In its Net Zero by 2050 Report, the International Energy Agency reported that almost half of the emission reductions required by 2050 will come from technologies which are currently at the demonstration or prototype stage. Attracting investment and increasing the speed with which these technologies can come to market will be critical in meeting this milestone. Reflecting this, the role of technology development and transfer in implementing the energy transition was a major focus of COP28 late last year, with commitments from state parties to triple the use of renewable energy sources and overhaul financial support for green technologies in pursuit of this technological revolution.
In practice, this will involve energy sector participants acquiring technologies (and technology companies), entering into research and development arrangements, undertaking collaboration, tech-sharing and licensing deals to secure access to novel technologies (or out-licensing technology developed in-house). All this will need to be done at a scale and speed never seen before. As the sector decarbonises, turning towards new technologies related to hydrogen production and storage, new means of electricity transmission and storage, carbon measurement, verification and capture facilities, technology and intellectual property (IP) will become a key proprietary asset for many energy companies.
Developing and enforcing contractual frameworks which can protect the value of these assets will be a critical consideration. Arbitration, as the dispute resolution mechanism at the heart of the energy sector, can have an important role to play in helping to resolve many of the disputes around these frameworks.
The energy transition and the role of IP
Most of the innovation required to meet the needs of the energy transition is expected to come from the private sector (sometimes in collaboration with government). Used well, IP can be an important tool in incentivising innovation and enhancing the commercial viability and dissemination of new technologies by providing greater certainty over returns on investment.
Some energy sector players will not have the ability or internal resource to innovate at the speed required, so may look to commission or develop technology in collaboration with a third party (perhaps a technology company with limited experience in the sector). Given the speed of the transition and the value of being an early mover, these collaborations will sometimes be completed under pressure. There may be less time to explore in detail precisely what information and technology each party is contributing to the collaboration, how it is going to be used in the course of the collaboration, and exactly how each party can use the technology created (or the underlying technology that helped create the innovations produced) in the long term. Given these are new technologies, it may also be less clear to the parties what will come out of the collaboration and accordingly, who will be entitled to do what with that output.
In these circumstances, it is not hard to see how disputes may arise from such collaborations. This is especially so given that many collaborations will involve more than two parties, as part of risk-sharing around novel technologies. Many will be partnerships between established energy sector players and entities from other sectors and industries (including tech companies). They may therefore bring different expectations and operate by reference to different norms around how these collaborations will work, especially when it comes to ownership and continued use of outputs.
There may also be disputes around the licencing of technologies, including as to the scope of licences, royalties payable where one party owns the IP but licences it to another to develop in exchange for future royalties, and the breach of licence terms.
Reducing the risk of IP disputes in the energy transition
Some dispute risk is inevitable, given the amount of collaboration and the pace of change. However, there are ways to mitigate the risk. We outline some of these approaches below:
Addressing these and other IP issues in express terms is worth the initial effort when establishing a collaboration, as it will set expectations and reduce the scope for dispute over ownership and use of IP from the collaboration – often hotly contested and very valuable issues.
Resolving IP disputes involving development of technology through arbitration
Arbitration is well-known to the energy sector as a mechanism for resolving contractual disputes. The flexibility, relative ease of enforcement, neutrality and potential for confidentiality and specialist decision-makers, among many other things, have made arbitration the forum of choice in many energy sector contracts for decades.
The types of IP disputes described above are well-suited to being resolved through arbitration. Collaboration arrangements, joint ventures, technology development, and licensing arrangements will typically take place through contractual frameworks, often with multi-jurisdictional elements. Arbitration offers the potential to resolve disputes which arise under these agreements in a neutral forum, removed from any domestic court system, something that may be important where one party is state-owned or a particularly significant source of revenue and employment in a country.
It also allows the selection of a tribunal with relevant experience and expertise in both the subject matter and IP issues – something which may be important where the dispute is highly technical.
The potential to resolve disputes behind closed doors, as arbitration offers, will be appealing to parties involved in the development and use of novel technologies, where the nature of the technology and the existence of a rift in a commercial relationship between collaborators may both be sensitive topics. Similarly, a party out-licensing IP may not wish disputes as to royalty arrangements, longer-term use provisions or the validity of IP rights to be litigated in the public domain.
