Tag: patent protection
Australian Patent Filings Up in 2021, Aided by Innovation Patent’s Demise
The number of standard patent applications filed in Australia exceeded 30,000 for the first time in 2021, increasing by nearly 3.6% over the previous year, and following on from two successive years of decline. Growth was driven primarily by direct national filings, with PCT national phase entry (NPE) filings up by less than 1% on 2020. Standard application filings by Australian residents experienced particularly strong growth, increasing by 21% over 2020 numbers, while applications by foreign residents grew by just 2%.
At first blush this looks like good news for Australian applicants, and thus for innovation in Australia. But the headline figures conceal a distorting influence on filing behaviour in 2021, namely the phasing out of the innovation patent system. It was entirely predictable that thousands of new innovation patent applications would be filed in the weeks leading up to the final deadline of 25 August 2021. What might have been less obvious is that the beginning-of-the-end of the innovation patent system would also lead to a spike in filings of new standard patent applications. Australian residents, in particular, filed more than six times as many direct standard applications in August 2021 as compared with a ‘normal’ month, accounting for a majority of the overall growth in resident filings for the year. All of these applications with a filing date on or before 25 August 2021 are able to provide a basis for future divisional innovation patent filings, for as long as they remain pending, and up to the final expiry date of the innovation patent system on 25 August 2029.
The down side of this boost in Australian resident filings, assuming that they indeed represent applications brought forward to beat the innovation patent deadline, is that we should expect to see a corresponding decline in the coming 12 months, just as we did following introduction of the Raising the Bar patent reforms in 2013.
Provisional filings suffered a further decline – the largest since 2013 – of nearly 12%. No doubt this can also be attributed at least partly to the phase out of the innovation patent system, with some applicants electing to file an innovation or standard application directly, prior to 26 August 2021, rather than file a provisional application as a basis for a future priority claim. The 2013 drop in provisional filings was similarly influenced by a desire to get a standard patent application into the system, and request examination, prior to commencement of the Raising the Bar patent law reforms. But even accounting for these disruptions, provisional filings have been in a general decline for many years, and 2021 looks to be a continuation of that trend. Provisional applications are filed almost exclusively by Australian residents, so this is not a good sign for the state of innovation and IP protection in Australia.
In a surprising turn of events, the growth in standard filings by Chinese applicants did not continue in 2021. Following a number of consecutive years of significant growth, I had previously predicted that 2021 could be the year in which filings by Chinese applicants surpassed those of Australian residents. But the jump in Australian filings combined with a 7% decline in filings from China to defeat that expectation. (For now.)
Australians have therefore remained the second largest users of their own patent system, with US residents once again being overwhelmingly the top filers. Standard applications from the US increased by nearly 5% in 2021, following a 1.6% decline in 2020. The other members of the top five countries of origin – China, Japan, and Germany – all experienced declines in 2021.
But enough with the summary – let’s look at some charts and tables!
Read more »Gb Sciences Completes $8 Million Sale of Las Vegas Cannabis Facility
The sale will accelerate the development of Gb Sciences’ proprietary Parkinson’s disease and COVID-related Cytokine-Release Syndrome therapies LAS VEGAS, Jan. 11, 2022 (GLOBE NEWSWIRE) — Gb Sciences, Inc. (OTCQB:GBLX), a leading plant-inspired, biopharmaceutical research and development company, has closed the sale of its last remaining cannabis facility, completing a transition to the biopharmaceutical industry. “This is a landmark […] Electrical steel – Another temporary supply chain shortage or a threat to OEMs’ electrification plans?
While major steel producers are investing millions to increase electrical steel production capacity, the rapid growth of the hybrid and electric vehicle segment could potentially cause material demand to outpace supply from 2025.
As the automotive industry battles the semiconductor shortages, which have prevented the production of 9.3 million units to date, the rapid expansion in growth of EV sales raises questions about the future availability of sufficient electrical steel needed to produce electric motors to meet the electrification targets set by regulators and OEMs around the globe.
Several major steel producers have announced investments in new xEV steel capacity over the next three to five years, but will this be sufficient to meet the specific grade and regional requirements of the xEV market?
What is electric steel? Why does it matter for automotive?
Electrical steel, or silicon steel, is an iron-silicon alloy that possesses superior magnetic properties to other types of steel alloys making it optimized for a variety of electrical machines ranging from power and distribution transformers to electric motors.
