NISTIR 7161
The Role of the U.S.  National Innovation System in the Development of the  PEM Stationary Fuel Cell

IV. Knowledge Creation and the Use of Intellectual Property in the Fuel Cell Industry

This section focuses on knowledge creation within the fuel cell industry. The first two subsections briefly discuss the historical roles of government and universities, respectively, in fuel cell knowledge creation. The third subsection focuses on current government programs designed to create knowledge in the fuel cell arena. The section concludes with a discussion of the dynamics of the fuel cell innovation arena, presenting economic concepts of knowledge creation and applying these to the current intellectual property environment within the fuel cell industry.

A. Historical Government Support for Knowledge Creation in PEM Fuel Cells

Since the early 1960s, government programs have significantly influenced the development of fuel cells. A notable initiative was a series of contracts to purchase working fuel cells for the U.S. space program. Since operating performance was important but cost was not, the recipient companies were able to develop technology without proving its commercial feasibility for terrestrial markets. Ballard Power started with a Canadian government contract to build a PEM fuel cell. Another example of government funding is the DOE-sponsored effort, which started in the 1960s and continues to the present day, to develop large Molten Carbonate and Solid Oxide chemical plant-type systems for central utility electricity generation. 1

Los Alamos created another piece of new knowledge through its discovery of how to operate PEM fuel cells on impure hydrogen fuel. Traces of carbon monoxide in hydrogen fuel, which are generated in processing liquid fuels such as gasoline or methanol, reduce fuel cell performance. By forcing low levels of air into the fuel feed stream, Los Alamos researchers removed the carbon monoxide catalytically within the cell, allowing fuel cells to run as well on contaminated hydrogen as on highly pure hydrogen. Though this development is far from a perfect solution, it did help to open the way for the use of PEM fuel cells with realistic hydrogen fuel feed streams derived from the processing of liquid fuels.

Historically, universities have conducted significant amounts of R&D for certain scientific disciplines related to the area of fuel cells. Table 4 shows the amount of historical R&D spending by universities in 1980, 1990, and 1999 in disciplines related to fuel cell research, including electrochemical, mechanical, polymer, ceramic, fluid flow and controls engineering, physics, chemistry, and materials science.

It is difficult to present reliable conclusions about the relative quality of various university research efforts. Based on the anecdotal evidence collected for this study, Case Western Reserve, Texas A&M, Ohio State, Rensselaer Polytechnic Institute, and California-Irvine are some of the academic institutions that conduct significant amounts of fuel cell research.

C. Government Support for Knowledge Creation in Fuel Cells (Outside of the Advanced Technology Program)

In his 2003 State of the Union address, President Bush called for a significant increase in research for the hydrogen economy and fuel cells. Specifically, President Bush announced a $1.2 billion hydrogen fuel initiative for developing the technology for commercially viable hydrogen-powered fuel cells to power cars, trucks, homes, and businesses. His hydrogen fuel initiative includes $720 million in new funding over the next five years to develop the technologies and infrastructure to produce, store, and distribute hydrogen. Combined with the FreedomCAR (Cooperative Automotive Research) initiative, President Bush proposed a total of $1.7 billion over the next five years to develop hydrogen-powered fuel cells, hydrogen infrastructure, and advanced automotive technologies.

1. Department of Energy

Several government agencies currently support fuel cell research and the generation of new knowledge. The largest supporter in terms of research dollars is the Department of Energy. DOE supports fuel cell research through two separate departments. 4 The Office of Fossil Energy supports the development of high-temperature ceramic-based fuel cell systems, which operate on natural gas. This program primarily supports the development of Solid Oxide and Molten Carbonate fuel cells. Much of that work is done through the Solid State Energy Conversion Alliance, a partnership between DOE, the national laboratories, and industry.

The other part of DOE performing fuel cell research is the Office of Energy Efficiency and Renewable Energy. This office supports research in the PEM fuel cell area. It also manages the FreedomCAR project, which is a partnership between DOE and a consortium of U.S. automakers. FreedomCAR supports the development of PEM fuel cell technology for automotive applications.

Table 5 shows the distribution of research dollars for total hydrogen research, which is divided between fuel cell applications and infrastructure.