Arbitration also has certain advantages when it comes to procedural flexibility, including the prospect of agreeing a simplified or expedited procedure to address time-sensitive matters and the possibility of addressing multi-party and multi-contract disputes in a single forum. Moreover, when it comes to enforcement, arbitral awards remain a more straightforward proposition than many domestic court judgments, something which is likely to be of interest in cross-border contracts.
In the context of an ongoing collaboration, where disputes may arise at a number of points over the life of the contract, all of these considerations carry additional weight. In short, it will be critical in maintaining a good working relationship in the long term that disputes can be resolved efficiently and effectively when they arise.
The use of arbitration as a forum for resolving appropriate IP disputes is growing. A recent report from the World Intellectual Property Organisation (WIPO), which offers arbitration services for IP disputes, revealed a 450% increase in requests for arbitration being filed with WIPO between 2012 and 2019, with 548 such arbitrations being commenced in 2022. Other arbitral institutions have created special procedures to encourage the resolution of IP disputes before them, with the Hong Kong International Arbitration Centre and the Singapore International Arbitration Centre both maintaining a panel of arbitrators with specialist IP expertise.
Nevertheless, whether arbitration is the right choice for a particular contract will depend on the relevant jurisdictions and the nature of the rights involved. There may, for example, be risks around arbitrability. Some jurisdictions do not permit arbitration of issues connected with certain IP rights, while others are silent on the issue. By contrast, some jurisdictions (like Singapore) have expressly legislated to clarify that arbitration is indeed available to resolve such disputes (although disputes related to the validity or infringement of registered IP rights like patents and trademarks will typically be excluded from this).
More generally, it is important to distinguish between contractual parties enforcing IP rights as between themselves (in arbitration) and as against third parties (before courts).
Many of these points can be addressed through careful drafting of an arbitration clause. This is both to clarify the interaction between the submission to arbitration and the resolution of disputes involving third parties (typically those involving validity and infringement of patents and trademarks) and to make explicit the parties' agreement as to the relief which can be ordered by a tribunal. This could involve, for example, providing expressly that a tribunal may order a party to take an action, such as applying to remove a particular right from the register if found invalid by the Tribunal. In drafting such clauses, it will be important to think about types of likely disputes, the nature of the IP rights involved and the remedies likely to be sought.
Standards, SEPs and FRAND licensing disputes – Submission to arbitration?
Standard essential patents (SEPs) are patents for which you must take a licence if you want to create technology that integrates with a particular standardised technology (and where not doing so would inevitably infringe the patents). Currently, these mainly centre around mobile telephony standards – such as 5G – and are administrated through standard-setting organisations. Anyone wishing to manufacture a 5G phone needs to take a licence of all the SEPs that have been assessed as essential to that standard. This request for a licence must in turn be granted on fair, reasonable and non-discriminatory (FRAND) terms by the patent owners whose patents are part of the standard.
Disputes have arisen all over the world between technology originators and implementors (many companies are both) around the nature of these FRAND terms. Most such disputes, which are between potential licensees and the SEPs licensors, have taken place before the UK, US and Chinese courts.
However, many licensors (and indeed licensees) would prefer not to have their FRAND terms set publicly in this way. Arbitration could allow FRAND disputes to be resolved confidentially (at least initially), provided there is an agreement to arbitrate (which could be concluded after the dispute arises if there is no pre-existing agreement).
This is will likely prove relevant in the context of the energy transition. As new technologies are successfully developed and commercialised, these may become standardised in a similar way to those used for mobile telephony patents. Patent pools may be set up through which to enable licensing for those wishing to create new technology that integrates with these standards in order to achieve interoperability. This may be a key part of facilitating the development of commercially viable markets and ensuring that elements produced by different manufacturers can work together, as part of scaling up these new technologies. Arbitration is likely to offer an attractive forum for potential licensees and licensors as they navigate through their differences around the terms of access to these technologies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
