Thought Leadership

Protecting Your Hydrogen Investment: Intellectual Property Issues

Client Updates

The past 18 months have seen an explosion of interest in hydrogen, with investors scrambling to invest in this burgeoning industry sector and valuations for hydrogen-related companies multiplying rapidly.  As interest and investment in the hydrogen market grows, companies will look to protect their investment in emerging hydrogen technology.  Intellectual property laws provide a variety of ways to monetise innovations while preventing competitors from freely benefiting from research and development efforts.  For example, a company may file for patents that provide a twenty-year monopoly in most countries in exchange for public disclosure of a new invention.  Alternatively, a company might decide to keep its innovation as a trade secret that may be protected indefinitely from theft but not independent creation by others.

However, the same rapid growth that makes the hydrogen market an attractive space also creates several potential pitfalls for the unwary in the protection of intellectual property. 

Joint Development and Collaboration Arrangements

With more companies and government entities entering the hydrogen space, and given the multifaceted nature of hydrogen projects, many new partnerships will inevitably emerge between different entities looking to develop and implement hydrogen-related technology.  Joint development or collaboration agreements can help companies and research institutions lay out the scope of work and funding for such partnerships.

To protect intellectual property rights, any such agreement should include confidentiality and non-disclosure provisions clearly establishing expectations regarding how to handle confidential information.  In this way, parties can share information knowing that they have legal remedies available for any breach of the agreement.  However, the agreement goes both ways.  With the requirement that other parties to the agreement will protect your confidential information comes the corresponding responsibility to protect the other parties’ confidential information.  Care must therefore be taken to establish procedures to prevent inadvertent disclosure of confidential information.

Joint development agreements also provide a useful mechanism to pre-establish ownership and usage rights for any intellectual property that may be generated by the partnership.  In some situations, the parties will agree to joint ownership for all intellectual property.  While such arrangements often seem the most equitable, joint ownership arrangements can inadvertently dilute the exclusivity, and therefore the value, associated with certain kinds of intellectual property.  In other situations, one party may be the owner of the intellectual property with mandatory licensing available to the other parties.  Deciding how to structure these agreements requires an understanding of what types of confidential information, prior intellectual property, and contribution to the partnership each party brings with them.  Accordingly, it is important to enter any partnership not only with knowledge of the goals of the partnership, but also with a strong understanding of the background and capabilities of all parties.

Government Funding and Reporting

New advances in the energy sector, particularly those dealing with lower-carbon initiatives, also frequently attract interest from government entities.  Government funding can be a great source of capital for new research and development projects in the hydrogen market.  Partnerships with governmental agencies and laboratories also create a mechanism for companies to share expertise and collectively work towards effective energy solutions.  However, government funding typically has certain strings attached to it that many companies may not be aware of.

Most agreements with government agencies make funding contingent on public reporting of the results from any tests or research projects.  This reporting usually takes the form of reports published on the agency’s website or presentations given at annual meetings.  Although the agencies are aware that companies highly value the intellectual property and confidential information obtained through these partnerships, the burden will be on the individual companies to make sure that they comply with reporting requirements while protecting this information.  Special care should be taken to confirm that patent protection is considered before making any public disclosures.  Similarly, companies should carefully review all reports and presentations to confirm that trade secret information is not inadvertently disclosed to the public.

Freedom to Operate

Many new or smaller research and development focussed companies may not fully appreciate that being aware of the intellectual property of competitors may be equally, if not more, important as developing your own intellectual property portfolio.  Being aware of what other hydrogen innovators are doing also allows a company to efficiently focus its own resources on truly novel and marketable projects.  This knowledge can also be useful in avoiding third-party claims of infringement.  Indeed, facing a patent infringement claim in the early stages of the commercialisation process could be fatal to many of these companies.  Thus, performing an investigation into third-party patents, also referred to as a freedom to operate study, could be a worthwhile investment when branching into new development areas.

The hydrogen industry sits squarely at the intersection of the energy and technology sectors.  The development of a global hydrogen economy will require the development of new technologies, and the scaling-up and refinement of existing technologies.  Intellectual property will therefore be the foundation for much of the expected growth in this hydrogen economy.  Intellectual property laws provide powerful tools to protect investments in hydrogen research and development.  Devoting resources early in the investment process to understand the rights and obligations associated with these tools, allows a company to maximise its benefit while minimising risk in the marketplace.

 

ABOUT BAKER BOTTS L.L.P.
Baker Botts is an international law firm of approximately 700 lawyers practicing throughout a network of 13 offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy, technology, and life sciences sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit bakerbotts.com.

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