Are 102, 6th Paragraph and 102, 2nd Paragraph the New 101 in Patent Eligibility? Williamson v. Citrix Online Makes One Wonder: Part 2 of a 2 Part Series – Possible Strategies

Are 102, 6th Paragraph and 102, 2nd Paragraph the New 101 in Patent Eligibility?  Williamson v. Citrix Online Makes One Wonder:  Part 2 of a 2 Part Series – Possible Strategies

By Michael Stein, Stein IP LLC

September 2, 2015


This is part 2 of a 2 part series addressing the growing use of 112, 6th and 2nd paragraphs to invalidate claims in the USPTO and the courts, and what the standards are for implementation and application of these sections of 35 USC.  Part 2 explores possible strategies to minimize the impact of 112, 6th and 2nd paragraph, and likely assist in avoiding 101 rejections as well.


So, what is a patent attorney to do when faced with the difficult task of preparing a new patent application, whether from scratch or based upon foreign priority, and hopes to avoid either having limitations interpreted as being means plus function limitations under 112, 6th paragraph or being declared indefinite under 112, 2nd paragraph (remember, for the purposes of this article, the pre-AIA references to the 35 USC are being used for the sake of simplicity, but the same holds true under post-AIA situations since the language of the relevant sections has not changed)?


The following are some tips which I believe will increase the chances of running into problems with 112, 6th paragraph and 112, 2nd paragraph, and also hopefully 101 as well.  One important consideration is that the specification as originally filed be as detailed, complete and definite as possible, since one cannot amend the specification significantly after filing to overcome any claims rejections.  There is no magic language that can be used as a safe harbor, as the USPTO has clearly indicated in their webinars on 101 (and thus by extension to 112).  So here it goes, in no particular order.

  1. In describing the invention, try to avoid using words like “device,” “computing element,” “unit,” “portion,” or even “for …ing”  as examiners and courts are increasingly unpredictable in their applications of § 112, 6th paragraph analysis, more frequently treating such words as “nonce” words.  Instead of saying “processing unit” or “processing module,” simple recite a “processor,” for example
  2. Use “configured to” or “adapted to” if the structure is questionable.  Such language assists in making an argument that the limitation has structure and is not purely functional.
  3. Integrate structural limitations with the functional limitations in the claims.  Sometimes a little more in the claim, to provide some real structure will actually broaden the scope of your claim since the people performing claim construction will not have to go to the specification to determine the breadth and scope of the disclosed structure and its equivalents.  Once a claim constructor goes to the specification, it is very difficult to limit the extent to which the specification is relied upon and the owner of the patent does not want to be limited to only the specific embodiments disclosed in the specification when asserting infringement.
  4. Be careful about language like “determining,” “calculating,” “comparing,” etc., with no explanation as to what parameters are being used and how these activities are being accomplished. Provide specific examples in the specification where possible and practicable to clearly explain the algorithm being used.  See, for example, Ibormeith IP v. Mercedes-Benz,  732 F.3d 1376 (Fed. Cir. 2013) where the court held that there was not sufficient structure for “computational means for weighting the operational model according to the time of deay.. and for deriving, from the weighted mode, driver or operator sleepiness condition and producing an output determined thereby”, when a description of an algorithm that places no limitations on how values are calculated, combined, or weighted is insufficient to make the bounds of the claim understandable.
  5. For the drawings, do not use simplistic line charts (e.g., a box with a few smaller boxes inside to represent a computer) or flow charts, but use complex and layered charts.  Provide a detailed hardware diagram, and flowcharts showing the specifics of what is happening. Relate the hardware to the functionality, such as what gets passed and from where to where.  For algorithms, consider having separate diagrams showing the distinct operations of each step in the most general flowchart(s), so that even if the most basic algorithm is determined to be a means plus function limitation, one can argue that the more detailed diagrams and corresponding description provide sufficient structure, and one can also argue that the more detailed diagrams and corresponding description are not merely abstract ideas with nothing more should a 101 rejection be raised.