While electrical steel is estimated by IHS Markit to account for only 1% of the 2 billion metric ton 2020 global steel market, its supply is being considered as an increasingly critical input to OEMs' electrification plans as well as various energy transition initiatives. An important automotive application of electric steel in automotive is electric motors. These systems convert electrical energy into mechanical energy by energizing copper windings in a stator, which creates a magnetic field then causing the rotor to spin.
The commercial electrical steel market is divided in two major categories: grain-oriented electrical steel (GOES) market and the non-oriented electrical steel (NOES) market.
This distinction is fundamental to understand which type of electrical steel the automotive industry has an exposure and what mitigation strategies might be required. GOES is used in static machinery like transformers, which require unidirectional magnetization, while NOES is used in rotating machinery like motors and generators, which require multidirectional magnetization.
Applications for NOES are extensive and include consumer appliances (washing machines, dishwashers, etc.), heating, ventilation, and air conditioning (HVAC) (including domestic refrigeration), automotive applications, small, medium, and large industrial motors, power generators, pumps etc. Because of the significantly higher volume of demand for rotating machinery, global NOES production in 2019 significantly exceeded the quantity of GOES produced that year.
Carmakers have a direct exposure to NOES, but they are indirectly also exposed to GOES.
- NOES is a direct material input used in electric motor
manufacturing for both hybrid and electric vehicles, as well as in
many low-power motor applications, ranging from high duty cycle
motors like those used in electric power steering, oil, and fuel
pumps to short time duty motors like those used for comfort and
convenience like electric seat adjustment or sunroof. Some 35 to 45
low-power motors are fitted on average per car, with about 20 in
the B segment and 80 in the E segment (with some extremes like the
Mercedes S-class that has more than 100 motors).
- The critical difference between the different motor types is in the NOES grade being used. For reference, mild hybrid motors use less than USD10 of high-grade NOES, while battery-electric vehicles will use anywhere between USD60 to USD150 per motor of an extension of high-grade NOES, referred to as xEV grade, which in some configurations can even represent more than USD300 NOES content per vehicle, for example, when featuring individual traction motors on the front and rear axles to independently power the four wheels, like in the Rivian R1T. This xEV grade is where capacity constraint concerns are emerging.
While this article will focus on specific concerns around xEV-grade NOES, it should be noted that GOES is critical to support the rollout of much-needed EV charging infrastructure. OEMs therefore have in indirect exposure to this electrical steel subsegment also, meaning it is critical for the automotive industry to understand and manage their exposure to both categories of steel alloys. Many steel mills also employ common production equipment for GOES and NOES. This further compounds the risk owing to the increased difficulty in understanding producer capacity allocation strategies.
Is there an imminent shortage of xEV NOES for the auto sector? Why?
NOES capacity has been sufficient to satisfy the needs of the different industrial sectors over recent years, however increased demand from the automotive sector, in particular with OEMs' acceleration in their electrification drive, is likely to result in significant pressure for steel manufacturers to serve both the automotive sector and the other sectors that use this steel alloy from 2023 onward.
While in 2022, with some apprehension and assuming no other upstream and downstream disruption, we expect OEMs' orders being fulfilled. We foresee a structural capacity deficit to satisfy the automotive sector's requirements, which will require significant capital investment in the coming years.
Of the over 11 million tons of NOES produced in 2020, xEV-grade NOES accounted for a total of 456,000 tons, but as far as the automotive sector is concerned, this is by far the most critical.
There are different reasons why a capacity crunch for xEV-grade NOES might emerge.
- There is limited room for new entrants: Only
14 companies are currently capable of manufacturing xEV-grade NOES
that meet global OEM requirements. More manufacturers may decide to
enter this sector in the future, however major barriers to entry
exist caused by capital expenditures associated with cold rolling,
annealing, and coating equipment, manufacturing know-how,
OEM-supplier relationships, and patent protection. OEMs are now
able to purchase high-quality NOES from an increased (albeit still
limited) number of high-volume electrical steel suppliers.
- Concentrated manufacturing footprint: Some 88%
of the manufacturing is concentrated in Greater China, Japan, and
South Korea and then exported to other regions usually in the form
of steel coils. Supply is extremely limited in North America. There
are only five mills globally that have a broad product offering
that meaningfully covers the full spectrum of products and only one
of them is located outside of Asia.
