Opinion: Patent pooling can drive down renewable costs

OTC 2016
Opinion by Douglas Rankin

The renewable energy industry continues to grow in Scotland, but not all companies are fully exploiting the opportunities for protecting and commercialising their innovation.

Figures from the Department of Energy & Climate Change show that the sector performed robustly in 2013. Low carbon sources provided almost two-thirds of power in Scotland with renewables generating more power than either coal or gas. The Scottish Government’s target – for renewable energy to generate the equivalent of half of Scotland’s electricity needs by 2015 – is on course to be met.

Sector employment levels also provide cause for celebration. A Scottish Renewables-commissioned report of more than 540 companies found that there are currently 11,695 people in full-time employment in the sector, an increase of 5 per cent on the previous year’s study. More than half of the businesses surveyed said they would seek to increase employment levels in 2014.There are evidently many positives within the sector in Scotland, which continues to develop and mature.

However, for many the initial investment costs of distributed generation remain prohibitively high, and the payback period too long. There is genuine need for companies to find ways to reduce these initial costs if they are to remain competitive.

Scotland has a proud history of innovation, and a greater number of SMEs compared to many countries throughout Europe – and while those SMEs in the distributed-generation sector excel technologically, their size can make it difficult in the early years to get to market and reach or maintain profitability. This stops them from benefiting from the economies of scale that can be achieved by, for example, centralised generation.

Seeking a collaborative or consortium approach across technology sectors can, in some cases, be the only reasonable way of driving down costs and making the technology commercially viable. This approach could suit SMEs in the distributed-generation sector, with the increasing desire to minimise those initial costs and reduce the payback period.

Alongside models such an open innovation and patent commons, a successful collaborative innovation model is ‘patent pooling’. A patent pool is typically a portfolio of patents whereby the patent owners agree access and to share innovative technology and platforms. These collaborative models can help save time, reduce development costs and allow companies to benefit from the economies of scale required to drive down costs.

At the same time, developing simplified multilateral licensing agreements reduces the need for complex legal agreements and negotiations, while still offering financial rewards and protection to those developing and sharing the common technology. In such a way, valuable and efficient designs can be shared across SMEs under such innovation models.

Of course, companies may fear that collaborating in such a way with competitors will prevent direct competition. However, there are examples which show this is not the case. Innovation and communication standard setting in the telecoms industry is one and the renewables industry can also look to the automotive industry’s use of shared vehicle platforms.

Companies and investors know that protecting innovation and intellectual property can be vital to the success of a business. From a commercial perspective, unprotected innovation is risky and proper protection is often seen as a necessity for investors. Therefore, patent pools not only provide all the benefits of technology diffusion, reduced costs, and opportunities for economies of scale, but should also satisfy investors that those companies are acting diligently to protect their IP.

The renewables sector may be thriving, but businesses must find innovative ways of working in order to lower costs. Protecting IP and sharing with others in the field can be the key to unlocking that brighter future.

Douglas Rankin, Chartered Patent Attorney at Marks & Clerk in Glasgow.