Which way is the wind blowing? If you are a wind energy manufacturer or a developer looking to implement or expand wind energy farm operations, this is a question you must be asking yourself when it comes to the potential effects recent litigation between major manufacturers will have on the wind power industry.
On July 31, 2017, GE sued Vestas Wind Systems A/S and its U.S. subsidiary for patent infringement, pitting the number one and number two wind turbine manufacturers in the United States according to the American Wind Energy Association. GE accused Vestas of infringing GE’s U.S. Patent No. 7,629,705 with several of its wind turbine products. The patent covers a method of controlling the operation of a wind turbine generator so that it remains connected to the power grid during and subsequent to a low voltage dip, which may be caused, for example, by large electrical loads, lighting strikes or short circuits.
This is the second time GE has sued a competitor for infringing this patent. In 2010, GE sued Mitsubishi Heavy Industries, the fifth largest wind turbine manufacturer, for infringement of the ’705 patent in the U.S. District Court for the Northern District of Texas. The court awarded GE approximately $170 million in damages and a permanent injunction. However, GE and Mitsubishi later settled the lawsuit in 2013. Though the terms of the settlement were not disclosed, it likely included a cross-license of intellectual property between the parties.
GE has not indicated the amount of damages it seeks from Vestas in the present lawsuit. However, GE alleges that Vestas has willfully infringed its patent, noting that GE subpoenaed Vestas’ US subsidiary and one of its electrical engineers during the Mitsubishi litigation, and that Vestas would therefore have been aware of GE’s ’705 patent. A finding of willful infringement would entitle GE up to treble damages.
Vestas has indicated it believes GE’s lawsuit is without merit and that it intends to challenge it. Given its size, Vestas has leverage it can exert to push back against GE in the litigation. For one, Vestas has approximately 560 U.S. patents, which its attorneys are no doubt reviewing to identify possible counterclaims against GE for infringement of Vestas’ patents. Vestas will also likely look to the details of the Mitsubishi litigation for additional arguments it can make to challenge GE’s patent. However, GE’s patent has already survived several validity challenges at the U.S. Patent and Trademark Office (USPTO). Nevertheless, as with the Mitsubishi case, the litigation between GE and Vestas will likely result in a settlement, likely including a cross-license of intellectual property, and the settlement terms will depend on the relative leverage the parties are able to apply.
Vestas will be under pressure to resolve the lawsuit as soon as possible to avoid the uncertainty of litigation affecting existing or new agreements with developers for the supply of wind turbines. The longer the litigation continues, the greater the level of uncertainty such developers may feel, possibly causing them to opt for another wind turbine supplier. Vestas’ potential counterclaims against GE may have the same detrimental effect on GE. Therefore, a prolonged legal battle between the parties is likely to do more harm than good to both parties, as well as the U.S. wind power industry as a whole.
GE’s lawsuit against Vestas, following on the heels of GE’s lawsuit against Mitsubishi, will no doubt cause other wind energy manufacturers to more closely evaluate the potential risk that the ’705 patent poses to their wind turbine businesses. Given that GE has now asserted the ’705 patent against both Mitsubishi and Vestas, and that the patent has survived several validity challenges, GE may continue to vigorously assert its patent against wind energy competitors.
Wind energy manufacturers may also want to ensure they have an adequate program for identifying and mitigating potential intellectual property risks. For example, a program for periodically monitoring and reviewing newly issued competitor patents can identify patents that pose a potential barrier to commercialization of the company’s products, allowing companies time to develop strategies for mitigating infringement risk.
Further, companies should seek to grow their intellectual property portfolios and continue to pursue patent protection for their innovations. Not only can patents allow a company to protect its investment in innovation by allowing it to exclude others from practicing its inventions without permission, but patent assets may be useful negotiating tools when faced with a lawsuit from a competitor.
As the U.S. wind energy market continues to grow, competition is likely to increase between wind energy manufacturers. Companies will no doubt continue to seek ways to leverage any advantage they may have to maintain or grow their market share, including using intellectual property assets on their technology, if necessary via lawsuits, to do so.
Lead image credit: GE