patent was filed on 16 November 2001 claiming the priority date 20 May 1999 and was granted on 23 February 2007. Other revocations refer to grid fault ride-through technology (patent 197959) and an inverter to provide a reaction to an abrupt frequency change (patent 202887).  

The patents were revoked by the IPAB principally on grounds that "the claimed inventions were not novel, they do not have an inventive step and are therefore obvious, and that the patent does not specifically define the claimed invention and therefore is liable to be revoked on ground of insufficiency", said Enercon lawyer Stefan Knottnerus-Meyer on 10 January. Section 8 of the India Patent Act requiring companies to keep the IPAB regularly informed of developments related to patent applications outside India was a supplementary ground in most revocation petitions, he added.

Knottnerus-Meyer said the remaining seven India patents have not yet been revoked. An IPAB hearing on them is due on 20 February. However, "the IPAB has already indicated it will deal primarily with the question of whether Yogesh Mehra was actually authorised to file nullity actions on behalf of EIL. Enercon disputes that Mehra has this authority. EIL’s articles of association clearly support Enercon’s arguments," he claimed.

HOW DOES INTELLECTUAL PROPERTY PROTECTION WORK AROUND THE WORLD — By Ros Davidson

Wind companies looking to protect their intellectual property (IP) should use IP attorneys who know local rights and their enforcement, so the risk can be factored into a business plan. But companies should also know employees’ and consultants’ rights to their inventions.

Most major nations — including China — have signed the Paris Convention for the Protection of Industrial Property. This gives applicants who have filed a patent in one member country protection in another member jurisdiction if they apply for a patent there within 12 months.

The European Patent Office (EPO) awards EU-wide patents, but these can be challenged in any member country and the outcome is not binding across the trade bloc. Enforcement is subject to each member state’s laws. An EPO patent is the strongest globally in terms of gauging novelty, says Guillaume Henry, a Paris-based IP lawyer. But EU and US patents are of similar quality when outcomes to challenges are taken into consideration. The EU has an IP helpdesk in China for small and medium enterprises.

Inventors should consider fast tracks for green patents, which exist in the UK and US. In the EU, one can ask for speedier consideration. China has been mulling a fast track and was circulating guidelines last month.

Due diligence of potential suppliers is crucial. There is also no substitute for knowing a potential partner, says Edward Chatterton, an IP lawyer at DLA Piper in Hong Kong. A would-be joint-venture partner may have robust patents, but a rogue middle manager who steals business secrets — which are not protected legally except by confidentiality agreements — or an ex-employee who retains computer access.

Small companies or individuals, especially, should know competitors’ research. Yan Zhao, a patent attorney at DLA Piper in Shanghai, emphasises being aware of local innovation in a large country such as China, where domestic innovation is escalating. The EPO has an online searchable global database of green patents in English, French and German. The US Patent Office online database covers
US patents only.

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