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Intellectual property in the energy sector

Energy companies may not always be up to date on legal issues involving the technology they use, and thus may unwittingly be exposing themselves to allegations of patent infringement, write Ji Young Park, Spencer Abraham and Salvatore Tamburo


The energy industry may be exposing itself to patent infringements

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Who would have thought 10 years ago that utilities would be in the forefront of the third industrial revolution?

Smart meters are here. Solar panels are on rooftops. State energy law now includes energy storage provisions, and automobile manufacturers are working together with the energy industry to deploy the next generation of vehicles powered by electricity. In the midst of all this, utilities are working with software providers to manage the smart grid and accommodate the latest renewable energy resources and information technology.

It appears, however, that the energy industry may not always be up to date on legal issues involving the technology they use, even those technologies that are part of our everyday operations like Wi-Fi and Bluetooth, and thus may unwittingly be exposing themselves to allegations of patent infringement.

As energy companies adopt technologies to equip themselves and their clients to take full advantage of the smart grid, they need to think about how to protect their homegrown technologies and protect themselves against patent infringement lawsuits. Obtaining the advice and guidance of counsel is a relatively simple and inexpensive way to protect a company’s proprietary technology and avoid common pitfalls of such lawsuits.

Good examples of companies who know how to protect their technologies are Apple and IBM. These high-tech goliaths have been developing consumer electronic products, and patent portfolios covering the products, for decades in order to prevent anyone from stealing or using their innovative ideas without permission.

By securing patents that cover the companies’ proprietary technologies, they were able to protect their place in the market against unscrupulous copycats. The situation is no different for companies in the energy sector.

For example, a couple of years ago, Dominion Resources Inc secured a patent to protect its invention related to conserving energy using smart meters. This cutting-edge technology was invented by Dominion’s engineers, and upon recognizing its value, Dominion obtained a patent that protects the invention.

When Alstom Grid Inc, an electricity distribution management solution provider, started promoting a software product that infringed Dominion’s patent without permission, Dominion filed a patent infringement suit based on its patent.

Dominion’s lawsuit was successful and in October 2016, the court enjoined Alstom Grid Inc from selling the infringing feature without Dominion’s permission. The court also multiplied the jury award in this case based upon the jury’s finding that Alstom’s patent infringement was willful.

Dominion’s lawsuit is one of many patent infringement lawsuits now implicating businesses in the energy sector. For instance, between November 2015 and May 2016, Atlas IP, LLC, brought patent infringement lawsuits against multiple utilities, including PG&E and Florida Power & Light Company. In its complaint, Atlas IP, LLC alleged that the utilities infringed its patent related to a wireless communication device by communicating data using smart meters.

And with the increased use of information technology in the smart grid era, what has been a long-time reality for companies in the IT sector seems to be bleeding into the energy sector: patent infringement lawsuits brought by non-practicing entities, also known as ‘patent trolls’. Atlas IP, LLC, for example, is an assignee of a patent once owned by a well-known non-practicing entity in the IT sector, Wi-LAN Inc. Wi-LAN, for years, brought patent infringement lawsuits against companies providing consumer electronics devices, such as Apple, Sharp, Ericsson, Samsung, LG, and Toshiba.

The companies in the IT sector are also targets of patent infringement lawsuits based on patents covering communication technology standards, for example Wi-Fi and Bluetooth. This means, when a company is selling a mobile device using Wi-Fi technology to access the internet, it is infringing a Wi-Fi patent and the owner of the patent can bring a patent infringement lawsuit against the company. Smart Energy Profile (SEP 2, also known as IEEE 2030.5 standard), a communication standard expected to be largely adopted by utilities so that a customer at home can check how much electricity he or she has consumed using a smartphone connected to a W-Fi network, similarly puts utilities at risk of patent infringement.

There are simple precautionary measures utilities and energy sector businesses, entering the era of the smart grid and Internet of Things (IoT), could easily take to protect their proprietary technologies and guard against the most common pitfalls of patent infringement lawsuits.

First, consult with patent lawyers with expertise in the energy industry to evaluate the company’s research and development efforts, and file a patent application that covers the company’s inventions.

Second, to the extent the company enters into an agreement with a vendor supplying software solutions based on the invention(s), the agreement should be reviewed with the understanding that an adoption of such technology may subject a utility to the risk of being a defendant in a patent infringement lawsuit.

The company should seek the advice of IP lawyers with expertise in licensing and contracts, and build provisions into the agreement intended to protect the company against such lawsuits. This may include, for example, a representation by the vendor that its product does not infringe or a warranty to defend against such claims.

Third, when faced with a cease and desist letter or a patent infringement notice, speak with a patent litigator who understands the technology at issue to determine the reasonableness of the patent owner’s position.

When a patent infringement is found to be ‘willful’, as the trial court found in the Dominion case, the patent statute allows the courts to enhance damages up to three times the amount found by the fact finder, depending on the degree of egregiousness of the defendant’s behavior. An opinion letter from a patent attorney that the asserted patent is either not infringed or invalid, and the reasonableness of the positions taken by the defendant before a lawsuit is filed, can help mitigate against a willfulness finding and enhanced damages.

Every patent case is different, and as with many things, the devil is in the details. Still, an overall strategy put into place to protect a company’s intellectual property and to address a claim for patent infringement can help the energy industry appropriate the full value of intellectual property, as both a shield and a sword.

And the opportunity to benefit from such strategies may come sooner than expected.

Ji Young Park is Associate at Blank Rome LLP, Spencer Abraham is Principal at Blank Rome Government Relations LLC and Salvatore Tamburo is Partner at Blank Rome LLP, a Philadelphia-headquartered law firm with offices in the US and Shanghai.