Slump in Clean Energy Patents Causes Concern

Clean energy patentsAs of late, the spike of clean energy technology innovation is slowing down in the United States, during a time that the Trump administration is aiming to drastically cut government research spending in the industry.

In fact, according to a recent report by Brookings Institution, the number of patents issued related to cutting carbon emissions increased from 15,970 in 2009 to about 35,000 in 2014 and 2015, before decreasing to 32,000 in 2016. Today’s clean energy technologies like more efficient electrical grids and devices that can store intermittent wind power are still in a very early stage, so private investment alone is not enough.

Generally, patents mean inventiveness and more patents in a space suggests more innovation is happening, which means better market opportunity. From 2001 to 2009, patents were static for clean energy – as patents for energy fields, including solar, wind, energy storage, energy efficiency, and nuclear power issued each year stayed around 15,000, according to the study. Then, in 2010 things climbed for about five years when the growth in patents issued in clean tech fields outpaced patents overall and outpaced high-tech fields including pharmaceuticals, biotechnology and semiconductors.

One key reason for the change was the injection of federal research dollars and Obama administration initiatives to boost research in renewable energy, according to an article in Science Magazine. The Federal Recovery Act pumped $3.3 billion into research and development at the Department of Energy (DOE), including a significant chunk for renewable energy. In fact, research spending through the Office of Energy Efficiency and Renewable Energy averaged $1 billion per year under Obama, $100 million more annually than under former President George W. Bush.

Paul Morico of Baker Botts LLP sat down with IPWatchdog to discuss why this recent slump in clean energy patents could be cause for concern.

The slump in clean energy patents is a direct result of the downturn in oil and gas prices, according to Morico. “When oil was trading at over $100 per barrel just before the crash in 2014, there was a lot of investment going into renewable/clean energy. After the prices of oil crashed, investors started cutting back their investments in renewable/clean energy because the costs of many of these technologies couldn’t compete with low oil and gas prices,” he explained.

The time it takes for the investment costs of these renewable sources to be amortized is long given that many of them are unproven technologies. Investors are not willing to make those investments when the existing market is not favorable for such products. There is a direct correlation between patent filings and investment, so when investment is down, so are patent filings.

“In my opinion, the drop in clean energy patent filings is a direct result of this drop in oil and gas prices. Less investment in these technologies will undoubtedly lead to less overall innovation in this area,” said Morico. “However, several energy companies and other long-term investors in clean energy are making longer term investments in these technologies and so they have not cut back as much on their basic/long-term research efforts.”

Unfortunately, research linked to the commercialization of these technologies is the first casualty of these lower commodity prices, and thus innovation tied to these efforts is likely being slowed. That type of research, however, can be reignited reasonably quickly once commodity prices increase.

So, what can be done to improve this?

According to Morico, the only real short-term solution to this issue would require governmental involvement. Some possible solutions would be to temporarily reduce patent filing fees or grant tax credits for costs associated with filing and prosecuting patents in this area. The patent office has previously given such preferential treatment to clean energy patents by instituting The Green Technology Pilot Program in 2009, which allowed clean energy patents to be examined on an expedited basis. That program ended in 2012, although other existing procedures exist for accelerating patents of all types.

“Support in the form of subsidies, however, raises the broader issue of how much should the government be involved in this area,” Morico explained. “That is a political question that only the politicians can answer.”


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One comment so far.

  • [Avatar for SMK]
    May 18, 2017 09:48 am

    With all due respect to Mr. Morico, it appears his offered solution tells the tale of the decline in issued “green” patents, not simply the downturn in oil and natgas prices.

    The green pilot program ran from 2009-2012. There was a sudden uptick in patents in 2010, when expedited examination likely started pushing its first issued patents through. That lasted until 2015. The time an application is pending is 2-5 years, so more applications came in when there was hope of obtaining a patent in a useful amount of time (2009-2012) and issued patents dropped off when it was back to business as usual (2012 +/- three or four years, so the drop off happens around 2015/16 when you would expect it to occur).

    The incentives for capital have to match the risk/desired action. Thousands of dollars for a languishing applications that result in outdated patents by the time of issue don’t match the investment. Seems pretty straightforward to me, but hey, that’s just me.