Intellectual property (IP) and the renewable energy transition: Five critical IP issues

Introduction

Energy companies are under increasing pressure to meet growing global energy demands and simultaneously accelerate global decarbonization efforts. This energy transition to renewable energy and less carbon intensive processes requires colossal investments in time and money to transform existing technologies into emerging technology solutions.

As energy processes solutions are improved through innovation, intellectual property (IP) protection and risk mitigation will be vital for successful commercialization and return on investment for these endeavors. For example, patenting a newly developed renewable energy process and technology can provide the right to leverage the claimed process and technology, and therefore recoup time and monetary investments and also maximize the chances of success. Alternatively, trade secreted methods in an energy facility that are not publicly disclosed can provide a head start and/or operational advantages in perpetuity, if not easily reverse engineered.

In order to maximize a return on investment for developing solutions to problems associated with the renewable energy transition, companies must have an IP strategy tightly aligned with their business goals, and technical acumen to effectively commercialize these initiatives. The foundation for developing and deploying a coherent IP strategy and successful energy transition commercialization program is establishing an “IP team” comprised of business, technical, and IP legal professionals who are aligned, engaged, and atuned to your corporate mandate. Below are five critical IP considerations for your company’s IP team to consider when investing in and leading the energy transition.

Identify, address and secure IP rights early on

Investments in new technology development within your organization must be complimented by a strong innovation and IP culture that encourages the invention, disclosure, documentation and protection of new ideas. Companies that don’t effectively identify, review and protect their innovation with IP will inevitability give those ideas away and donate their investment to the public without any recourse.

Policies, procedures and frequent training programs should encourage engineers and scientists to invent and document new ideas, as well as mandate efficient workflows for the review and protection of inventions by the IP team. For example, IP team review of external third-party engagements and proposed publications can confirm IP filings are completed and/or that appropriate confidentiality and non-disclosure obligations are in place to avoid potential loss of IP rights. Importantly, disclosure or publication of novel ideas without the appropriate confidentiality measures may prohibit future efforts to seek IP protection.

On the other hand, when considering licensing or investing in the development or scaling-up of technology owned by a third party, any payment and/or cost sharing should be conditioned upon the right to use that technology as desired in the future to avoid paying a premium later as the technology becomes proven. The IP team’s involvement with due diligence, structuring, negotiation and execution of these technology transactions will help ensure third-party technology owners have the right IP protections in place to justify your company’s economic investment.

The moral of the story here is that there is no better time than the present to secure your company’s IP rights. It will only become more difficult and more expensive in the future, possibly rendering the rights weaker or not as effective.

Continually review and assess third-party IP risk

One of the most frequently overlooked and potentially impactful IP issues associated with new technology development and commercialization is compliance with third-party IP rights. Patents provide the right to exclude others from making, using, and selling a claimed invention in the country of filing – not the right to practice the invention. That is, due to the overlapping nature of patent rights, a company may have numerous patents covering a specific energy process and at the same time require a license from a third-party patent owner in order to operate that same process without the threat of patent infringement litigation. In order to avoid one of the most complex, lengthy, and expensive types of litigation and possible injunction against an installed process, it is crucial for IP teams to conduct freedom to operate (FTO) analyses or clearance reviews for blocking third-party patents before implementing or using new technology to ensure third parties’ IP rights are respected.

Before investing in internal technology development, an IP team can help your company get ahead of potential patent issues by performing competitive intelligence in the field to steer technology investments towards open “white space,” and not closed areas covered by broad-blocking patents. While technology is in development and progressing, IP teams should also iteratively perform FTO analyses in each country where new technology will be commercialized to avoid a process that potentially infringes third-party IP rights. In some instances where the finalized technology to be implemented is close to one or more patent claims, a formal non-infringement and/or patent invalidity opinion may be desirable as a future defense to allegations of willful infringement and possible enhanced damage awards.

