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United States

Trade commission ban on European turbines

A "limited exclusion order" was issued on August 30 by the US International Trade Commission banning variable speed turbines made by German company Enercon GmbH from the United States for the next 15 years or so. A US governmental agency has determined that the power electronics in Enercon's E40 technology violates a patent held in the US by Kenetech Windpower. Enercon officials immediately vowed to appeal against the ruling and deny that any of its technology infringes the patent. The decision is sure to worsen the already strained relations between the European and US wind communities.

In a decision which has stunned the international wind industry and is certain to have a wide reaching impact, variable speed turbines made by German company Enercon GmbH are to be banned from the United States for the next 15 years or so. A US governmental agency has determined that the power electronics in Enercon's E40 technology violates a patent held in the US by Kenetech Windpower. Enercon officials immediately vowed to appeal against the ruling.

The notice of a "limited exclusion order" was issued on August 30 by the US International Trade Commission (ITC) in Washington DC. The "limited" ban refers only to turbines from a particular source -- and not all variable speed wind technology, says Mark Kelly of the ITC's Office of the General Counsel. But Kenetech -- or whoever buys its power electronics patents -- could attempt to initiate the same process for any foreign wind turbine using power electronics. Several European companies have variable speed wind turbines under development, including WindMaster and Lagerwey in the Netherlands and Windtec in Austria.

Enercon's E40s were the specific subject of the complaint because they were to be installed at Big Springs in Texas by US firm New World Power Corp, which was thus also named in the ITC decision.

"The Commission determined that the appropriate form of relief is a limited exclusion prohibiting the unlicensed entry for consumption of variable speed turbines and components thereof manufactured and/or imported by Enercon GmbH of Aurich, Germany, and/or the New World Power Corp of Lime Rock, Connecticut, and that infringe claim 131 of U.S. Letter Patent 5,083,039," concludes the ITC notice.

EU official protest

The bombshell decision is sure to worsen the already strained relations between the European and US wind communities. Indeed, it has just come to light that the European Union (EU) had blasted the ITC's preliminary Enercon decision in June -- even before it became final -- as "discrimination" and contrary to GATT 1994, the Uruguay round of the General Agreement on Tariffs and Trade. The EU also warned that it may take the Enercon dispute to the World Trade Organisation (WTO), as GATT is now known.

"The Enercon case is another eloquent illustration of the type of discrimination against non-US products in patent infringements contrary to Article III of GATT 1994É" wrote the European Union (EU) Delegation of the European Commission in Washington in an official two-page letter of protest to the US Department of State about the Enercon case, dated June 27. In fact, the ITC is routinely criticised as "protectionist" by advocates for foreign based companies.

Officials for Enercon GmbH were clearly stunned by the decision and are promising to continue the fight. The company denies that any of its technology infringes a Kenetech patent. It also says Kenetech's 1993 variable speed patents are invalid anyway because "prior art" existed -- the technology was already out there. And Enercon denies that it had completed a sale for import of an E40, which Kenetech had alleged and which the ITC decision upheld. Without a sale for import to the United States, the ITC has no jurisdiction in the matter.

"We look forward to getting a real hearing in a real court instead of in a biased venue such as the ITC," says an infuriated Mark Haller, Enercon's US representative. Kenetech Windpower, which has filed for bankruptcy protection, is also suing Enercon over patent infringement in US District Court in San Jose. That matter is as yet unresolved and is another avenue in which the patent fight can be settled. And even if Enercon is more likely to prevail in an ordinary federal court, the dispute could easily take a year to be fully resolved. Until then, Enercon turbines cannot be imported into America.

So surprising is the ban that even the American Wind Energy Association (AWEA), the US industry's lobby group, seems taken aback by the turn of events. "It's very hard for me to understand how the ITC arrived at that decision," says AWEA's Randy Swisher. AWEA's official position, he says, is to oppose "international trade barriers" as they impede "free and fair competition" -- a reaction implying that even AWEA sees the ITC outcome as protectionism rather than as a matter of patent infringement. And on the impact of the ban he notes dryly, "Enercon has already been limited and restricted in this market for however many months or years it's been since this action was filedÉ" But will AWEA officially issue a protest in some way? "It's difficult to expect a trade association to take a position on a dispute between two member companies," he responds.

The ITC's August 30 ruling becomes final unless it is vetoed by President Bill Clinton within 60 days of its issuance. Clinton is highly unlikely to veto such a decision, especially in an election year. It would then last -- and would be enforced by US Customs agents -- until the Kenetech variable speed patent expires, apparently in the year 2011. Enercon and New World, however, have another 60 days from when the ITC decision becomes effective in which to appeal it in federal court, so may challenge the ITC up until the end of December. Indeed a favourable verdict in the federal appeals court would overturn the ban completely.

The 15 month ITC probe was initiated when Kenetech filed a complaint alleging unfair trade practices by foreign company Enercon. Such a complaint is usually only taken to the ITC after informal discussions with the US Office of Unfair Import Investigations, which is a party to the administrative law hearing at the ITC. A "preliminary determination" by the ITC in May had upheld Kenetech's contention that one of its patents had been infringed and that there had been a sale for import of one of the "accused" turbines. More specifically, the ITC found a violation of section 337 of the 1930 Tariff Act. The ITC evidentiary hearing had been held in front of an administrative judge in Washington DC in January and early February.

Such an investigation is relatively rare. Only ten patent infringement cases were investigated under the Tariff Act last year by the ITC, and only 16 during the year before. The ITC, based in Washington DC, is a federal agency that oversees various international trade matters including unfair trade practices, such as patent or copyright infringement, dumping of foreign goods in the US market, studying trade and tariff issues and acting as the government's think tank on international trade issues.

The US wind power market is so tight, the fight over the few opportunities available has become bloody. And worldwide, the Europeans and Americans are battling to establish niches in regions of the Third World that are promising for wind development.

In its formal letter of protest, the European Union accused the US of treating foreign products that allegedly infringe US patents "less favourably" than domestic products challenged on the same grounds. There are "fundamental discriminatory elements" in Section 337 of the Tariff Act of 1930, it continued. In cases such as this, respondents such as Enercon must defend themselves both in federal court and in front of the ITC, which essentially doubles their effort and expenses and with different procedural rules. "Éthe European company, Enercon, is exposed to the risk of having to comply with different obligations imposed in different courts."

Lastly the EU asks the State Department not to allow action contrary to GATT to be taken against Enercon or any other European company. If it is, the EU notes that it has the right to settle disputes under the World Trade Organisation. "The Community wishes to reserve its rights under the WTO dispute settlement procedures should the United States decide to disregard this request," it concluded in the letter, which was dated before the final ITC decision in late August.

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