- Scope to change material or steel supplier is
limited: Owing to the correlation between the efficiency
of a motor and an EV's operating range, differences in core loss (a
critical measure of the input electrical energy wasted as heat
during magnetization) between competing NOES products suppliers can
have significant impacts on OEM purchasing decisions, particularly
for OEMs that purchase electrical steel laminations in high
volumes.
While OEMs and tier-1 traction motor manufacturers may have multiple mills on their approved sourcing list, most programs only have one PPAP approved steel mill. Material characteristics are also matter of litigation among suppliers.
For example, in October 2021, Nippon Steel sued Toyota and Baoshan Iron and Steel (Baosteel), a subsidiary of the state-run China Baowu Steel Group, which is the largest steelmaker in the world. Nippon Steel claims the steel supplied by Baowu to Toyota for its hybrid motor cores violates its patents on composition, thickness, crystal grain diameter, and magnetic properties. - Downstream processes also face bottlenecks:
Aside from the limited number of steel manufacturers capable of
producing xEV NOES, bottlenecks may emerge across the entire
downstream motor supply chain. Not only are there only 20 motor
core lamination stampers which can cater the OEMs' needs, but there
are also only five companies that can produce these unique stamping
presses and fewer than 10 independent tool shops with the
competency to fabricate the unique stamping dies that can support
state-of-the-art motor designs.
Lead times for certain pieces of key production equipment have doubled over the last four years. Furthermore, not only are many of these companies small, family-owned businesses that have capital constraints limiting their ability to scale, a good portion of these have not traditionally significantly participated in the automotive industry.
How much xEV-grade NOES do OEMs need in the medium term? How big is the shortage?
The global gross demand for xEV-grade NOES required for the manufacturing of traction motors in hybrid and electric light vehicles is expected to grow from 320,000 tons demanded in 2020 to just over 2.5 million tons by 2027 and in excess of 4.0 million tons by 2033.
Based on capacity data from Metals Technology Consulting, a significant concern emerges around capacity constraints in 2023. It is highly unlikely mills can support market demand from 2025 onward without significant additional investments. However, adding capacity in 2025 requires mills to make decisions imminently. The situation looks even more dire when factoring in that most xEV-grade NOES mills can only sustain 90% capacity utilization over extended time periods.
Due to the exponential growth of electrified vehicles in the coming years, there remains a risk of electrical steel supply not meeting demand between 2023 and 2025. Despite projected capacity increases, a structural shortage of 61,000 tons is likely to occur in 2026. Without further major investments, this shortage could rise dramatically to 357,000 tons in 2027, culminating to a 927,000 tons shortage by 2030.
Which OEMs are more exposed?
The shortage is expected to particularly impact OEMs that are targeting a high share of hybrid and electrical models as part of their future product sales. Albeit battery electric vehicles (BEVs) manufacturers, particularly pure-play OEMs like Tesla are more exposed, there is also an exposure for OEMs wanting to hedge their electrification bets with a higher hybridization share in their mix, like Toyota for example. Additionally, the likes of Jaguar, Mini, Volvo, Mercedes-Benz and Alfa Romeo that intend to sell only plug-ins or EVs from 2025-30 onward, alongside larger OEMs like Renault-Nissan-Mitsubishi and Volkswagen.
OEMs with a large share of vehicle builds in Europe also face serious headwinds as the supply-demand imbalance looks to be the most pronounced in that region, especially when factoring in cost competitiveness challenges resulting from tariffs on imported material.
Which region has the biggest gap?
Region-specific effects to OEMs will likely be directly driven by the production capabilities of domestic steel suppliers and the import tariffs in place in the region. In regions that are projected to demand significantly higher volumes compared with domestic supply, import tariffs can heavily affect operating expenses for OEMs that purchase motor cores at high volumes. For example, in the United States, Section 232 applies high duties, approaching 200%, on NOES imported from seven non-EU countries and quota-based tariffs on NOES imported from the EU.
Europe is the region with the highest supply imbalance, but to date, North America still has a major blind spot for NOES electrical steel production. Cleveland Cliffs (formerly AK Steel) is the only local producer of NOES. Cleveland Cliffs' NOES and GOES manufacturing shares common production equipment. Cleveland Cliffs is considerably focusing more on grain-oriented steel production to address the increasing regional demand for electrical transformers, thus reducing available xEV-grade NOES capacity.
