United States: Smart Grid And The Importance Of Intellectual Property

Last Updated: July 4 2011
Article by Paul Davis

The U.S. power grid has more than 300,000 miles of sprawling transmission lines that weave throughout the country, and the Department of Energy gives it a 99.97% reliability rating. Yet despite the sheer size of the system, a few outages can cost Americans at least $150 billion dollars annually.

Electricity has to be used the moment it's generated. A power plant cannot store a surplus of energy to power air conditioners during the next heat wave. And a growing population continues to plug more and more power-hungry gadgets and appliances into the grid.

To address these shortcomings and prepare for future power needs, a plan is underway to transition to a more efficient power grid called a Smart Grid.

A Smart Grid delivers electricity from suppliers to consumers using two-way digital technology to control appliances at consumers' homes to save energy, reduce cost, and increase reliability and transparency. It is a nickname for an ever-widening array of utility applications that enhance and automate the monitoring and control of electrical distribution.

There are five technologies that drive the Smart Grid: (i) integrated communications; (ii) sensing and measurement technologies; (iii) advanced components (superconductivity, storage, power electronics and diagnostics); (iv) advanced control methods; and (v) improved interfaces and decision support.

Applications of the Smart Grid include end-use applications such as automated demand response, use of on-site storage and generation, and smart charging of plug-in hybrid electric vehicles (PHEVs). Smart meters, price-sensitive "smart" appliances, energy storage and distributed generation are the components of these applications. However, some of the highest value applications are likely be on the distribution system side. One of the highest-value early-stage Smart Grid applications is system visualization, which uses networked systems to allow system status monitoring to occur. Currently, for example, outage management is often triggered by a call from a customer who has lost power. With system visualization, outage management does not depend on customer outage reporting, and in some cases can report overhead vegetation contact before a tree actually falls on a line.

Performance optimization is an area of patent activity. Examples include (i) improved grid performance, security and reliability, (ii) better integration of decentralized, distributed and intermittent renewable generation sources into power systems, (iii) facilitation of new demand-side management and energy efficiency programs involving a higher degree of customer participation and (iv) introduction of new services to customers.

Distribution automation allows for more efficient use of the electric distribution system and may lead to highly resilient systems able to route around trouble spots in emergencies.

Finally, on the transmission system side, better visualization of system status allows for improved integration of intermittent resources like wind and solar. So, while the smart meter may have become the "poster child" for the Smart Grid, advanced sensors, synchro-phasors and distribution automation systems are examples of equipment likely to be even more important in harnessing the value of the Smart Grid.

Examples of Smart Grid applications are listed in the following table.

Sample Smart Grid Patents
Number Title Owner
7,233,843 Real-Time Performance Monitoring and
Management System
Electric Power Group, LLC
7,274,975 Optimized Energy Management System Gridpoint, Inc.
7,337,153 Resolving Energy Imbalance Requirements
in Real-Time
Siemens Power Transmission &
Distribution, Inc.
7,305,281 Management of a Bulk Electric Power
Market
ISO New England, Inc.
7,333,880 Aggregation of Distributed Energy
Resources
EnerNOC, Inc.
7,376,491 Detection of Islanding in Power Grids General Electric Company
2008/0177678 Method of Communicating Between a Utility
and Its Customer Locations
Southern California Edison

Smart Grid technologies have experienced significant patent activity over the last decade in areas such as (i) advanced metering, (ii) IT systems and hardware for distribution automation and (iii) business methods for efficient selection of power sources

Patent owners include industry giants like Siemens, private players like GridPoint/V2 Green, nonprofits like ISO New England, consultants like Electric Power Group, as well as utilities, government laboratories and individuals.

The USPTO's Green Technology Pilot Program and Track 1 Initiative

Applicants in the green technology space can file petitions under the USPTO's Green Technology Pilot Program, which allows for expedited processing of patent applications related to green technology. The program was originally set to expire on December 8, 2010, but has been successful enough to warrant an extension through the end of 2011. Since the program began in December 2009, a total of 790 petitions have been granted to green technology patent applicants, with 94 patents having already been issued.

The Track 1 initiative provided that by paying a $4,000 per application fee, applicants could receive prioritized examination, which was going to be available as of May 4, 2011.

On April 22, 2011, however, USPTO Director David Kappos announced the impact of the budget reductions embodied in the fiscal year 2011 budget enacted on April 15, 2011. (Fiscal year 2011 runs through September 30, 2011). The budget gives the USPTO the authority to spend only $2.09 billion, which is about $100 million less than its projected fee collections.

Facing the reality of not being able to spend any of the $4,000 per application fee it would have collected, the USPTO has decided not to implement fee-based prioritized examination (Track 1), which would have been available May 4, 2011.

Litigation

An initial round of major NPP patent litigation hit the clean tech industry in the mid-2000s. There were two significant instances of this activity. The first was a series of lawsuits brought by hybrid power train start-up Paice against Toyota, accusing the automaker of infringing some early patents on gas-electric hybrid vehicle technology. After a five-year battle, Toyota ultimately licensed all of Paice's 23 patents.

