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European interim ruling on patent validity -- GE Wind sues Enercon and its agents in Britain and Canada

A preliminary assessment of the validity of a much disputed patent on variable speed wind turbine technology held by GE Wind Energy has been issued by the European Patent Office (EPO). The assessment is likely to have a crucial bearing on suits filed by GE in December and January against German company Enercon for alleged infringement of GE's patent in Britain and Canada.

In what is shaping up to be a veritable David and Goliath battle, Enercon also announced last month that it is preparing to retaliate against its far more powerful rival by filing suits against GE in Germany for allegedly breaching patents held by Enercon.

The EPO assessment from March 12 is the latest step in a decade long and high stakes patent war that could once again change the course of the wind industry. An American version of the patent, which does not expire until 2010, has already been effective in banning Enercon from the United States market for the past seven years. Now Enercon's position in Europe -- and possibly those of all other companies marketing variable speed wind turbines -- will be influenced by the result of oral hearings to be held by the EPO on June 16. In terms of sales, Enercon is the world's third largest wind turbine company after Vestas and NEG Micon.

Victory claim

The preliminary opinion issued by the EPO prior to next month's hearings is already being heralded as a victory by Enercon. The EPO panel of experts "clearly questions the validity of this patent," claims Aloys Wobben, Enercon's owner. He has vigorously maintained from the outset that Enercon does not contravene either the American or European patent, though so far he has not won any of a series of appeals or counter suits in America.

The three person EPO panel, an "opposition division," was formed after opposition filings to the patent were lodged by no less than ten wind industry companies after it was granted in late 1998. As well as Enercon, the ten include Vestas, NEG Micon and Lagerwey, plus suppliers of electronic equipment to the wind industry such as WEIER Electromotorenwerke GmbH and Alstom UK Ltd.

The crux of the EPO's preliminary assessment rests on whether the patented power factor control and power conditioning methods, when combined, qualify as "novel" or "inventive." The assessment concludes that a person skilled in the art would have been able to "automatically deduce without any inventive skill" that active power factor control could be applied to a wind turbine. The EPO requires oral presentations, however, before it can decide whether the techniques used to match the output from a variable speed turbine to the grid involve an inventive step.

If the EPO deems there is nothing new or inventive about GE's patented technology, it warns that it sees no other "supplementary features" for "a new allowable claim" for a patent by GE.

It took GE just over half a year to exercise its intellectual property rights, acquired as part of its purchase of Enron Wind in April 2002. In December it filed suit against the small Ecotricity group in England, which includes Western Windpower, for infringement of European patent 0569556B1. A month later, GE filed a second suit, this time in the Federal Court of Canada in Toronto, against Enercon and its local representative, Pincher Creek-based Windpower Inc (WPI), for infringement of Canadian patent 2100672. The defendants filed a response asking the plaintiffs to file "further and better particulars," a matter still being fought over.

No hearing date has been set in either case. Stephen Cottrill of Enercon's London-based lawyers, Oswang, expects the UK case to be heard early next year. In such court cases, the parallel filing by the defendant of a substantive opposition to the patent in question -- as Enercon has done with the EPO -- typically leads to a judge staying the infringement suit until the patent is resolved.

Court cases

Wobben says that efforts at conciliation between Enercon and GE have so far drawn a blank. "What I want is the court cases and the ITC order to be withdrawn," he says referring to the US International Trade Commission (ITC) ban on Enercon. "I do not like these court cases. They are destructive."

From Ecotricity, Dale Vince agrees. GE's action is "aggressive, negative and restrictive," he says. "Their advert says: now it gets interesting. It should say: now it get litigious." GE's move is diverting attention from the real business of building up a healthy wind industry, he continues. "My view is that it's something that does GE no credit to be acting in this way. It's the action of a manufacturer that has no confidence in its product and instead wants to fight in the market with its lawyers," he says. "It is a naked attempt to dominate the wind market with some dodgy old Yankee patent."

Steve Zwolinski, head of GE Wind Energy, says that GE believes it is important for the long term growth of the industry that the intellectual property (IP) structure is upheld and clearly understood. "We are intending to invest quite a lot money in this industry. We intend to make sure that the value of that investment is protected in the IP structure. There is really not a lot more to it than that," he says. "The proper place to do that is in the courts."

seeking patent respect

Industry speculation is rife about GE's purpose with the litigation, ranging from theories that GE is simply testing the strength of the patent, that is sees the courts as the only way of competing with Enercon technology, or that it sees legal harassment as a way of persuading Enercon to sell its technology rights to GE.

Zwolinski declines to comment on whether GE will take action against other companies it believes have breached the companies IP rights. "This is a lawsuit involving Enercon," he says. Neither will he say why action was specifically taken against Enercon's agents in Canada and Britain, both minor export markets for the German company. "We are trying to take a patent for its merits and enforce it," says Zwolinski. "We want to make sure people respect our patents as we would respect other people's patents."

Although Zwolinski says he considers it "unfair on all the parties to try and influence these decisions outside the courts," he confirms talks between GE and Enercon. "We will continue to have a dialogue," he adds. Such meetings, says Zwolinski, are part of any legal proceeding between two parties and settlements are possible at any point.

Wobben says he is considering marketing the E66 1.8 MW turbine, which is not specified in the ITC ban, in the US. GE would handle this competition "like any other machine," says Zwolinski. Wobben points out that Enercon now holds US patents on "all the important elements" of its technology.

In Canada

At the centre of the Canadian dispute is a single 600 kW E40 wind turbine in southern Alberta, the only Enercon machine operating in North America. Ironically, the day it was commissioned, December 11, 2001, was the same day the patent now held by GE was granted by Canada's Intellectual Property Office. Under Canadian law, patent holders can sue for infringement retroactive to the date a patent application was first available for public inspection -- in this case August 20, 1992.

WPI president Dale Johnson, who is planning a 100 MW project in southern Alberta using Enercon 1.8 MW E66 turbines, says he is happy that GE has forced the patent issue. "GE says there is an infringement. Enercon says there isn't, and we'll defend it."

Enercon claims GE acted very aggressively on the Canadian market in 2002, threatening customers with a patent infringement suit if they used Enercon turbines for projects. "That's what we were hearing," says Johnson. "It was out there, so we're glad it is going to be settled. And it will be one way or another."

Pat Dwyer, a partner in Lundbreck Developments Joint Venture A, which owns the Alberta E40 turbine, is critical of GE's decision to sue. "I would say in this reasonable world, they should have something that is comparable to offer before they stop other people from using something. They are not producing a gearless technology windmill that works."

Meanwhile, Wobben is taking steps to assert his own intellectual property rights. Since the mid-1990s, he has filed 45 patent applications in Canada covering various aspects of wind turbine technology, nearly all of which are still pending.

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