Visit windpowermonthlyevents.com for the latest on our upcoming conferences and webcasts

Canada

Canada

Out of bankruptcy and into trouble -- Dispute over rights to turbine

A manufacturer of small turbines based in the US state of Vermont has emerged from bankruptcy and relocated to Canada to find itself in a dispute with a Canadian company that has been building and selling AOC's 15/50 machine for eight years and wants to continue.

Atlantic Orient Corporation (AOC), a manufacturer of small turbines based in the US state of Vermont, has emerged from bankruptcy and relocated to Canada to find itself in a dispute with a Canadian company that has been building and selling AOC's 15/50 machine for eight years and wants to continue.

"Certainly it is our intention to advise customers that only AOC has the right and licence to the drawings and the intellectual property," says Malcolm Lodge, AOC's newly appointed president and general manager, who runs the company, which has new owners and new investment, out of Charlottetown, Prince Edward Island.

The other company involved in the dispute is Halifax-based Atlantic Orient Canada Inc (AOCI), created in 1995 by AOC and Nova Scotia's Seaforth Engineering, says vice president Stan Mason. The aim was to help market the 50 kW turbine and bring as much of the manufacturing as possible to Canada, where costs were lower. The companies signed a letter of intent, and although there is no further formal documentation of the relationship, AOCI has been carrying on business since then using, says Mason, drawings from AOC.

"You don't give something that is your only product, you don't give it to somebody completely, you don't bring them into your shop and train them and teach them how to do everything if there isn't some sort of rights there. This is our stance," he says.

AOC argues there is "no indication" in the letter of intent that intellectual property rights were conveyed, says Lodge. As far as AOC is concerned, he says, the relationship with Seaforth was a casual one that AOC terminated when Seaforth challenged the company's bankruptcy proceeding. In fact, he adds, any prior contract or agreement between AOC and Seaforth would have been extinguished by AOC's bankruptcy and subject to a claim. "They didn't make one," says Lodge.

The two sides also disagree on the ownership structure of AOCI. AOC says it owned 51% when the company was formed, while Seaforth says that AOC owns 49%.

The dispute is wending its way through courts in both the US and Canada. In March, while AOC was in the midst of its bankruptcy reorganisation, it filed suit in New Hampshire claiming that AOCI, by advising customers and suppliers it still had the rights to the technology, was interfering in AOC's business and in contempt of an injunction issued by that state's bankruptcy court. But, says Mason, the company named in that injunction was AOC Energy, formed by Seaforth and other investors to bid on AOC's assets in a sale that never went through. AOCI was not part of that group, he says.

In July, AOCI filed suit in the Supreme Court of Nova Scotia against AOC, Lodge and Lodge's consulting firm, claiming they were interfering in its business by telling customers and suppliers that it didn't have rights to the 15/50 turbine. "It is going to be up to the courts to decide. We've really gone our separate ways right now, completely," says Mason.

Five continents

There are currently about 50, 15/50 turbines installed on five continents, and both companies are continuing to actively market the machine. AOCI has a purchase order to supply eight turbines to a project on Sagar Island in West Bengal, India, and is "in negotiation for a couple of very large contracts," says Mason. He adds that with the growing interest in net metering across North America -- and in using wind to help offset costly and polluting diesel generators in remote communities -- there is room for two companies that manufacture the same small 50 kW turbine.

"We have a vision for what we want to see the machine go towards and I'm sure the other side has a vision of the advances they are going to make. So within five or six years anyway, you would have two machines that are pretty different," he says.

While AOC does not want to see two companies building and selling its 15/50 turbine, it does believe the small turbine market holds great promise. Since emerging from bankruptcy in May, says Lodge, the company has received and delivered orders from Alaska and Texas and is manufacturing for a project in North Dakota.

"We receive inquiries every day from interested developers and individuals wishing to construct wind turbine systems. Most are from remote locations and potential net energy billing locations in the US and Canada," says Lodge. "This is an area of the industry that Canada has concentrated on. Canada gave up on the large wind turbine business in the middle eighties with the demise of the vertical axis wind turbine -- and there has been no sustained R&D program in the country or interest to support it. But in the wind-diesel area, we feel there is an enormous worldwide potential."

Arizona deal

In September, AOC agreed with Arizona's Southwest Windpower, which produces 400-3000 watt wind turbines, to jointly market the AOC 15/50. "Southwest already finds itself in many remote regions installing small wind turbines. Now, with the AOC Model 15/50 we will have the ability to develop larger projects including micro-grid systems to power villages," says Southwest's Andy Kruse.

The reorganisation of AOC began last year after one of its investors, Entegrity Partners LLP, became concerned about the financial state of the company and took control by obtaining a majority of shares and securing the senior notes, says Lodge. AOC filed for bankruptcy in September 2002.

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus

Windpower Monthly Events

Latest Jobs