I have no doubt that there are many other techniques to address the growing use of 112, 6ht and 2nd paragraphs, and different people have different viewpoints.  Not even the judges on the en banc Federal Circuit all agreed when 112, 6th should be used, and in what manner, with the dissent indicating that it will be very difficult in the future to assess the scope of claims in the future based upon the majority’s reasoning.  If they cannot agree, then it cannot be so simple for us practitioners.  We can only do what we feel is best for our clients.

If you have any other techniques to avoid limitations being interpreted as means plus function under 112, 6th paragraph, or to ensure that there is sufficient structure in the specification under 112, 2nd paragraph, please let us know.

Update on Implementation of American Invents Act Effective As of September 16, 2012

By Dennis Clarke and James McEwen

On September 16, 2011, the “Leahy-Smith America Invents Act” (AIA) was signed into law. The AIA makes the most substantial changes in U.S. patent law in decades and sets various dates on which these changes are to take effect.

The most profound of those changes is the switch to a first-inventor-to-file system, in place of the current first-to-invent practice in the U.S. This change takes effect only for applications originally filed on or after March 16, 2013. However, on September 16. 2012, other major changes will take effect, including the possibility of requesting inter partes review and other post-grant trial procedures before the newly renamed “Patent Trial and Appeal BoarcL” This paper will predominantly relate to the new requirements relating to declarations and assignments and other miscellaneous provisions that have an effective date of September 16, 2012. The new trial proceedings are discussed briefly hereinbelow.

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USPTO Issues Proposed Rules for Implementing the America Invents Act

Charles Pierce and James G. McEwen

On July 25, 2012, the United States Patent and Trademark Office (USPTO) announced proposed rules as a result of changes in the America Invents Act (AIA) converting the U.S. patent system from a first to invent to a first to file system.  These changes will take place on March 16, 2013.

The proposed rules are intended to promote consistency caused by the changes in the AIA for pending applications, and to implement the AIA for future applications.  Comments on the proposed rules are open until October 5, 2012.  Below is a summary of significant elements of the proposed rules.

The proposed rules will treat commonly owned or joint research agreement patents and patent application publications as having the same inventive entity for the purposes of 35 U.S.C. §§ 102 and 103 as required under 35 U.S.C. § 102(c) of the AIA.  35 U.S.C. §102(c) of the AIA essentially broadens the current 35 U.S.C. §§ 103(c) by making these provisions usable for novelty.  The broadened use of this exclusion should be beneficial to holders of large families of patents.

Since new 35 U.S.C. §102(b) provides exceptions to 35 U.S.C. §102(a) based upon prior disclosure by the inventor, the rule changes also allow the submission of affidavits or declarations to show that a disclosure upon which a claim rejection is based was made by an inventor, joint inventor, or someone who obtained the disclosed subject matter from the inventor or a joint inventor.  These provisions will also allow the submission of affidavits to show that there was a prior public disclosure by an inventor, joint inventor, or someone who obtained the disclosed subject matter from the inventor or a joint inventor.  This will be codified in 37 CFR §§ 1.104, 1.130, and 1.131.

Another change being implemented relates to using the effective dates of foreign priority applications against third party patents.  In order to ensure that the foreign priority documents are received in time for publication and use, the USPTO is now requiring that the certified copy be received within the deadline now only required for submitting the priority claim: the later of four months from the filing date or sixteen months from the foreign priority date.  The claim must also be included in an Application Data Sheet.  While these changes are likely not an issue where the applicant is able to retrieve priority documents using the priority document exchange (PDX) system, this timing will be an issue for all other applications.  Therefore, applicants need to ensure that the certified copies are provided as soon as possible in the prosecution process or be required to file a Petition for late acceptance.

The last major change in this round of AIA rulemaking is relate to the transitional period between first to invent and first to file, and probably will have the greatest short term impact on patent practitioners.  In order to ensure that the USPTO can properly evaluate which set of rules to apply when faced with priority claims for applications filed prior to March 16, 2013, the USPTO is requiring the applicants identify which rules will apply.