The second was Columbia University Professor Gertrude Neumark Rothschild's enforcement of a pair of patents relating to pioneering LED production techniques against many major targets, including Toshiba, Panasonic, Sony Ericsson, LG Electronics, Motorola, Samsung, Sanyo, Sharp and Philips Electronics. According to her attorney, Rothschild has reached settlements or licensing agreements with more than 40 companies generating more than $27 million. Clean tech is now in the midst of a second wave of NPP litigation. Leading the charge is Sipco LLC, an Atlanta, Georgia-based developer of wireless mesh technology. In August 2009, Sipco sued Florida Power & Light and FPL Group in federal court in Miami, alleging that the wireless network technology in the utility's Smart Grid system infringes three Sipco patents. In November 2010, Sipco sued such Smart Grid companies as Energate, Ecobee, Rainforest Automation, SmartSynch, AMX Corporation, SimpleHomeNet and CentraLite Systems.

Earlier this year, Sipco expanded the scope of its patent enforcement activity to target players in the electric vehicle charging station space, including Coulomb Technologies and ECOtality, as well as additional energy management, control system and wireless companies such as EnergyHub, Jetlun, SmartLabs, ABB and Ingersoll-Rand.

In solar, Solannex recently began targeting major thin-film photovoltaics players with a patent directed to interconnect structures for PV cells. In the last few months, Solannex has sued Miasolé and Nanosolar for patent infringement. Companies operating in Smart Grid or thin-film, or developing technology to enter the space would be prudent to be aware of the Sipco and Solannex patents.

With just about every major oil company involved in renewables on some level, particularly biofuels, one recent patent infringement suit may mark the start of a trend. In February, Butamax Advanced Biofuels, a Delaware-based biofuel joint venture between BP and DuPont sued Gevo, an Englewood, Colorado, advanced biofuels company, for infringement of a patent directed to Butamax's biobutanol production technology and recombinant microbial host cells that produce the biofuel.

With the oil majors increasingly involved in biofuels start-ups via research funding, buyouts and JVs like Butamax, more patent infringement suits in this space are expected. Energy companies are no stranger historically to patent litigation in technology, as evidenced in the 1990s by Unocal's lawsuits over its MTBE patents and the long-running patent fight by Energy Conversion Devices, backed by Texaco, over nickel metal hydride battery technology.

Licensing

The IEEE has created a "Draft Guide for Smart Grid Interoperability of Energy Technology and Information Technology Operation with the Electric Power System (EPS), and End-Use Applications and Loads." The Guide provides guidelines for Smart Grid interoperability and a knowledge base addressing terminology, characteristics, functional performance and evaluation criteria, as well as the application of engineering principles for Smart Grid interoperability of the electric power system with end-use applications and loads. The guide also discusses alternate approaches to good practices for the Smart Grid.

The governing board of the Smart Grid Interoperability Panel has voted in favor of a new standard and a set of guidelines for making the long-planned "smart" electricity grid a reality. These address the need for wireless communications among grid-connected devices as well as the ability to upgrade household electricity meters as the Smart Grid evolves.

Standards for the Smart Grid

As Federal Energy Regulatory Commission officials acknowledge, the Smart Grid will require new technologies. Without widely adopted standards, entities will attempt to establish proprietary versions.

There are those who want "open" standards for the Smart Grid, but it's important to distinguish between the necessary characteristic of universal availability and the much less important goal that all included technologies be royalty free. Innovators need an expectation of a reasonable return to justify investments.

Patent owners may agree to royalty-free licensing of rights to secondary products to build acceptance of a main product. For example, a freely available grid connection technology might enlarge the grid and increase the overall market for various proprietary solutions sharing common connectivity to the larger grid. An owner of one of those solutions who also owns the connector patent might well license that patent royalty free. But if the owner of the patent mainly sells grid connectors, he or she is less likely to see a benefit to making a royalty-free license available to other connector vendors. In that case, the patent is protecting a key market.

Conclusion

The foundations of the Smart Grid are innovation, standardization and accessibility. Without technologies recently developed and still to be developed, these goals will not be attained. Without the protection of patents, the new technologies of the Smart Grid will not be funded. Patent protection is an important element relative to continued development of the Smart Grid. Standards will need to be set in order for the Smart Grid to work everywhere. Otherwise, there will be mini-Smart Grids. As in all areas of innovation technologies, litigation will play a role. This is not different from other areas of technology. Open source type of licensing remains an issue. However, as in all software, this should not be a major obstacle for innovators.

Goodwin Procter LLP is one of the nation's leading law firms, with a team of 700 attorneys and offices in Boston, Los Angeles, New York, San Diego, San Francisco and Washington, D.C. The firm combines in-depth legal knowledge with practical business experience to deliver innovative solutions to complex legal problems. We provide litigation, corporate law and real estate services to clients ranging from start-up companies to Fortune 500 multinationals, with a focus on matters involving private equity, technology companies, real estate capital markets, financial services, intellectual property and products liability.

This article, which may be considered advertising under the ethical rules of certain jurisdictions, is provided with the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin Procter LLP or its attorneys. © 2011 Goodwin Procter LLP. All rights reserved.

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