The U.S. Steel-owned Big River Steel plant in Osceola, Arkansas, United States starts NOES production in the third quarter of 2023. This will bring 180,000 metric tons of NOES capacity per year online, 45,000 of which will likely be allocated to xEV-grade NOES.
Considering the aggressive vehicle electrification targets set by the Biden administration's infrastructure bill, the time required for Big River Steel to start xEV NOES production, and the further time required for it to ramp up production to full capacity, OEMs in the region will likely continue to face limited local supply options, driving up motor costs in the short term and hurting their international competitiveness.
Are steel manufacturers investing to fill that capacity gap? Can new players solve the situation?
Steel suppliers have announced multimillion-dollar investments to boost production of high-grade and xEV-grade NOES. However, even when accounting for these, there will still be an investment gap. For reference, the shortage of 650,000 metric tons by 2028 could require some 6 to 12 new mills (depending on size and location) to satisfy increased demand from the automotive sector.
Adding a new plant typically takes about three years for an existing player, with roughly one year for engineering and two years for construction. For a new player, it may take anywhere between two to eight years to produce high-grade NOES or xEV-grade NOES and to engineer and build the facility, on top of the initial three years.
What else could steel manufactures do to address the capacity constraint for autos?
The auto sector is a strategic growth area for steel manufacturers, particularly for special steel alloys, and is generally a major source of revenues. This could not paint a more different picture than what is evident in the semiconductor chip shortage. In this potential electrical steel shortage, the auto sector is more in the driver's seat than it has ever been in the chip shortage. The auto sector could benefit from the built-in flexibility that steel mills have. Most mills that manufacture electrical steel have cold mill designs. This allows critical pieces of equipment to be shared across low-grade NOES, high-grade NOES, and xEV-grade NOES. In several cases, mills also share equipment between xEV-grade NOES and GOES.
Mills were purposefully constructed in such fashion to allow for cost-effective mixed product manufacturing to mitigate risk in product mix changes. This results in a structure where mills can choose to allocate capacity based on market demand by product, product profitability, and contractual obligations with customers. However, changeovers to tweak the product mix could result in a capacity reduction of as much as 20%. The xEV-NOES grades that the auto sector needs are associated with higher profit margins.
Therefore, steel manufacturers will likely prioritize auto sector demand in the allocation of existing "swing capacities". This means that they will prioritize xEV-grade NOES over low-grade NOES. However, there is a potential risk that the blanket may be just too short, meaning that cutting high-grade NOES in favour of xEV-grade NOES could result in subsequent shortages of high-grade NOES. This is likely to cause downstream effects on the costs of the plethora of low-power motors used for auxiliary systems in a vehicle, as well as other industrial sectors.
Besides converting some capacity from other grades to xEV-grade capacity, steel manufacturers could also boost production by prioritizing the manufacturing of slightly thicker gauge sheets. Counterintuitively, using thinner steel sheets does not help expand production capacity. Techniques developed to improve magnetic characteristics at parity of thickness consume rolling capacity, which is a key constraint in production. For reference, 1 metric ton of double cold-reduced 0.25 mm xEV-grade NOES takes the same capacity as 2.5 metric tons of 0.35 mm xEV-grade NOES. There is, however, a major limit to using thicker sheets since it requires a painful redesign of motor cores to account for the decrease in motor efficiency and the resulting impact on the vehicle range.
Can't the OEMs or auto suppliers manufacture motors without NOES?
In short, axial flux motors are a design that uses GOES rather than NOES, but it's currently only applied in niche segments, particularly high-performance EVs, for example Ferrari LaFerrari was the first vehicle to feature an axial flux motor. Mercedes AMG is also going to feature this technology from 2025.
What does a mitigation strategy look like for OEMs?
In principle, the NOES shortage risk for the automotive industry can only be resolved through an overall increase in xEV-grade NOES production by steel manufacturers. However, OEMs, often in collaboration with major traction motor tier-1 suppliers, may pursue several mitigation strategies, including the use of alternative motor configurations and materials and greater vertical integration in the motor supply chain.
- Alternative motor configurations: A shortage
risk of non-oriented electrical steel could be an opportunity to
potentially energize traction motor innovation. For example, OEMs
and tier-1 suppliers may try to change planar geometry of the
rotors and stators to reduce planned design scrap material in the
manufacturing process, which is typically anywhere between 30% to
45%, but in certain designs can be as high as 75%.
