Alternative Energy/Overview of Economics of Intellectual Property in AE

Overview of Economics of Intellectual Property

Data on enclosure: Patenting activity and increase over time

(Copenhagen Economics 2009)

• Between 1998 and 2008 215,000 patent applications were filed for clean energy technologies (specifically wind, solar, fuel cells, geothermal, ocean, biomass, and waste) internationally, of which 22,000 were in developing countries - 7,400 of these were actually owned by residents of those countries and not surpisingly, 6,800 of those were owned by residents of China.
• The worldwide growth rate of patent registrations for the period of 2004-2007 was 120%.
• In 1998 1 in 20 patents was protected in a developing country whereas in 2008 the split was 1 in 5.
• Fuels cell patents and solar energy patents account for 80% of these numbers, and wind energy is a distant third.
• 99.4% of the patents in developing countries were in a small group of emerging markets (China, India, and a few others) whereas the larger majority of developing countries only protected 0.6% of the patents.
• This split has raised concerns among smaller and less wealthy developing countries that the costs of alternative energy technologies will soon rise putting them out of their reach.
• This leads to the conclusion that patent rights can't be an obstacle to the transfer of clean energy technology to developing countries since there are very few patents for these technologies registered in these countries. A relaxation of the property rights regime for these technologies would not improve tech transfer to these countries.
• In 2008 the emerging markets (China, India and a few others) accounted for 20% of worldwide patenting.
• As the world looks for ways to reduce global GHG emissions and developed countries look for ways to facilitate the necessary emissions reductions in developing countries, the Copenhagen report suggests that the insufficiencies in technology transfer to developing countries, may more likely be attributable to some of the following issues:
  • insufficient technological knowledge to produce innovative technologies locally,
  • insufficient market size to justify local production units
  • insufficient financial resources to acquire innovative products
• The study finds that wind technology is the most likely to be patent protected in less developed economies and emerging markets. They account for 15% of the worldwide patent applications in wind technology.
• The very few patents (0.6% mentioned above) owned in the least-developed countries tend to be owned by firms in developed countries.
• The report suggests that firms are less likely to transfer technology to countries where IPR law is enforced loosely - pointing to literature that shows that strengthening IP legislation increases technology transfer because royalty payments represent the sale of IP rights between subsidiaries of a firm.

Image: Clean Energy Spacial Patent Distribution

(Reichman et. al. 2008)

• One barrier to studies of patents in green technologies (defined like clean tech in that the term covers technologies that facilitate carbon abatement, both energy supply and energy efficiency technologies) is that the U.S. Patent and Trademark Office (PTO) does not recognize green technology as a class, making it difficult to assemble quantitative information about patents in the sector.
• There is a lack of empirical evidence regarding the effect of intellectual property rights on innovation due to two factors:
  1. the technology is in a nascent stage and therefore lacks the history to be appropriately studied in this context.
  2. The lack of an appropriate GHG pricing system (or other appropriate economic tool to stimulate the market for carbon-abatement technologies) means that the market is still unstable and immature, hindering accurate studies of IPR.

"As a further indicator of innovation in the sector, the number of U.S. patents granted for clean technology breakthroughs has increased about twenty percent over the past five years, from fewer than 750 in 2002 to around nine-hundred in 2007." (Ward et al, 2008) Also see: Clean Energy Patent Growth Index

The CEPGI (shown below annually) tracks the granting of U.S. patents for the following sub-components: Solar, Wind, Hybrid/electric vehicles, Fuel Cells, Hydroelectric, Tidal/wave, Geothermal, Biomass/biofuels and other clean renewable energy.

Image: Clean Energy Patent Growth Index Chart

As depicted in the below breakdown of the CEPGI by its sub-components, patents in wind, fuel cells, hydroelectric, tidal and geothermal were up in 2008 over 2007 with hydroelectric and tidal patents being at all time highs.

Image: CEPGI Sub-Components Chart

"While the number of U.S. patent applications has steadily increased in recent years, the trend in the number of U.S. patents granted actually fell slightly from 2006-2007.6 This decrease in the number of patents granted may be a result of the U.S. Supreme Court’s ruling in KSR International, Co. v Teleflex, Inc.—arguably the most important patent ruling in years—which effectively raised the bar for inventors who wish to obtain patent protection for products that rely on new combinations of existing, publicly-known elements. Because alternative energy developments often incorporate older technologies, meaningful advances may be susceptible to being seen by the U.S. Patent and Trademark Office and the courts as merely “ordinary innovation” that “does no more than yield predictable results.” (pg 244) (Ward et al, 2008)

Literature review on efficiencies and barriers caused by IP in AE

Patents litigation increases in the US signalling the value of the technology to companies

Enercon vs. ITC

• Enercon v. ITC was a landmark wind energy patent infringment case from 10 years ago.
• ITC excluded Enercon's variable speed wind turbines from the US when Kenetech Windpower filed a complaint saying Enercon's wind turbines infringed its patents for controlling AC power output.
• Federal Circuit affirmed ITC's decision and prohibited Enercon from importing wind turbines into the US until 2010.

Southwest Windpower v. Aeromax

• Southwest, a small wind turbine manufacturer, claimed that Aeromax's wind turbines infringed its patent.
• Arizona court issued an injunction prohibiting sales of Aeromax's wind turbine.

Gamesa Eolica, v. General Electric

• Gamesa claimed that GE infringed its patent directed to a speed wind turbine that converts variable frequency AC to fixed frequency AC and maneuvers turbine speed to increase efficiency.
• Wisconsin court found no infringement in favor of GE.

Paice v. Toyota

• Paice claimed that Toyota's hybrid vehicles included a drive train similar to one covered by its patents.
• Texas court held that Toyota infringed Paice's patent, but denied an injunction and allowed Toyota to continue selling its hybrid cars for a royalty payment of $25 for each car sold during the life of the patent.
• Case was affirmed on appeal.

Ovonic v. Matsushita

• Ovonic claimed Matsushita's hybrid electric vehicles infringed its patents covering nickel metal hydride batteries.
• Parties ultimately entered into a settlement agreement including a cross-license and a combined license fee of $30 million.

Maxwell Technologies v. NessCap

• Maxwell, a manufacturer of ultracapacitors for hybrid cars and renewable energy sources, filed a complaint against Nesscap, a Korean competitor, to enforce its patents related to electric double layer capacitors.
• Court entered a preliminary injunction enjoining NessCap from selling its prismatic ultracapacitor products.
• January 2007, Nesscap filed its own suit against Maxwell, alleging that Maxwell's ultracapacitors infringe a NessCap patent.
• Both cases remain pending.

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