Specifically, where the application is filed after March 16, 2013, but claims the benefit of a foreign, provisional, or nonprovisional application having an effective filing date prior to March 16, 2013, the applicant will need to provide a statement whether the claims in the application are entitled to the earlier effective filing date.  Also, if the nonprovisional application that claims such benefit does not contain a claim to a claimed invention that has an effective filing date on or after March 16, 2013, but discloses subject matter not also disclosed in the prior application, the applicant must provide a statement to that effect.  For example, under proposed 37 C.F.R. 1.55, where the application claims priority to a foreign application filed prior to March 16, 2013, the applicant will need to specify if there is new matter in the application, and whether the claims are supported by the foreign priority date.  Examples of such statements include “upon reasonable belief, this application contains subject matter not disclosed in the foreign application” or “upon reasonable belief, this application contains at least one claim that has an effective filing date subject matter on or after March 16, 2013”.

These statements will have to be filed within the later of four months from the actual filing date of the later application, four months from the date of entry into the national stage in an international application, or sixteen months from the filing date of the prior filed application, or the date that a first claim to a claimed invention that has an effective filing date on or after March 16, 2013 is presented in the application.  Failure to make such a statement after these deadlines will require a Petition, and any changes will result in the Examiner issuing a Request for Information under 37 CFR 1.105 to require the applicant to prove by line and element number where support is found.  For continuations, divisionals, and continuation in part applications, this requirement will be codified in 37 CFR § 1.78.

As these rules are still only being proposed, applicants and the legal community are reviewing the proposed changes and preparing comments.  While many of the changes seem consistent with the requirements of the AIA, the transitional requirement for identifying whether disclosures and claims can have an effective filing date in a prior application are likely the most controversial and the most likely to cause significant problems for applicants having families of patents.  Therefore, as a short term solution, in order to avoid these potential issues should the USPTO not retract this provision, applicants should ensure that they file applications prior to March 16, 2013 if any priority claim is going to be made to an application filed prior to March 16, 2013.

Per se legal? The Eleventh Circuit Rejects FTC’s “Unlikely to Prevail” Antitrust Challenge to “Reverse Payment” Patent Settlements

By Meera El-Farhan

In F.T.C. v. Watson Pharmaceuticals, Inc., 677 F.3d 1298 (11th Cir. 2012) the U.S. Court of Appeals for the Eleventh Circuit rejected the Federal Trade Commission’s (“FTC”) antitrust challenge to “reverse payment” patent settlements. Under the terms of the “reverse payment” (or “pay-for-delay”) agreement, the patent owner of AndroGel, Solvay Pharmaceuticals, Inc. (“Solvay”), agreed to make over $20 million annual payments to the generic challengers Watson Pharmaceuticals, Inc., Par Pharmaceuticals, Inc., and Paddock Laboratories, Inc. In return, the generic challengers agreed to stay out of the market until 2015, unless another generic version was to enter the market before then.


The FTC brought suit against all parties to the agreement. The FTC challenged the “pay-for-delay” settlement on the basis of unfair restraint of trade (the settlement allegedly being an “unlawful agreement not to compete,” in violation of section 5(a) of the Federal Trade Commission Act[1] (“FTCA”)). The FTC argued that such monopolies allow both generic and patent holding pharmaceuticals to make more profits at the expense of consumer welfare (increasing drug costs by an estimated amount of $3.5 billion per year). On appeal, the FTC argued, among other things, that Solvay’s ‘894 patent [2] was “unlikely to prevail.” According to the FTC, because the patent was unlikely to bar Watson and Par, and Paddock’s generic drug from entering the market the settlement was an unlawful restraint on competition.

