Court Doubles Patent Royalties in GE-Siemens Wind Turbine Case

A federal district court in Massachusetts has doubled the royalty payments that General Electric must pay to Siemens Gamesa for patent infringement related to wind turbines in a New Jersey project.

GE must now pay $60,000 for every megawatt of electricity produced by the turbines.

The court’s opinion opened with a stinging rebuke of both companies:

Siemens Gamesa Renewable Energy A/S (“SGRE”) and General Electric Co. (“GE”) … are locked in a global struggle for dominance in the lucrative and vitally important market to develop offshore wind turbines. This struggle does nothing to advance the public interest of the people of the United States or any other nation. Indeed, it inhibits efforts to combat climate change world-wide. It would be far, far better for these two corporate behemoths -– consistent with antitrust requirements -– to cross license their particular technological contributions and forge ahead with production in the global public interest.

As Reuters reported, in 2020 Siemens sued GE for patent infringement involving GE's Haliade-X turbines.

In June of 2022, a jury found that GE had in fact infringed the Siemen’s patents.

The same judge ruled in September that Siemens’ technology was a "key element" of the turbines' functionality, allowing them to have larger motors and decreasing their failure rate.

The judge prohibited GE from making and selling the turbines in the US but allowed the company to keep using them in existing projects off the coasts of Massachusetts and New Jersey, while making royalty payments to Siemens.

The State of New Jersey filed an amicus curiae (friend of the court) noting that “Offshore wind energy is a critical component in New Jersey’s clean energy plan to address the impacts of climate change, sea level rise, and carbon-based emissions.”

The state has spent over $475 million to build infrastructure to support the project, which is expected to generate “4,850,000 megawatt-hours of clean, renewable energy annually for 20 years, or enough to meet the annual electricity needs of roughly 500,000 households.”

The state argued that preventing the project from going forward based on the patent infringement would

cause irreparable harm to the residents of New Jersey, who will be forced to source electricity needs from other sources, which may increase the Garden State’s carbon emissions in the short term and imperil its greenhouse gas policy objectives in the long term in addition to thwarting the State’s clean energy objectives.

The state contended that harm to GE would be addressed with damages rather than an injunction against use of the patented technology that would harm the people of New Jersey.

The judge found that Siemens had suffered irreparable harm because it lost significant market share to GE.

The jury initially found that GE should pay patent royalties of $30,000 per megawatt-hour.

When assessing damages for patent infringement taking place after an injunction against infringement has been issued, a court

should take into account the change in the parties' bargaining positions, and the resulting change in economic circumstances, resulting from the determination of liability — for example, the infringer's likelihood of success on appeal, the infringer's ability to immediately comply with the injunction, the parties' reasonable expectations if the stay was entered by consent or stipulation, etc.— as well as the evidence and arguments found material to the granting of the injunction and the stay.

Siemens asked to have the royalties amount trebled to $90,000. It argued that it was in a favorable bargaining position because of the jury’s determination that its patent was valid and infringed, because “[w]hen patent claims are held to be not invalid and infringed, this amounts to a “substantial shift in the bargaining position of the parties.”

Siemens argued that the finding of liability, along with giving GE a “license to infringe,” left GE in a better position economically and justified the trebled damages award.

In response, GE argued that it could modify the turbines to avoid its alleged infringement at a cost far below the original royalty rate, let alone the trebled rate.

The court agreed that Siemens was in a better bargaining position after the verdict in its favor. The court had basically given GE “a license for what now is willful infringement” in the public interest.

But the court also questioned “why GE would continue to use the infringing patent if the costs of designing around it are as low as it represents them to be.”

GE contended that the COVID-19 pandemic, inflation, and the Russia-Ukraine conflict had disrupted its offshore wind business so that its Renewable Energy Unit suffered a loss of $853,000,000 and a profit margin of negative 14.3 percent for the six months ending June 30, 2022.

GE argued that increasing the royalties to $90,000 would further threaten the project’s viability.

The court noted tartly that it was not tasked with making sure that GE retained its originally anticipated profits. Rather, “the court is tasked with making [Siemens] as whole as possible considering the Jury’s verdict and the weighing of factors….”

Also,

GE provided this Court no detailed explanation as to specifically how this increase in uncompensated costs would render the project economically impracticable to a point where GE cannot bear its contractual burden of meeting the public interest as a post-verdict licensed infringer.

Thus, concluded the court,

What is indubitably clear is that, by permitting GE to proceed on two offshore wind turbine projects notwithstanding the general injunction earned by [Siemens], this Court is conferring on GE, a patent infringer, a significant if incalculable economic advantage. GE will thus be able to build up relationships with reliable vendors and subcontractors and work out supply chain issues -- in short, gain the advantage of learning how to address that myriad of issues that become apparent only by actually building a project out. GE ought to pay for this privilege.

The court then “split the baby” by allowing an increase in the royalty to $60,000 per MWHr.

The case is Siemens Gamesa Renewable Energy A/S v. General Electric Co, U.S. District Court for the District of Massachusetts, No. 1:21-cv-10216.