Intellectual Property Disputes and the Political Climate in the US

High-quality, affordable batteries—used to power clean technologies like electric vehicles and energy storage—are key to the green transition and the prosperity it could potentially facilitate. They are also produced primarily by Chinese companies.

While the Biden administration attributes Chinese companies’ success in this space to “unfair, non-market practices,” the industry has also benefited from China’s underdeveloped traditional auto market compared with the U.S. As a result, Chinese consumers are more likely to switch from internal combustion-engine cars to affordable, domestically produced electric vehicles.

Whatever its origins, China’s success in the sector is significant enough that it now produces enough lithium-ion batteries to meet all global demand, according to Bloomberg NEF. But for U.S. lawmakers, this success story is little more than an additional layer—one they plan to crack—on the complex national security threat Chinese companies pose.

Companies like Ford Motors and Duke Energy have come under scrutiny from the U.S. government for working with or using China-based Contemporary Amperex Technology Co., Limited (CATL) batteries. Ford has scaled back plans to share a factory in Michigan with a battery maker, and Duke is phasing out the use of CATL products in military and civilian projects.

CATL is one of the companies listed in the Decoupling From Foreign Adversarial Battery Dependence Act, which the House of Representatives passed earlier this month. The bill prohibits the Department of Homeland Security from purchasing batteries or battery-related services (such as storage) from six listed companies, all of which are Chinese. It will go into effect in October 2027.

However, three years is likely not enough time for the U.S. battery industry to develop competitive, domestically produced alternatives, the source said. This Guardian which will take five to 10 years. Battery solutions that do not rely on lithium-ion batteries will also require years of development before they are ready for market.

Perhaps in recognition of these realities, the bill includes an exemption clause in the event that “there is no readily available alternative to purchase a battery of similar or better cost and quality.”

But even if Chinese companies could overcome Capitol Hill’s political opposition to their presence in the U.S. market, they would still have to deal with ongoing intellectual property (IP) disputes. Chinese companies’ efforts to commercialize their products in the U.S. have been met with lawsuits in both the U.S. and China, according to Hilary Preston, vice president of Vinson & Elkins.

The lawsuits, Preston said, target prominent Chinese battery makers such as COSMX, ATL and CATL (which is particularly important for the electric vehicle market). That means the Chinese companies are competing with each other to some extent to gain the best market position in the U.S. — in part by defending their intellectual property.

“Patent holders who rightly feel they have invested in research and development are not willing to give up royalties on that intellectual property if they believe competitors — from any country — are infringing their rights,” Preston said.

Although batteries have long been key to products like phones and laptops, their importance and value have grown with the growing global market for renewable energy. Still, there are only a few dominant companies making lithium-ion batteries. Growing competition both in China and around the world has made companies more likely to litigate over who owns what intellectual property, Preston said.

The growing importance of batteries has directly fueled two of the industry’s biggest headwinds: U.S.-China competition policy and intellectual property battles in both countries. In a statement last year addressing the safety allegations, CATL said the company was “committed to powering a green energy future” and “doing so with international partners around the world in a transparent manner.”

Concerns about clean technology made in China are also evidenced by President Biden’s imposition of 100% tariffs on Chinese electric vehicles and 50% tariffs on corresponding batteries, which were announced in May and finalized on September 13. The push to impose tariffs on Chinese competitors has filtered across the Atlantic; EU member states will vote later this week on whether to implement the continent’s proposed tariffs on Chinese cleantech companies.

The punitive measures will come on top of ongoing intellectual property lawsuits. “As the battery market continues to grow, we’ll continue to see more lawsuits,” Preston said. But she also noted that more lawsuits don’t necessarily mean Chinese batteries won’t be able to make it to market. Instead, it’s more likely that companies will shift construction costs, such as paying intellectual property royalties, into their business plans.

Moreover, lithium-ion batteries and new electric vehicles aren’t the only clean-energy products the United States needs, at least if it wants to realize the decarbonization ambitions that at least half the country has. Older technologies like solar panels will also be crucial. (The White House has also imposed a 50% tariff on solar products made in China.)

But the Biden administration has also made efforts to speed up the approval process for patents on key technologies. Initiatives like the U.S. Patent and Trademark Office’s Climate Change Mitigation Pilot Program and the Green Energy Patent Program are designed to speed up “the processing of patent applications for climate change mitigation innovations.”

These innovations aren’t always particularly new. Instead, they may represent areas that have been around for years but haven’t been commercialized enough to meet demand. The U.S. has seen a surge in patent applications for solar cells, clean hydrogen and batteries in the past few years, according to Preston.

“To meet our goal of reducing carbon emissions, we need to commercialize technology that is 10 or 15 years old,” she said.

China, for its part, has been pushing for increased commercialization of existing patents, especially those related to “key core technologies.” In February, the country’s Intellectual Property Administration released a work plan that included identifying and speeding up the processing of existing patent applications.

The progress (or lack thereof) of the two superpowers in renewable energy and other important innovations partly reflects the state of each country’s intellectual property systems. Providing American companies and individuals with full and effective intellectual property protection will help spur domestic innovation, partly by attracting investment and partly by assuring Americans that their inventions, while potentially useful in the U.S.-China technological and economic competition, are wholly their own.