The Eleventh Circuit rejected the “more likely than not” standard contended for by FTC. The court held the “unlikely to prevail” standard to be insufficient to state a claim; thus, a patent did not thereby exceed its “exclusionary potential.” The court adhered to the test set-forth by its precedent: “absent sham litigation or fraud in obtaining the patent, a reverse payment settlement is immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.”[3]

Although critics of the court’s decision argue such a test makes reverse payments “per se lawful” due to resulting difficulty in challenging reverse payment agreements, the Eleventh Circuit proffered convincing arguments for rejecting the FTC’s challenge. Among other things, the court argued FTC’s “predict-the-likely-outcome-that-never-came” approach would not only impose a retrospective burden on parties and courts (even if the burden of proof fell on the plaintiff), but also, such a test would not align with the strong public policy favoring settlements.

The court noted that parties settle patent litigations to “cap the cost” of litigation and avoid the “all or nothing” outcomes from courts. Settlements are one option for parties who “might not want to play the odds for the same reason that one likely to survive a game of Russian roulette might not want to take a turn.” The Eleventh Circuit further explained that the costly and tedious process of developing new drugs should also be supported by strong public policy favoring settlements over costly litigation. The court, with reference to the maxim “More Money, More Problems,” sided with pharmaceutical companies’ incentive to recoup costs of research and development. The court proffered additional reasons such as the exclusive appellate jurisdiction of the U.S. Court of Appeals for the Federal Circuit over patent cases and the court’s lack of expertise to rule on the patent.

The heart of resolving such cases, as noted by the Eleventh Court, is in striking the balance between antitrust law interests (promoting competition) and intellectual property law interests (allowing temporary monopolies to provide innovators with incentives to create). Antitrust laws aim to protect consumers from artificially high prices, maximize efficiency of the market, and also promote improvement of products through competition. On the other hand, granting patents ensures parties have the incentive to innovate in the first place. Although one can easily recognize the tensions between antitrust law and intellectual property law, one must also recognize the common goal: promoting innovation for a better future.

However, there is no consensus over resolving this tension yet. In the Sixth Circuit and the District of Columbia Circuit, reverse payment agreements are per se unlawful under the Sherman Act.[4] However, the Second Circuit, like the Eleventh Circuit, refused to assess the ex post validity of the patent at trial, but instead the court held that the question is whether “the exclusionary effects of the agreement exceed the scope of the patent’s protection.”[5] In devising a test that can better serve both interests, per se rules are unlikely to accommodate such a goal. However, with a growing circuit split among federal courts, in addition to a silent United States Supreme Court (as it passed the opportunity to articulate a unifying a standard at this point in time), the FTC will have many more opportunities to argue for, perhaps better, multi-factored tests.

[1] 15 U.S.C. §45(a)(1) (2006).

[2] U.S. Patent No. 6,503,894 (filed Aug. 30, 2000) (issued Jan. 7, 2003).

[3] F.T.C. v. Watson Pharmaceuticals, Inc., 677 F.3d 1298, 1312 (11th Cir. 2012)

[4] See In re Cardizem CD Antitrust Litig., 332 F.3d 896 (6th Cir. 2003); see also Andrx Pharmaceuticals, Inc. v. Biovail Corp. Int’l, 256 F.3d 799 (D.C. Cir. 2001)

[5] In re Tamoxifen Citrate Antitrust Litig., 466 F.3d 187, 213 (2d Cir. 2006)

Introducing Stein McEwen LLP Fall 2012 IP Training Program October 1-19, 2012

 Stein McEwen LLP is pleased to announce that it will be hosting an intellectual property training program from October 1-12 with an add-on session from October 15-19, 2012 in Washington DC.

