Long read: Patently disruptive

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From the May edition of pv magazine

Over the past couple of months, Hanwha has brought its patent infringement lawsuit against Jinko and REC in the regional court of Düsseldorf in Germany; and against Jinko, REC, and Longi Solar with the U.S. International Trade Commission and the U.S. District Court of Delaware. In Australia, it added PV distributors Baywa r.e. Solar Systems and Sol Distribution to its suits against the three manufacturers, for their role in distributing allegedly patent-infringing products.

All accused manufacturers have refuted the allegations. In March, before the case had been brought before the Federal Court of Australia, Jinko released a statement in response to the cases brought in U.S. and German jurisdictions saying, “Based on Jinko’s preliminary analysis of Hanwha’s complaints and the asserted patents, the company believes that the complaints are without technical or legal merit.”

Along with being the location of one of the legal claims, Australia is also the home of PERC technology, which was first invented by Martin Green of the University of New South Wales in 1983. Green’s team patented the technology at the time, but allowed some of their patents to lapse when they realized it would not be commercialized for some time, as effectively came to pass.

In recent years, various factors have enabled the lower-cost mass production of high-efficiency PERC solar PV technology, which is predicted to dominate the solar market by 2023, taking over from modules based on the aluminum back surface field (BSF) cell architecture.

PERC’s importance

According to industry forecasts, global sales of PERC solar cells exceeded $10 billion in 2017 and are expected to account for more than $1 trillion of sales by 2040.

Edurne Zoco, Research Director, on the IHS Markit Energy Technology team says that at present the competition between Chinese and non-Chinese suppliers is particularly fierce in international markets. “Tier-1 producers, like Longi, Jinko, Trina, and Canadian, are selling more and more in international markets. Some have announced that 80% of their sales will be outside of China this year.”

In 2018, Hanwha Q Cells experienced a net third quarter loss of $164.6 million, associated with the discontinuation of its China-based ingot manufacturing operations and currency exchange losses. In December, it lowered its full year module shipment guidance for the second time – in total, it reduced expectations from the range of 6,000 to 6,200 MW to a range of 5,500 to 5,700 MW – in line with slowing growth.

Zoco says that while Hanwha was the largest producer of solar cells worldwide in 2018, it has little access to the huge Chinese solar market – which represented 40% of global installations last year – and the South Korean market does not offer opportunities on the same scale. “Hanwha has a lot of product to place outside China. It makes sense that it is being more aggressive and trying to limit competition in crucial markets.”

The patent Hanwha Q Cells is seeking to enforce is on a 2002 development further to Green’s technology, and refers to a particular passivation structure that is said to have additionally reduced recombination losses that occur at the solar cell surface. The patent identifies the particular layers of the cell – a first dielectric layer including aluminum oxide and a second dielectric layer that contains hydrogen – and their thickness.

Green tells pv magazine that in his team’s work on PERC in the 1980s, “We were very likely first to report the type of ‘thin passivating layer, thicker optical layer’ on both front and rear surfaces that is described in the patent, but not with the particular material combination it describes.”

Opinion in Australia, from both sides of the dispute, is that the validity of the patent may be contentious, and is likely to be refuted on the basis of what was known about solar cells in 2002, and what other research into or production of cells had been published or undertaken at the time.

Longi Solar’s Product Director, Monsoon Wang, told pv magazine at the Smart Energy Conference on April 2, “We believe Longi’s technology is different from Hanwha’s technology.” At that time, the case had been filed to the Federal Court of Australia, but details had not yet been provided to Longi.

In a separate interview, Wang spoke more confidently, “We think Longi’s solution has found a very good balance between high efficiency and cost. Last year we shipped over 300 MW to Australia and our market share was about 6%. This year our target is to ship 500 to 600 MW.”

In relation to volumes of panels shipped, Zoco at IHS Markit says that Jinko, Longi, and REC could choose to ship large quantities of panels to Germany, the United States, and Australia prior to resolution of the case, which may take 18 months.

“If there is an expectation that the case is going to move forward, it could generate a surge of exports in advance,” she says.

On April 4, Hanwha received a glimmer of success when the U.S. International Trade Commission (USITC) voted to institute an investigation of alleged patent infringement by Jinko, Longi, and REC. A statement released by Brunswick Group advisors on behalf of Hanwha, said, “This decision by the USITC signifies that Hanwha Q Cells’ complaint satisfies the rigorous pleading requirements, including evidence of importation and alleged infringement,” and that the case would shortly be assigned to a judge to set a schedule.

Some industry insiders have speculated that the case in the United States may be an opportunity to discriminate against Chinese products by moving to restrict their importation.

Notably, the USITC has the ability to block the import of a product via customs at the border – and has been requested to do so by Hanwha Q Cells. It also has the ability to issue a “cease and desist” order for products already in the country. How this will play out is still unclear, but it definitely could affect the strategy of REC Group, JinkoSolar, and Longi to push as much product as possible into the U.S. market.

Hanwha Q Cells, which has an R&D center in Thalheim, Germany, the former Q Cells’ facilities, and manufacturing and test facilities in South Korea, Malaysia, and China, recently opened a 1.7 GW solar module assembly plant in Dalton, Georgia. “The U.S. is crucial for Hanwha and they really want to maintain market share,” confirms Zoco.

Timetable for dispute

In Australia, on Friday 12 April, the first directions hearing of the Hanwha lawsuits was held in Federal Court. It involved no substantive discussion of the merits of the case, but established timetabling for the next steps in the proceedings.

In the suits against Jinko and REC, the respondents must file and serve their defense and any cross claim by June 21. With regard to litigation against Longi, the court gave Hanwha leave to serve the company’s Australian subsidiary, which was only incorporated in March. Hanwha will again appear in court on May 3 to seek leave to serve proceedings on Longi in China.

The timetable of proceedings allows for responses and defense against cross claims. This first phase of hearings will conclude on July 19 with a second case management hearing to establish an ongoing timetable.

“These kinds of processes slow things down,” says Zoco. “Companies must devote resources and attention to refuting claims, and customers may wonder whether they are going to have an issue with supply, perhaps not in the near future, but much more so if the case has a positive outcome for Hanwha and imports of Jinko, Longi, and REC’s relevant products into Australia are ordered to cease.”

IHS Markit, however, is not forecasting a shortage in the availability of PERC cells and modules in 2019 or in 2020. “This year we’re predicting 25% growth in solar demand,” says Zoco. “Also, this case is limited to certain producers and to a specific product, so other producers can still supply the market, and these producers being investigated can also supply other module types,” she goes on to say.

All parties to the litigation have stated their commitment to upholding intellectual property (IP) rights. A Hanwha Q Cells’ spokesperson stressed in particular that defending IP underpins ongoing investment in R&D.

In response to the litigation, REC Group issued a statement saying, “REC is confident that it does not infringe Hanwha’s patent and will vigorously defend itself, its award-winning products, its distributors, customers, and partners.” It signaled its intention to petition for the invalidity of Hanwha’s patent.

For PERC technology’s inventor, the outcome of the legal dispute is more art than science. “You can never really predict a court decision,” Green observes.