The battle of the titans may have only just begun, with Siemens Gamesa and GE battling over intellectual property (IP) in US federal courts in at least two venues across the US.
Companies can settle out of court but the fight has already been costly and high-stakes.
Next up is a July 21 hearing in U.S. District Court in Boston, Massachusetts, where damages payable by GE to SGRE will be discussed, according to a court official.
In June, jurors found that GE should pay an unprecedented royalty – or damages – of $30,000/MW for GE’s new Haliade-X wind turbine in the United States because it uses technology covered by the SGRE’s ‘413 patent.
The infringed patent relates to the structural support mechanism of a direct drive offshore turbine and the physical and structural arrangement of the main shaft bearings. This allows the turbine to be larger so that it can support increased loads and thus produce more energy, explains the SGRE.
The Haliade-X, with a capacity of 12 to 14 MW, is GE’s flagship offshore turbine. It is to be installed in the 800MW Vineyard Wind Turbine 1 Vineyard 1 Wind Turbine (800 MW) Offshoreoff Martha’s Vineyard, Massachusetts, USA, North America Click to see full details project, under construction offshore Massachusetts and expected to come online in 2023. GE also has a framework agreement to supply Haliade-X turbines to Ørsted 120MW Wind bonito 1 Skipjack 1 Wind Turbine (120MW) Offshoreoff Ocean City, Maryland, USA, North America Click to see full details project off the coast of Maryland and 1100MW Ocean wind 1 Ocean Wind 1 (1100 MW) Offshoreoff Long Beach, New Jersey, USA, North America Click to see full details project off New Jersey.
Patent infringement could – at least in the short term – shake up the offshore wind sector in the United States.
$60 million in royalties
Shashi Barla (pictured), director and head of research at Brinckmann Group, agreed that GE’s royalty payments – if maintained – could make the Haliade-X “a bit uncompetitive”.
If GE is forced to pay a $30,000/MW royalty for its “backlog” of just over 2 GW of near-term projects, it will face $60 million in IP spend, Barla said, while its profit margin is already “very thin”.
Of GE’s aggressive stance on protecting its intellectual property, he recalled that GE had won fights with Vestas, Nordex and Mitsubishi. “Unfortunately this time it backfired,” he said. “It’s kind of shooting yourself in the foot.”
He lamented the fight against intellectual property, saying it “sends a negative signal” from the wind industry and that investors and developers “could get cold feet”. The fight is particularly risky because there are only three major offshore turbine suppliers in the world, excluding China, he said. “It’s a huge supply risk for the industry if GE and Siemens fight each other,” he said.
Barla said: “This kind of [IP] will delay the energy transition, when we should be accelerating the energy transition.
However, Barla said GE would be considering the next generation of offshore technology, which he said could be finalized in 12 months and commercially installed by around 2026, or even 2025 if GE is aggressive.
Another bright spot for GE, Barla said, is that of the 30 GW of U.S. offshore wind that Biden is calling for by 2030, 25 GW isn’t expected to come online until 2025 and 2030.
Boston jurors also found another SGRE patent, the ‘776, to be invalid. This is a broad, generic patent for an improved stator that helps improve turbine operation, cooling and maintenance, according to the SGRE.
The SGRE can no longer seek “reasonable royalties” for the use of the technology covered by the invalid patent, but it can appeal the verdict of the jury. “The patent isn’t necessarily dead in the water right now. All of that means it can’t be asserted unless the jury verdict is overturned,” patent attorney Jared Hoggan (above) said and partner at Munck, Wilson and Mandala in Dallas.
Grounds for appeal?
In fact, all parts of the verdict are subject to appeal. Both sides are expected to appeal, but Hoggan added: “GE is more likely to appeal because Siemens [Gamesa] could still leave without appeal with a very significant victory.
Appeals tend to be relatively inexpensive, compared to a jury trial, said Paul Morico, president of the intellectual property sector at the Houston law firm Baker Botts, who advised the president’s transition team. Joe Biden on intellectual property issues. A jury trial can cost 80% of a total bill, while an appeal may cost as little as 20%, he said.
Morico estimated that the legal costs for each side so far in the case will be “north of $10 million”.
Another issue that could be addressed in the July 21 hearing is SGRE’s argument for a permanent injunction for any new GE violations. The jurors, in their May 19 verdict, also did not specify when exactly the $30,000/MW royalty would become due. GE licenses, for example, typically specify a one-time fee payable within 90 days of a turbine being commissioned.
An expert had previously speculated that Judge William Young could address the issue of whether SGRE is obligated to license the infringing technology to GE, but this is unlikely as compulsory licensing does not exist in the United States. .
“GE is somewhat at the mercy of Siemens [Gamesa] – there is no compulsory license requirement,” Morico said.
Application of patent law
A notable aspect of the intellectual property dispute during the trial was Judge Young’s decision supporting SGRE’s argument that US patent law applies to offshore wind technology, even when the projects are located at beyond US territorial waters but within 370 km of the coast. The decision was made because the wind turbines are attached to the outer continental shelf (OCS).
The multi-billion dollar OCS decision could impact the entire current offshore wind pipeline in the United States, since nearly all of the offshore wind pipeline in the United States is on the OCS. GE has already told the court that it will appeal. A typical appeal takes 18 months, Morico said, adding that the SCO ruling could end up in the US Supreme Court.
Professor Elizabeth Winston (pictured) of the Columbus Law School at the Catholic University of America said the SCO’s decision was not a surprise and was in line with how the law is applied in other countries, including the UK.
Asked how the OCS decision could impact offshore wind projects in states other than Massachusetts, she said: “A decision of a Massachusetts district court is not binding on a district court of another jurisdiction, but may be found persuasive by another district court.”
Since last month’s verdict, GE has declined to comment on the matter, while a SGRE spokesperson said: “Siemens Gamesa is currently evaluating all options and no decision has been made at this time regarding the injunction or appeal.”