 The purpose of the Stein McEwen LLP Fall 2012 IP Training Seminar is to provide an overview of U.S. Intellectual Property Law, including patents, trademarks, copyrights, and trade secrets. The lectures will cover fundamentals of patent procurement, with optional sessions extending to the scopes of trademarks and copyrights, IP licensing, and IP litigation. A series of lectures will be presented by Stein McEwen LLP attorneys regarding these subjects, including workshops for the participants to receive hands-on experience.  These workshops will include activities such as reviewing disclosures of an invention and drafting sample claims to cover the subject matter of the invention. Tours of the U.S. Patent and Trademark Office, the U.S. Court of Appeals for the Federal Circuit, and a U.S. District Court will allow the participants an opportunity to understand the complexities of these agencies and courts.  At the U.S. Court of Appeals for the Federal Circuit, the participants will likely have an opportunity to observe a portion of a hearing involving patents. The IP Training Seminar is intended to provide a broad-based understanding of U.S. Intellectual Property Law, with a strong emphasis on patents. The already-implemented and still-to-take-effect provisions of the Smith-Leahy America Invents Act (AIA) will be woven throughout the syllabus.


Who Should Attend?

In-house staff members of corporate IP departments, patent attorneys, staff members of overseas law firms, inventors, and members of academia who deal in some aspect of IP.

Basic understanding of patent law for at least one country is recommended. No formal registration of any country’s patent office is required.

More information can be found at

If you have any questions, please contact Sarah Brogi at or

Breach of Consent or EPIC Fail?

By Dan McPheeters

As we touched on in our prior post, the Electronic Privacy Information Center (EPIC) has filed a lawsuit against Google alleging that the controversial new privacy policies that were implemented on March 1st violated the consent decree Google entered into with the FTC last October. The lawsuit was subsequently dismissed when a District Court judge agreed with the FTC that Courts lack the authority to force a federal agency to take action under a consent decree; however, since EPIC is appealing the ruling, the legal question posed by the lawsuit is still relevant. Interestingly, while the FTC has yet to take any formal action against the search giant, key officials have made their feelings known and they are not favorable to the once-beloved tech icon. Moreover, an analysis of the consent decree itself can help shine a light on whether Google has actually done anything wrong in implementing its new privacy policy.

The consent decree at the heart of this issue was entered into to avert further legal action against Google for perceived flaws in its handling of user information gathered by the now-defunct Buzz application. The full text can be found here. At the outset, the agreement explicitly denies wrongdoing on the part of Google, though the FTC is careful to state (and to have Google agree) that it had “reason to believe that [Google had] violated the Federal Trade Commission Act.” This is jurisdictional language that basically prevents Google from challenging the consent decree or the investigation as a whole as beyond the FTC’s authority. Boilerplate, yes, but it gives a strong indication of the purpose of the agreement. Here, it appears that while Google had not crossed a line, or else had entered into a realm that was not “illegal,” they had come sufficiently close that the FTC decided that it needed to step-in. Neither side wanted to engage in the bruising litigation that was sure to follow, and a compromise was struck that ensures Google’s actions are well within established legal limits, while giving the FTC a non-statutory remedy it may not otherwise have in the event they do not.

The content of the decree covers four primary areas: the communication of privacy policies to Google’s users; the implementation of on-going quality control measures to track and improve user privacy protections; third-party audits of the privacy policies and control measures; and record-keeping. The record-keeping provision is ministerial, and not relevant to the overall discussion here.

In communicating its privacy policies to users, Google is affirmative prohibited from misrepresenting “in any manner” the scope of information gathered, Google’s compliance with a privacy regime “sponsored by the government or any other entity,” and the extent to which consumers can control the “collection, use, or disclosure” of information gathered by Google. These are basic anti-fraud provisions, but the “in any manner” language strives for maximum transparency while likely placing a “plain language” requirement on Google’s communications to and agreements with its users. This latter point is borne out in Section II, which imparts on Google the duty to communicate any changes to its information disclosure policy to users independent of any prior end user-type agreements. In short, any time Google adjusts its policy with respect to selling or utilizing information with third parties, the company must share those changes with users. Google must also await an affirmative “opt in” from its users prior to disclosing or sharing information under the new policy.

