WIND

Cutthroat competition at heart of GE-Mitsubishi dispute

Industrial heavyweights General Electric Co. and Mitsubishi are raising the temperature of a 2-year-old dispute claiming patent infringements and monopolistic behavior in the U.S. wind turbine market.

In a complaint filed in a U.S. District Court in Arkansas yesterday, Mitsubishi Heavy Industries accused GE of scheming to control the nation's wind power market. Through a series of "baseless claims of patent infringement," Mitsubishi said in its complaint, GE has successfully scared off potential Mitsubishi customers and discouraged well-capitalized foreign competitors from setting up shop in the United States.

"GE is attempting to kill competition in the marketplace to the detriment of U.S. consumers," said Mitsubishi spokeswoman Sonia Williams. "We anticipate damages will be in the hundreds of millions of dollars, and may be over $1 billion."

In a separate suit filed in Florida yesterday, the Japanese turbine maker accused GE of infringing on a critical Mitsubishi patent.

The Mitsubishi complaint is the latest in a series of claims and counterclaims unfurled by the two companies, made as competition increases in the U.S. wind market and as both companies roll out their latest high-capacity wind turbines. GE, Japan's Mitsubishi, Denmark's Vestas Wind Systems, Germany's Siemens AG and a growing crop of global industrial conglomerates are racing to get a permanent foothold in North America, where wind projects are grabbing a bigger share of electricity generation.

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This grudge match started in 2008, when GE filed complaints at the U.S. International Trade Commission alleging Mitsubishi had infringed on GE wind-turbine patents. The U.S. ITC ended its investigation in January after finding Mitsubishi had not violated the patents, but it left the door open for further action. In February, GE then filed a suit in a Texas court accusing Mitsubishi of breaching the GE patents.

Japanese turbine maker claims it's been shut out

The dispute at the ITC attracted the attention of influential members of Congress with GE factories or headquarters in their states. Democratic Sens. Charles Schumer and Kirsten Gillibrand of New York, which is where GE Energy is located, and Republicans from Southern states wrote letters to the ITC warning that job losses would result if GE lost the patent case.

The dispute also continues to play out amid heated discussion about U.S. leanings toward protectionist policies and the capacity of global wind and solar companies to reach American consumers without expanding their U.S. manufacturing base.

In the complaint yesterday, Mitsubishi said that GE has a 70 percent market share for variable-speed wind turbines. As Mitsubishi tells it, once it entered the market in 2006 and secured lucrative contracts, GE "embarked on an unlawful scheme" to drive it and others out of the U.S. market.

Variable-speed windmills are designed for significant utility-scale power generation. They operate on a wide range of wind speeds when connected to the transmission grid. Mitsubishi also claimed that GE obtained a handful of wind-turbine patents through improper means and failed to disclose sources of information to the U.S. patent office.

"GE's unlawful scheme has worked," says the complaint. "Prior to the initiation of GE's first lawsuit against Mitsubishi, Mitsubishi had sales of approximately $2 billion a year of variable speed wind turbines in the United States. Since GE's litigation campaign began over two years ago, Mitsubishi has not sold a single variable speed wind turbine in the United States."

GE calls claims 'outrageous'

When GE filed a new suit against Mitsubishi shortly after the ITC ruling, Mitsubishi explains, "This, GE hoped, would prolong the period of uncertainty over Mitsubishi turbines in the U.S. market for the pendency of the second suit."

GE spokesman Daniel Nelson in an e-mail called Mitsubishi's antitrust complaint "meritless and outrageous."

"GE stands strongly behind the merits of its patent infringement lawsuits against [Mitsubishi] and will fight to protect its intellectual property," Nelson said, adding that the company intends to "vigorously defend itself" against Mitsubishi's charge of patent infringement.

Matt Kaplan, a wind analyst at Emerging Energy Research, said wind purchasers have been scared off by the potential for legal problems if they purchase turbines from Mitsubishi instead of GE. The market-level impact is there, but he said the complex patent infringement claims made by the companies are hard to parse.

"It shows that the market is very competitive," he said, "and that Mitsubishi does feel a real threat from GE patent issues."

Tempest in once-tranquil market

GE controls about 44 percent of the North American market for wind turbines and components, and Mitsubishi comes in a distant fourth. Still, Kaplan said, the Japanese manufacturing giant isn't to be toyed with, and neither is the line-up of significant global power players that want a piece of the U.S. wind market.

"GE's dominant lead over the market has made it difficult for companies to enter and steal market share," Kaplan said. "But Mitsubishi, a heavy industrial company, does have the ability to threaten GE."

Kaplan said the ITC ruling and its ability to push back against GE litigation is critical for Mitsubishi. The company plans to begin construction this year on a $100 million plant in Fort Smith, Ark., to build wind-turbine engines for the U.S. market.

While Mitsubishi's Williams said the project is still a go and could employ nearly 400 people, she acknowledged the drop-off in Mitsubishi wind contracts since GE's claims raised concerns about building the plant. She warned that the plant could sit idle "if GE's unlawful conduct continues."

According to the American Wind Energy Association, 15 companies sold large-scale wind turbines to U.S. customers in 2009, up from five companies in 2005. "The wind industry is increasingly in the hands of major industrial players," Kaplan said. "This is a clear shift from what we've seen in the past."

Companies interested in installing wind-power capacity in the United States haven't shied away from the market, Kaplan said, but the GE-Mitsubishi disputes have caused those companies to pause for a second and walk gingerly as they chooses their suppliers.

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