Alternatively, when licensing technology, it is common market practice that the licensor (who owns and will collect licensing revenue for use of its technology) bears the risk and responsibility for any violation of third-party IP rights. Accordingly, licensees should require standard IP representations and warranties regarding ownership, non-infringement and use of the technology as well as demand a full IP indemnification in the case of any actual or alleged infringement and/or misappropriation of third-party IP rights. In parallel, IP teams can help further mitigate the risk of third-party IP issues associated with in-licensing transactions by conducting litigation searches on the licensor, asking the licensor about its FTO activities and litigation history, as well as performing independent FTO analysis for the process to be licensed.

In summary, companies should confirm their freedom to operate renewable energy processes within the parameters of third-party IP rights before commercializing new technology. This is a high impact risk that can result in expensive litigation, multi-million dollar judgments and/or potential court orders to stop operations even after significant capital investments.

Understand IP coverage depth and strength

When internally developing technology, proactive consideration and balancing of patent, trade secret, copyright, trademark and other forms of IP protection will help form an “IP moat” of protection around technological advancements and ensure companies extract the maximum value from their investments during the renewable energy transition. The depth, width, and deterrent effect of an IP moat is dependent upon the technology and particular types of IP protection deployed and requires significant analysis to understand. The scope of patent protection is limited in terms of the jurisdiction of grant, the breadth and limitations of the patent claim, alternative or design around opportunities for the technology, and what has been practiced in the prior art. Likewise, trade secret protection can offer a potential competitive edge or head start but cannot prevent competitors from independently developing or reverse engineering. Copyrights are similar in that they protect against wholesale copying of the expression of an idea but cannot stop independent development. And finally, trademarks provide brand name recognition and can help establish market positioning. A combination of these IP rights should be balanced, considered and established as part of the IP team’s effort to build an IP moat of protection around innovation.

When considering licensing or procuring technology from a third party, the IP team should be deployed to review the processes and methods licensed by the technology owner, as well as the associated IP protections. Reputable technology licensors should cooperate with due diligence exercises and provide information regarding its IP position and blocking effect in the competitive landscape. Failure to understand the complete scope of the technology and/or the licensor’s IP position can result in overpayment for access to the technology and/or unexpected competitive activities.

Qualification and quantification of IP coverage for technology is a difficult, multifaceted analysis. An IP team equipped with as much technical, commercial and legal information as is available will help reduce ambiguities in their assessment.

Avoid IP contamination

For companies simultaneously engaged in internal technology development and assessment or licensing of third-party technology in the same technical area, IP contamination is a specific risk that may compromise ownership of their IP protection. That is, confidential, technical information received from external sources under non-disclosure obligations (including restrictions on use and publication) can contaminate internal research as well as IP filings therefrom. The most common example of this occurs when the same scientist or engineer that is developing technology for a company also receives confidential information from third parties related to the same technology. Any inventions and patent filings by that scientist or engineer can be considered contaminated. Not only could this jeopardize ownership of those patent filings, it may also constitute breach of the non-disclosure obligations with the third party.

Companies can mitigate IP contamination risks by narrowly tailoring confidentiality agreements to avoid receiving confidential information on the same (or substantially similar) subject matter as internal research efforts. Alternatively, another option involves setting up firewalls (with different technical personnel on each side) to protect internal research efforts and avoid breaching confidentiality obligations. In any case, policies and procedures should specify responsible management of third-party confidential information and establish precautionary measures when hiring technical experts from competitors to work on the same or similar technology.

Be mindful of data

Access and the right to use data during technology development is critical for the IP team to identify and protect innovation. After all, data is, in many respects, the “new oil.”

For internal activities, companies should deploy user-friendly systems and procedures to manage, store, categorize and protect data as renewable energy technology is developed. Both positive and negative test results can be beneficial during technology development and together are often the key to acquiring valuable patent claims.

On the other hand, companies should demand rights to (and, if possible, ownership of) data developed as a result of investments in third-party technology. Even with the most favorable IP ownership contract terms in place, your company may not be able to recognize and protect innovation without access to generated data.

In conclusion, companies that will be in the best position to recover their investments during the energy transition will understand IP risk and utilize their IP team to secure IP rights early and often, respect third-party IP rights, understand IP coverage for commercialized technology, avoid IP contamination and confirm access to innovation data.