Google is also bound to create a comprehensive privacy program that addresses risks to consumers and protects the privacy of information gathered by the company in a way “appropriate to [Google’s] size and complexity.”  To this end, the company is required to hire a third-party consultant, approved by the FTC’s Associate Director of Enforcement, to provide assessments of its privacy control and assessment systems. This consultant is required to provide a biennial reports that explain and certify the systems and their compliance with this decree.

Understanding this agreement begins with acknowledging what it does NOT do; nowhere does this consent decree dictate a specific provision to Google’s privacy policies, absent the mandatory “opt in” item. Further, the bulk of the decree outlines a quality control and risk management system that Google is obliged to establish and will be subjected to 3rd party review. The third party review is critical; while the agreement allows Google to continue operating substantively as before, the assessments provided by the consultant will carry tremendous evidentiary weight. Because the consultant will be a “qualified, objective, independent third-party professional,” the FTC will get to apply a “reasonable person” test to Google’s controls by virtue of their ability to select the consultant who will render opinions, without subjecting the reports to a negative light in later litigation by reason of their being prepared by an agent of one of the parties to the dispute. This will likely force Google into relying on more conservative interpretations of and approaches to its privacy regime and restrain its expanding ability to gain access to users data, which were the primary goals of the FTC’s investigation in the first place.

This brings us back to the question of whether EPIC has a legal leg to stand on in its lawsuit. The answer clearly seems to be no. As mentioned, the consent decree does not mandate any specific terms to Google’s privacy policies, with the exception of the “opt-in” provision. It also, very carefully, avoids establishing a standard by which the any of Google’s or the consultant’s obligations will be evaluated in the context of the decree. This means that the FTC’s evaluation of the decree, and decisions as to its enforcement, are entirely discretionary. Assuming EPIC can get past the standing question, there is no standard to which EPIC can hold the FTC in judging the CONTENT of Google’s privacy policy itself. Thus, the suit should fail for lack of justiciability.

Given the publicity surrounding Google’s updated privacy policy and the updates sent to its users (of which this author is one), it seems unlikely that the policy violates the consent decree, absent a negative assessment of its appropriateness from the 3rd party consultant. However, this will probably not quiet the critics. Privacy is being eroded in many ways, but few profit from watching our activities in the same way or degree as Google. It seems somewhat understandable that feeling like data mines whose existence is boiled down into activities that can be tracked and sold to advertisers would rub some people the wrong way, but that is far different from alleging illegality. And, at least with respect to the consent decree, it does not appear that the new privacy policy has crossed the latter threshold.

In our next post, we will look at Google’s troubles in the EU, where it seems that claims of illegality have a stronger legal basis.

Much Ado About Google

By Dan McPheeters

Google has been taking flak recently for its “new” privacy policy, which rolled out on March 1st. From tech bloggers calling the company “evil” (and showcasing their graphic design skills in the process) to accusations of illegality from European and American regulators, the company has surely taken a PR hit of late. But that simply begs the question: has the company actually done anything wrong, or have they merely completed the metamorphosis from lovable David to hated Goliath?

On a personal level, as someone who grew up in the 90’s it is interesting to see Bill Gates viewed as a beloved philanthropist and Google as an evil, invasive company hell-bent on eviscerating its users’ privacy in the unholy name of profit. The juxtaposition is somewhat jarring. Meanwhile, there are those in the media who have pointed out that the privacy policies have not actually changed, and that if anything the policy has been made more transparent and easier to understand. Then there is the question of whether privacy on the internet, or even the notion that one’s internet activity was not subject to being aggregated, was a reasonable or realistic expectation in the first place.

Rhetorical battles aside, there are legitimate legal issues at play. Our next posts on this topic will, in turn, look at two specific legal challenges to Google’s policy: the first alleges that the policy violates the consent decree Google entered into with the FTC over the controversial “Buzz” application; the second hails from across the pond, where EU regulators are up in arms over the perceived threat to privacy and possible legal violations. Up next: Buzz Kill.