Table 5. Total DOE R&D Funding for Hydrogen, Fuel Cell, and Infrastructure Development (thousands of dollars)

Based on the requests for funding in FY 2004, the Bush administration supports significant investment in the hydrogen economy. The total amount of requested funding for FY 2004 exceeds the 2003 figure by 70 %. 5  Hydrogen production and delivery and hydrogen storage are slated for 100 % and 200 % increases in funding, respectively. On the fuel cell application side, stack component R&D and technology validation are the gainers. A key item to conclude from table 5 is that the Bush administration has increased support for the building blocks of the fuel cell technology such as the stack and technology validation as well as the supporting hydrogen infrastructure while freezing the amounts that support the actual building of fuel cells.

2. National Institute of Standards and Technology

NIST, which develops standards and measurements for a broad range of products and technologies, contributes to the creation of knowledge in the fuel cell industry through its Residential Fuel Cell Test Facility. NIST built this facility to accomplish three goals: (1) accelerate the widespread commercialization of fuel cells in building applications; (2) provide consumers with accurate, easy-to-understand information on the financial costs and benefits of fuel cells; and (3) provide feedback to fuel cell manufacturers on the overall performance of fuel cell systems under varying environmental, thermal, and electrical load conditions.

NIST plays a key role in the development and commercialization of new technology. Not only must new standards be developed for new technologies but often the equipment and tests needed to measure the standards must be developed as well. For fuel cells, NIST will develop a methodology for determining the seasonal performance of residential and small commercial fuel cell systems. This methodology will aid the purchaser of a residential fuel cell in determining the economic impact of such a system. NIST will supplement the efforts of many consensus standards, such as those of the American Society of Mechanical Engineers (ASME) and the American National Standards Institute (ANSI), with a test procedure and rating methodology that accounts for any change in performance as a function of environmental conditions, electrical load, and thermal load. The fuel cell used by NIST in its test facility was purchased from Plug Power. Section V.B.5 provides a more specific description of Plug Power's role in developing fuel cell standards.

3. Department of Defense

The U.S. Department of Defense supports fuel cell demonstration and development in two separate programs. One program is the Fuel Cell Demonstration Program managed by the U.S. Army Construction Engineering Research Laboratory (USACERL) to demonstrate that small fuel cells can work in the field. USACERL's specific tasks include installing turnkey packages, devising site criteria, screening DOD candidate installation sites against selection criteria, evaluating viable applications at each candidate site, coordinating fuel cell site designs, installation and acceptance of the power plants, and performance monitoring and reporting. Although the program initially focused on Phosphoric Acid fuel cell systems, PEM fuel cells are now the program's main focus, with over 20 PEM installations (more than half from Plug Power) established in the last two years with no concurrent new deployments of Phosphoric Acid fuel cells.

The second DOD program is the Defense Advanced Research Projects Agency's fuel cell research conducted under the Advanced Energy Technologies Program. 6 The current program, Palm Power, is focused on projects that will produce electric power in the field for individual soldiers or small groups of soldiers. The program is developing compact fuel cell and thermal-to-electric energy conversion technologies and is primarily focused on 20 W to 500 W portable power systems using Solid Oxide fuel cell systems that can perform under military conditions and run on jet fuel.

D. Intellectual Property in Fuel Cells

Older science-based industries such as semiconductors, pharmaceuticals, and chemicals developed extensive knowledge markets over the years. These markets are characterized by intra-firm knowledge generation through R&D activity and by inter-firm knowledge trading through licensing and cooperative R&D.

In the relatively new industry of fuel cells, the market for knowledge is less developed than in more mature industries. Because the technology base is relatively unexploited compared to more mature technologies, a certain "land grab" mentality exists in terms of patenting activity. Since it is difficult to determine which patents will prove most valuable in the long term, the incentive is to patent often. Fuel cell makers employ two strategies that maximize value in their knowledge generation process. First, they create proprietary products that integrate many different processes into a single unit. Then, they patent many of the processes and integration strategies. In addition, the process of building the fuel cell and integrating its components creates a lot of tacit knowledge that companies accumulate and use to differentiate themselves and their products from the competition.