- Greater vertical integration: OEMs may seek to
vertically integrate their motor supply chains and directly partner
with steel manufacturers to better control their inputs. OEMs are
keen to reduce their reliance on tier-1 suppliers for electric
motors for various reasons, including the ability to now benefit
from economies of scale with the higher volumes per platform, to
retain in-house critical engineering skill, and to convert a
portion of its workforce to this new value chain while internal
combustion engine (ICE) manufacturing is being phased out.
For example, General Motors (GM) recently announced an alliance with GE to create a regional supply chain for materials such as electrical steel. By partnering with steel manufacturers, automakers will be able to continuously push the operating range of their vehicles with optimized NOES grades for their needs. - Thoughtful materials engineering and print specification development: OEMs that choose not to partner with steel mills may need to rethink how material specifications are developed. Today, that focus is principally around optimizing motor performance, not supply chain risk mitigation. This results in situations where OEMs can only purchase steel from one mill in the world because it is the only supplier that is capable.
Could this potential capacity crunch affect OEMs' electrification drive?
This potential shortage could severely affect OEMs' electrification plans if this is not addressed by adding more capacity and investment in new capacity. While measures such as "swing capacity" allocation (manufacturing capacity that can accommodate a broader product mix without major intervention to production line configuration or process), modifying motor core designs to reduce material usage, adopting different materials, and integrating supply chains can alleviate NOES supply chain risks for OEMs in the short term, increasing additional production capacity is the only measure to address the structural imbalance between capacity and the major demand ramp-up for electrical steel.
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Prateek Biswas, Senior Analyst, Supply Chain and Technology, IHS Markit
Raising the Bar Has Not Reduced the Patent Acceptance Rate in Australia
Data on patent acceptances into 2021 confirms that the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (‘RtB Act’), which came into effect on 15 April 2013, has had a minimal impact on the rate of patent application acceptance in Australia – and to the extent that an effect is present, it does not run in the direction that might be expected! Here, I define ‘rate of acceptance’ as the proportion of examined applications that go on to be accepted for grant. Between 2009 and 2013, the rate at which applications subject to the former (i.e. pre-RtB) provisions were accepted rose from 69% to 72%. In comparison, the acceptance rate of post-RtB applications has stabilised at around 75% in each year between 2017 and 2021.
Some people may have anticipated that, in raising the standard of inventive step and introducing stricter requirements for enablement and support of claims, the RtB reforms would result in fewer applications being accepted. I was not one of those people, and I expect that neither were most other patent attorneys. Those of us who work on behalf of patent applicants are well-aware that, firstly, most of those applicants are seeking patent protection in other jurisdictions that have high standards of patentability, and are not wasting time and money on equivalent Australian applications for inventions that do not meet those standards. And, secondly, encountering a higher bar to acceptance does not necessarily mean abandoning the application altogether; often it may simply mean settling for a more limited scope of protection.
Perhaps more surprisingly, however, raising standards of patentability has not resulted in applicants making more rounds of amendment to their applications in order to achieve acceptance. In fact, if anything applications examined under the post-RtB provisions have been, on average, subject to fewer amendments in examination than pre-RtB applications.
Interestingly, in the transition between the two legal regimes, the earliest applications to be examined under the provisions of the RtB Act had acceptance rates in excess of 90%, while acceptance rates of the last applications to be examined under the former provisions fell to below 50%. These effects are most likely attributable to the respective applicants’ strategies in pursuing early examination of post-RtB applications, and in persisting to the bitter end with some pre-RtB applications.
Another interesting observation is that expedited examination has become increasingly popular in the years since the RtB reforms commenced, rising from just under 6% of all cases in 2014/15 to over 8% in 2020/21. In particular, expedited examination under the Global Patent Prosecution Highway (GPPH) program rose from just 2.7% of cases in 2013/14 to 5.1% in 2019/20. In fact, GPPH requests were the majority of all expedited examination requests in every post-RtB year except for the first (2013/14).
Finally, the most recent data confirms (once again) that the duration of patent prosecution (i.e. from examination request through to acceptance, in successful cases) has reduced significantly – from a median of over 600 days, to a little more than 400 days – since commencement of the RtB reforms. This has been due, in almost exactly equal parts, to the tighter time constraints imposed on applicants, and to reductions in Patent Office delays in commencing examination after a request has been filed.
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