Citing threats from “pandemics and other biological threats, cyber-attacks, climate shocks and extreme weather events, terrorist attacks, geopolitical and economic competition” as having the potential to materially disruption manufacturing in this country, President Biden, by Executive Order No. 14,017 (February 24, 2021), directed the U.S. Department of Energy (DOE) to submit a report specifically identifying risks in the supply chain for high-capacity batteries and to make recommendations to address those risks. As directed, DOE prepared its report and, on June 8, 2021, announced the following four immediate actions to bolster the advanced battery supply chain in the United States:
Increasing U.S. manufacturing requirements in federally-funded grants, cooperative agreements, and research and development contracts;
Releasing the Federal Consortium on Advanced Batteries’ National Blueprint for Lithium Batteries;
Providing financing to the advanced battery supply chain for electric vehicles; and
Procuring stationary battery storage for federal sites under the Federal Energy Management Program.
DOE also announced significant funding and financing opportunities for associated mining and manufacturing operations to further build American resources.
I. U.S. Manufacturing Plan Requirements
A key policy goal of Executive Order No. 14,710 is to rebuild domestic manufacturing capacity and to create jobs. To accomplish this, DOE announced that it will make a Determination of Exceptional Circumstances under the Bayh-Dole Act, 35 U.S.C. §§ 200-212 (“Bayh-Dole”), for all innovations developed with DOE Science and Energy Program funding and require contractors to substantially manufacture products derived from that research in the United States.
Bayh-Dole, or the Patent and Trademark Law Amendments Act (Pub. L. 96-517, December 12, 1980), is United States legislation dealing with inventions arising from federal government-funded research. Under the implementing regulations of Bayh-Dole, contractors may elect to retain title to any subject invention made under contract with the United States and generally receive a set of “standard patent rights” set forth in 37 C.F.R. § 401.14. These rights are subject to rights reserved by the government, which include (1) the government’s retention of a nonexclusive, nontransferable royalty free license for itself; (2) the agency’s right to require the contractor, an assignee, or exclusive licensee of the subject invention to grant a nonexclusive, partially exclusive, or exclusive license to a responsible applicant or applicants with reasonable compensation; and (3), the agency’s “march-in” right to grant such a license itself if it determines that the contractor, assignee, or exclusive licensee has not made efforts to commercialize the invention within a reasonable time.
In exceptional circumstances, Bayh-Dole authorizes the funding agency (in this case DOE) to modify the terms of funding agreements by restricting or eliminating contractors’ rights to title, or to retain title itself to subject inventions in order to better promote the policy and objectives of the Act. 35 U.S.C. § 202(a). Such policies and objectives include efforts to promote: (1) utilization of inventions arising from federally supported research or development; and (2) commercialization and public availability of inventions made in the United States by United States industry and labor.
If DOE makes a Determination of Exceptional Circumstances (“DEC”), the agency will likely require applicants for funding to submit a U.S. manufacturing plan for use by the agency in evaluating applications. The manufacturing plan is the applicant’s measurable commitment to support U.S. manufacturing of the technologies related to their funding agreement. The range of commitments may include, for example, manufacturing certain products in the U.S., investing in U.S. facilities, or a licensing strategy aimed at supporting U.S. manufacturing. The commitments are proposed by the applicants, not the agency. The DEC would then permit the DOE to modify the standard patent rights clause in its funding agreements to incorporate and enforce the proposed manufacturing plan. And, the standard patent rights clause may be modified to make compliance with a U.S. manufacturing plan a condition for maintaining rights to the inventions made by the recipient under the funding agreement.
According to DOE, the DEC will cover more than $8 billion in climate and energy innovation funding requested in its FY22 budget, including more than $200 million in support of research, development, and demonstration funding for battery technology. While this does indeed represent a significant funding opportunity, it comes with administrative burdens and risk of forfeiture of patent rights. Funding applicants will need to exercise care, not only in the submission of their U.S. manufacturing plans and negotiation of funding agreements, but also in the invention disclosure process, and other compliance obligations.
II. National Blueprint for Lithium Batteries
On the same day that DOE made its advanced battery policy announcement, the Federal Consortium for Advanced Batteries (FCAB) issued its report entitled, National Blueprint for Lithium Batteries. The FCAB is a consortium of federal agencies that are interested in ensuring a domestic supply of lithium-ion batteries and includes representatives from the Departments of Energy, Defense, Commerce, and State, as well as other federal government organizations. The report lays out a ten-year government-wide plan to develop a domestic lithium-ion battery supply chain and makes projections of future market growth for lithium-ion under various end-use applications. The report also proposes near-term (2025) and long-term (2030) objectives to support five goals that are needed to secure the domestic supply chain.
A. Market Growth Assessments
According to the report, global lithium-ion cell manufacturing capacity for commercial and passenger electric vehicle (EV) applications was 747 GWh in 2020, while U.S. manufacturing capacity was 59 GWh. By 2025, the report projects global manufacturing capacity will be 2,492 GWh, while U.S. capacity will be 224 GWh. However, demand from U.S. sales of EVs is projected to require 320 GWh. As such, there is a desire to close the gap between US supply and demand.
In order to operate reliably, the electricity grid will require large amounts of “balancing resources” to accommodate a high penetration of intermittent renewable energy generation and increasing electrification of the transportation and building sectors. The report observes that “non-lithium storage technologies may emerge as the most cost-effective long-term solutions for stationary storage”, but projects annual deployments of lithium-battery-based stationary energy storage will grow from 1.5 GW in 2020 to 7.8 GW in 2025, and potentially to 8.5 GW in 2030.
Further, the report identifies a nascent third market that is seeking to electrify vertical takeoff and landing (eVTOL) aircrafts for use in package delivery and limited passenger transport (up to four passengers). The report posits that current and developmental lithium-ion batteries could enable commercialization of eVTOL in the not too distant future, but notes that electrification otherwise of larger aircrafts will require “significant advances in lithium-ion battery technology.”
Finally, the report discusses potential military applications and certain challenges the Department of Defense faces with its advanced battery supply chain due to the unique nature of needs for battery use in weapons systems and higher military specifications. The Department of Defense believes that its battery demand will grow from not only its traditional uses of batteries in “combat platforms, weapons, sensors and individual warfighter equipment”, but also in connection with the hybridization of the combat platforms and the introduction of tactical microgrids.
The bottom line from the FCAB report is that without a…