It is helpful to divide the fuel cell industry into three types of companies. There are the fuel cell makers, which integrate components around a fuel cell stack. This category includes companies such as Ballard, Plug Power, and UTC Fuel Cells. Second, there are the fuel cell component makers, which make components such as the membranes and catalysts. This category includes companies such as Johnson Matthey, DuPont, 3M, Gore, and Englehard. Finally, there are the large manufacturers that hope to sell fuel cells in their predominant power, automotive, and portable electronic device markets. This category includes companies such as GE and General Motors.

Figure 4 illustrates the patenting activity of five fuel cell makers. This figure shows that Ballard and UTC have generated the most patents-not surprisingly, as they have been patenting much longer than has Plug Power. Overall, each of these three companies is now averaging between 10 and 20 of the new patents granted each year. To put that in perspective, the whole fuel cell area only produced an average of 60 patents a year through the 1970s, 1980s, and early 1990s.

Figure 4 - Number of full cell patents held by five selected fuel cell companies.
Source: U.S. PTO (2003).

Table 6 shows the patenting activity of the fuel cell component companies and downstream distributors.

The overall business strategy of fuel cell makers has been to develop strategic partnerships with both component suppliers and downstream distributors. This strategy makes sense from a practical standpoint, because large companies dominate both upstream supplier and downstream distribution markets. What has emerged from these interlocking strategic relationships is that each fuel cell company concentrates its intellectual property strategy around its core area of expertise. For example, figure 5 shows the distribution of Plug Power's fuel cell patents by component area. The plate, stack, and water management components account for 56 % of the company's total patents. These three areas also represent the core of Plug Power's technical expertise.

Figure 5 - Plug Power's distribution of patents by fuel cell component area.

Source: Plug Power.

In the fuel cell industry, it is difficult to find data on the size of the licensing market for fuel cell technology. What is known is that fuel cell companies often license technology from the national laboratories and universities. Celanese received an exclusive license to Case Western Reserve's high-temperature membrane and, in turn, has licensed the technology to Plug Power for stationary applications.

Based on data from 13 ATP fuel cell projects, three companies reported that some portion of the technology for their ATP project was licensed from a government national laboratory; one company reported that a portion came from two universities; and another reported that a portion came from a small private company. 7 Of the three companies that reported receiving their technology from a national lab, one reported that some of its technology also came from a large company, and another reported that some of its technology came from a second national laboratory. The main conclusion that can be drawn from this admittedly limited sample is that private firms use the knowledge generated by national laboratories. Moreover, one of the best methods to diffuse publicly generated knowledge is to have that knowledge embedded in a commercial product such that it can enter the marketplace. 8

Firms do license technology when appropriate. However, until the fuel cell industry begins to deliver significant volumes, the demand to license technology is low. What has emerged is a significant degree of cooperative R&D and joint marketing, since a fuel cell involves several technologies and will ultimately need to be sold in mass markets such as the car and the home.

Despite the lack of profits and revenue to date, it appears that fuel cell companies are creating "moats" around their technologies. In other words, as fuel cell technologies evolve and become more commercially viable, it appears that fuel cell companies want to protect their intellectual property position with the broadest patenting claims available. Therefore, as commercial markets expand, each company will be in a better position to license its technology or use its patent portfolio as a bargaining chip in a cross-patenting negotiation.

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1DOE was established in the 1970s under the Carter administration, but the programs began in agencies that eventually became part of DOE.

2Los Alamos National Laboratory (2002).

The parameters that affect fuel cell performance include fuel, electrical load, thermal load, and environmental conditions. The types of tests used to measure the effects of the parameters on fuel cell performance include steady state, thermal load, and transient and start-up test (Davis 2002).

3The parameters that affect fuel cell performance include fuel, electrical load, thermal load, and environmental conditions. The types of tests used to measure the effects of the parameters on fuel cell performance include steady state, thermal load, and transient and start-up test (Davis 2002).

4U.S. DOE (2003), p. 46.

5Ultimately, Congress granted $158 million for FY 2004 and the president has requested $190 million, which would represent a doubling of funds in only two years.

6www.darpa.mil/dso/thrust/matdev/advancet.htm.

7Information on ATP's Business Reporting System may be found at www.atp.nist.gov/eao/ir-6491.pdf.

8Jaffe (1997).

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Date created: March 29, 2005
Last updated: August 3, 2005

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