EU Batteries Regulation
Next stage aims at greater standards on sustainability and disclosure
3 Oct 2024
Insight
Global
3m read
The days when batteries were simple chemical-based means of storing energy are history. The modern and rapidly evolving age of battery power is built upon sophisticated technology and innovation to widen the use cases, with intellectual property (IP) playing a crucial role in the sector. From grid storage units to batteries in electric vehicles (EVs), billions of dollars in investment has poured into research and development to improve battery design in the last decade, with a heavy focus on boosting charge lifetime and reliability. With leading battery manufacturers increasingly treated by investors as comparable to technology firms, innovators must be alive to how they can use IP to protect this investment, as well as navigating an increasingly complex landscape of third-party IP.
How to protect battery technology IP?
One of the key decisions an innovator faces is how to guard its IP. Patent protection is often the first thought when considering protecting tech innovation and patents are obviously a key part of the toolkit, particularly for innovations competitors can easily copy once a product hits the market. In 2023, there were 170,000 patents or patent applications published globally in the battery field, with about 90,000 of these in China. This number is expected to be higher in 2024 with the key territories being China, Japan and Korea, followed by the US and Germany.
However, trade secrets can also play an important role in the IP armoury, either instead of or alongside patents. Protection as a trade secret – keeping the information confidential – avoids the need to publicly disclose your innovation as occurs when a patent application is published and may give competitors a leg up.
Manufacturing processes are one area where trade secrets can be particularly effective, as it can otherwise be difficult for competitors to learn how these confidential processes work. However, protecting battery innovation through trade secrets in isolation comes with its own risks – such as employees moving to a competitor with valuable IP. There have been notable claims of this in the sector, such as the proceedings Tesla has filed alleging trade secret theft by two former employees that subsequently started a battery company in China.
Manufacturing is one area where trade secrets can be particularly effective, as it can otherwise be difficult for competitors to learn how these confidential processes work. However, protecting battery innovation through trade secrets in isolation comes with risks.
The decision on whether to protect IP for EV batteries through patents, trade secrets or a combination of both may also be influenced by evolving regulations, such as the EU Batteries Regulation, which came into force on 17 August 2023. This regulation's transparency requirements, including the so-called battery passport that allows the public and individuals involved in repair, repurposing or recycling to access certain protectable information, could impact the viability of trade secrets by mandating disclosure of otherwise confidential data.
Lastly, it is particularly important to think about how IP should be protected, and who will own it, during any collaborations with third parties. Where IP is jointly developed there can be many complexities around ownership and licensing, and the right to use that jointly developed IP in future products. All of these issues should ideally be agreed at the outset of a collaboration so the respective parties know their position.
Monetising innovation
As well as securing protection for a company's own product, patenting can also be used as a tool to monetise innovation. This could be through licensing IP to third parties or enforcing that IP to collect damages or secure a settlement. One sign this may be a trend emerging in the battery sector is the formation of a patent pool by LG Energy Solution and Panasonic Energy called Tulip. Tulip's portfolio is reported to contain more than 5,000 patents from 1,500 patent families, and further licensors may contribute to the pool in the future. The formation of a pool of this kind can help smaller market players to agree licensing terms with a single pool administrator, rather than risk facing patent enforcement from multiple different parties.
The risks of third-party IP
The flipside of the above approach is that, as the battery space grows more complex, with an increasing number of patents to navigate, the risk of infringing third-party IP grows. Companies with innovative battery products should regularly monitor the patent landscape and conduct freedom to operate checks to ensure they avoid expensive patent infringement claims down the line.
Standardisation and FRAND
One issue that may continue to impact the battery space is standardisation, which looms most prominently with EV charging. While industry standards like the Combined Charging System and CHAdeMO have already set benchmarks, there is still potential for further alignment across the industry. For example, four group standards related to EV batteries released by the China Automotive Power Battery Industry Innovation Alliance were officially implemented from 1 September 2024 and China has formulated a series of national standards for EV charging interfaces.
If more unified standards emerge to make charging technology more consistent – along similar lines as 3G/4G/5G standards in the telecoms sector – then the patents covering that technology are likely to come with obligations to license them on fair, reasonable and non-discriminatory (FRAND) terms. Such terms allow for IP-protected rights to be incorporated within industry standards, placing obligations on rights holders to license their use, but this can be a delicate process. FRAND licensing and litigation has become a significant focus in telecoms and is starting to become more prominent in the automotive sector. In short, as standards continue to evolve in the battery and EV space, companies will have a whole host of new IP issues to consider and navigate.
Chapters
- Chasing Zero – Why battery power should unlock the energy transition
- Critical minerals – The race at the heart of battery storage
- Batteries and IP – Protect your innovation
- Scale electric? – The EV revolution risks stalling
- Buying lightning – Battery storage is reinventing the grid
- PFAS explained – What forever chemicals mean for clean energy dispute risks
- Key terms in battery energy storage markets
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The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2024
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