update on the recovery act for cleantech companies: financing incentives and protecting your ip...

Update on the Recovery Act for Cleantech Companies:

Financing Incentives and Protecting Your IP

PL31065

Fred GregurasPalo Alto Office

[email protected]

Green Eggs Breakfast Forum

October 1, 2009

Update on Recovery Act Financing Incentives

Much slower rollout than anticipated Bonus accelerated depreciation-2009 only, extend for

2010 so it has time to be a financing tool? Loan guarantee funds transferred to clunkers program California money for road improvement projects

ARPA-E and other grants ARPA-E next round request for information (closed Sept

25) ARPA-Energy concept paper (closed June 2) Concept paper vs. complete application approach No ARPA-E money distributed yet; awards announced

later this fall

Update on Recovery Act Financing Incentives

Cash grant in lieu of investment tax credits

Loan guarantee program

Single solicitation deadlines rather than continuous application periods.

Cash Grant in Lieu of Investment Tax Credits

Announced on July 9; applications accepted on web portal beginning July 31.

Applications may be submitted as soon as a facility is under construction. This should be done in order to receive the fastest payment.

“Under construction” generally means that at least 5% of the total cost of the facility has been incurred.

Application information requirements much greater than for Form 3468 for ITC but manageable.

Continuing track record of payout (over $1B) is starting to provide predictability for financeability for project finance.

Recovery Act Loan Guarantee Program

First solicitation under Recovery Act was for electric transmission infrastructure projects deploying commercial technology (closed September 14).

Application costs make it feasible only for companies with strong balance sheets.

Unlikely to have any impact on job creation until the first quarter 2011 because of the timelines and complexity of such projects.

First Recovery Act LGP Fees (Transmission Infrastructure)

Application fees: $200K with Part I; $600K with Part II

Facility fee: ½ of 1% of the guaranteed amount due at time of signing final term sheet.

Maintenance fees: $200K – 400K per year.

DOE outside counsel and consultant fees paid by applicant with no cap.

Fees are not refundable or reimbursable out of guaranteed loan proceeds.


Additional Recovery Act solicitations to be for “renewable energy systems, including incremental hydropower, that generate electricity or thermal energy and facilities that manufacture related components” and certain leading edge biofuel projects.

Renewable energy system FOA is supposed to be released by early October

Fees for other types of projects must be lower and decision-making faster so commercial as well as utility scale projects can benefit.


Lending committee of most banks will evaluate whether the underlying loan should be approved assuming there is no guarantee.

Guarantees are generally limited to 80% of project costs. DOE may guarantee 100% of a loan funded by the Federal Financing Bank which may be for no more than 80% of eligible project costs.

Borrower and other principals must make a significant cash investment in the project.

DOE may determine an appropriate collateral package among creditors.

Financial Institutions Partnership Program (FIPP)

Loan Guarantee Program (Proposed) Proposed by SEIA and others and under discussion at

DOE.

Smaller banks would be pre-qualified by DOE for loan guarantees for small renewable energy systems projects or portfolios of projects – up to $25M?

Applications would be simpler and shorter and approval primarily based on qualified bank lending committee decision.

Fees would be normal bank loan application processing fees.

Rolling solicitation.

May become part of Congressional consideration of Federal Green Bank that would finance renewable energy and energy efficiency projects

Protecting Your IP in DOE Programs

Need to carefully review the FOA. IP provisions are generally in the section titled “Other Information”.

“Proprietary Application Information”

“Intellectual Property Developed Under this Program”

Inventions

Technical Data

Protecting Your IP in DOE Programs

“Notice of Right to request Patent Waiver”

Class waivers

Small business (<500 employees), non-profit, university/Bayh-Dole.

Required deliverables: pre-existing trade secret, produced under program funding or produced with both private and government funding

Proprietary Application Information

PI should only be included when it is persuasive to the reviewers understanding of the value of the proposal.

Include specified proprietary legend on first page of the project narrative.

Line or paragraph containing PI must be identified and marked with a second specified legend.

Intellectual Property Developed Under this Program (Patents)

Federal government will generally own the patent rights in an invention that is conceived or first actually reduced to practice under a DOE award unless the recipient is a non-profit, university or small business under the Bayh-Dole Act or there is a waiver of government rights.

Must elect to retain title and file patent application

DOE has executed a class waiver for the ARPA-E program and certain other FOAs.

Right to request waiver.

If no waiver, contractor receives only a revocable non-exclusive license.

Intellectual Property Developed Under this Program (Patents)

When contractor retains title, government has a non-exclusive license to practice or have practiced the invention on behalf of the government, “march in” rights in exceptional circumstances and requires that exclusive licensees manufacture products substantially in the U.S.

Contractor may request a Technology Investment Agreement. IP rights are negotiated under a TIA.

Intellectual Property Developed Under this Program (Technical Data)

Required Deliverables

Technical data first produced under the agreement – needed by contractor to ensure commercialization?

Trade secrets: prepared at private expense and maintained as trade secret

Restricted computer software

Mixed – partly produced under the agreement and partly at private expense

Negotiate classification, separate and mark deliverables


DOE generally has “unlimited” rights in technical data first produced under the agreement.

“Unlimited rights” means the rights of the government to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform publicly and display publicly, in any manner and for any purpose, and to have or permit others to do so.


“Limited rights data” means data, other than computer software, that contain trade secrets or are commercial or financial and confidential or privileged, to the extent that such data pertain to items, components, or processes developed at private expense.

“Limited rights” are the rights of the government in limited rights data as defined in a LR Notice.

LRD may not be used for manufacturing or disclosed outside the government, without the consent of the contractor, except in limited circumstances. Subject to non-use and non-disclosure obligations when disclosed externally.


“Government purpose rights” are the rights to modify, reproduce, release, perform, display or disclose technical data within the government without restriction and outside the government for government purposes only. Usually expires after 5 years. Subject to non-use and non-disclosure obligations when disclosed externally.

GPR is a compromise between UL and LR in the case of mixed funding for deliverables produced under the agreement.

Main differences between GPR, UR and LR are in the permitted uses and the external disclosure permitted.

Special protected data rights may be negotiated in some cases.

Rationale is to insure commercialization.

ARPA-E may allow contractors to protect trade secrets from use or disclosure outside of the government for 5 years.

Not in most DOE FOAs.

Separation of types of data in the deliverables.

Notices on deliverables if limited rights, government purpose rights, special protected rights or restricted computer software.


Summary

The predictability of the cash grant program is starting to improve the financeability of renewable energy projects.

Bonus depreciation should be extended through 2010 so it has time to be a financing tool.

The proposed FIPP loan guarantee program could help get many small projects funded. Otherwise, costs of LGP make it feasible only for companies with strong balance sheets.

DOE program IP contractual provisions are generally favorable to applicants but careful attention is needed for implementation-negotiation, election, separation and marking.

update on the recovery act for cleantech companies: financing incentives and protecting your ip...

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