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Offshore Turbines Pose Patent Risks as US Pushes Wind Power

June 9, 2022, 9:20 AM

A federal court decision that patent law reaches wind farms miles off the US coast will force more companies to grapple with infringement risks just as the government pushes to promote offshore wind development to produce electricity.

Wind turbines attached to the outer continental shelf are “within the United States” for the purposes of US patent law, Judge William Young in the District of Massachusetts recently ruled in a case Siemens Gamesa Renewable Energy A/S brought against General Electric Co. over offshore wind turbines. The outer continental shelf ordinarily extends 200 nautical miles from the shore, although it can extend further in some areas.

The order addressed a new issue for wind energy projects, which have been an emphasis of the current administration. President Joe Biden has pledged to cut US-generated greenhouse gas emissions roughly in half by 2030, and has worked to boost offshore wind power, including through the sale of offshore wind leases.

While not binding on other federal courts, the district court’s ruling will require turbine makers and others to consider infringement liability when building projects on the outer continental shelf—and potentially paying royalties.

“If I had a wind farm on the outer continental shelf, I would be more careful in evaluating my patent infringement risk,” said Jayme Partridge, a principal at Fish & Richardson PC in Houston.

Scarce Case Law

GE has contracts to supply its new Haliade-X turbines for two wind farms, one off the coast of Martha’s Vineyard in Massachusetts and another near southern New Jersey. The Vineyard project is the first utility-scale offshore wind installation in the US, according to project developers.

Siemens alleges the GE turbines infringe its patented technology. A trial started May 31 in the federal District of Massachusetts.

Parts for the Haliade-X, which GE has called the most powerful offshore wind turbine in operation, are made abroad, GE said in court filings. And both of the east coast projects will be located at least 12 miles out to sea, GE said.

Arguing there was no infringement in the US, GE suggested that patent law’s reach ends 12 nautical miles from shore, the outer boundary of the “territorial sea.”

But Young agreed with Siemens that the Haliade-Xs will be within U.S. territory as defined by the 1953 Outer Continental Shelf Lands Act, a law that governs how the federal government controls mineral exploration and energy development on the outer continental shelf.

The Massachusetts court was the first to determine whether that statute extends patent law to offshore wind energy, according to GE.

“The reason case law is scarce is that we haven’t been using this resource as effectively as we could be,” said Elizabeth Winston, a professor at the Columbus School of Law at The Catholic University of America, who has written about geographic limitations of US patents.

Attached to Shelf

Oil and gas companies have dealt with similar questions about the reach of patent law, particularly with the rise of deepwater drilling.

Judge Robert Schroeder in the Eastern District of Texas said in a 2016 decision involving broadband satellite provider Hughes Network Systems Inc., which worked with energy companies, that when the OCSLA’s requirements are met, the act “encompasses patent law claims.”

Cases have turned on whether a device is attached to the outer continental shelf, as opposed to floating in the waters above. A Southern District of Texas judge, for example, in 2011 found alleged acts of patent infringement by vessels conducting seismic readings in the Chukchi Sea had occurred outside US territory and noted that the vessels weren’t attached to the seabed.

“The Shelf Act seems to come into play when you’re talking about something attached to earth, as opposed to a floating vessel,” said Paul Morico, chair of the energy IP practice group at Baker Botts LLP in Houston.

Young’s ruling also underscores a recent change to the OCSLA.

Until last year, the act applied to installations or devices attached to the seabed for the “purpose of exploring for, developing, or producing resources therefrom.” The language applied awkwardly to wind projects, attorneys say, raising questions on whether patent law would follow turbines to sea.

Congress amended the language in 2021 to include “non-mineral energy resources.”

The “2021 amendment made the Court’s decision much easier in this case, as the court specifically relied on that language in its Conclusion section,” said Cortney Alexander, an attorney at Kent & Risley LLC in Atlanta.

The US isn’t unique in applying patent law to the outer continental shelf. Winston said courts in both the UK and South Africa have found patent infringement with respect to installations on the shelf near their shores. Countries will continue to grapple with the reach of national patent laws.

“The questions are being addressed and I think the energy field has the ability to really make more concrete what the issues are to many people,” Winston said.

Licenses, Royalties

Most offshore wind projects will be attached to the outer continental shelf, energy attorneys said, noting logistical problems and increased expenses that are associated with installing turbines in deeper ocean waters.

Applying patent law to these projects is “probably going to have an impact on royalties and licenses and the like in connection with IP associated with this technology,” Morico said.

Global competition among major turbine makers has increased, while some traditional oil and gas companies are exploring clean energy projects, looking to leverage their extraction experience to find a role in the transition from fossil fuels.

Attorneys expect more patent disputes over alternative energy technology, including as the nascent offshore wind industry develops. Partridge, who previously worked as in-house litigation counsel for ExxonMobil Corp., said the conventional oil and gas industry was behind in patenting.

“I think this will become a bigger area for controversy, especially for patent infringement.”

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Adam M. Taylor at ataylor@bloombergindustry.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com