Study Indicates that the Renewable Energy Market in the U.S. is One of the Most Attractive in the World

By Margaret M. Welsh

According to Ernst and Young’s Renewable Energy Attractiveness Index, the United States has one of the most attractive renewable energy markets in the world.  In February 2012, Ernst and Young released its quarterly report and listed the renewable energy market in the United States second only to China.  The Report tracks the attractiveness of forty countries and ranks countries based on the development of their renewable energy infrastructure and their suitability for individual technologies.

China maintained the number one position; however, the Report indicates that China’s renewable energy market growth could slow down because of a reduction in solar cell company investments by foreign countries.  The Report also predicts a decrease in renewable energy markets for more developed countries, including countries in Europe.  This is spurred by Europe’s financial uncertainty.

The United States remains at the top of the renewable energy market attractiveness list.  Yet, the Report based its ranking on the assumption that the wind production tax credit would be extended beyond 2012.  The Report also indicates that state initiatives have played a large part in the U.S. renewable energy market.  States leading the pack for renewable energy, according to the Report, are Massachusetts, Colorado, Texas, Hawaii, and California.  Research and development efforts and manufacturing investments at the state level have created a strong renewable energy market for the United States.

For the complete report see Renewable Energy Country Attractiveness Indices, Ernst & Young, February 2012,—Gas/Oil_Gas_Renewable_Energy_Attractiveness-Indices.

The Bipartisan Dash to Extend the Renewable Energy Production Tax Credit

By Margaret M. Welsh

As many are aware, the wind energy production tax credit which is set to expire at the end of this year was not extended in the payroll tax legislation as many renewable enthusiasts had hoped.  The renewable energy production tax credit was originally enacted by the Energy Policy Act of 1992 and has been extended over the years.  The production tax credit generally provides a per-kilowatt hour tax credit for electricity generated by qualified energy resources.  Qualified energy resources now include wind, closed-loop biomass, open-loop biomass, geothermal, landfill gas, municipal solid waste, some hydroelectric, and larger-scale marine and hydrokinetic power.

The credit for all the qualified energy sources listed above expires in 2013, except for wind energy which expires at the end of this year.  Currently, the wind energy production tax credit provides a 2.2 cents/kilowatt-hour tax credit for electricity generated from utility-scale wind turbines.  This credit has been instrumental in lowering the cost of electricity rates generated from wind resources in the United States.  The American Wind Energy Association (“AWEA”) reports that the credit has helped reduce electricity rates and lowered the cost of wind power by ninety percent.  Since wind energy sites take a considerable amount of time to develop and construct, there are already negative impacts of the tax credit’s impending expiration date.

AWEA is optimistic that bipartisan action can help to extend the tax credit.  Currently, there are several bipartisan actions to watch.  Last November,  House Representative Reichert (R-WA) along with Representative Blumenauer (D-OR) introduced a bill, H.R. 3307 American Renewable Energy Production Tax Credit Extension Act of 2011, proposing an extension of the tax credit until January 1, 2017 for qualified energy sources.  Currently this bill has seventy-two cosponsors and has received broad industry endorsement.

Another option to extend the production tax credit was introduced on February 15, 2012 by Senator Bennet (D-CO)  and co-sponsored by Senator Moran (R-KS) as an amendment to the Senate’s transportation bill to reauthorize federal aid for highway safety and construction programs (S. 1813).  The amendment seeks to extend only the wind energy production tax credit by one year to align with the expiration dates for the other qualified energy sources.  Further on February 24, 2012, AWEA reported that numerous U.S. Representatives and Senators signed a letter to the Leadership of the House and Senate calling for a production tax credit extension for wind energy as soon as possible.  The leaders urged that an extension is needed to provide stability for the wind industry and to help the wind industry gradually move to a market-based system.

AWEA stresses that the wind energy tax credit should be extended in the first quarter of 2012 to avoid delaying wind energy projects.  Thus, the bipartisan efforts might already be too late for a few wind energy projects, but could provide measurable stability for the other qualified renewable energy sources from either a broad-based renewable energy tax credit extension or from a lesson learned that earlier action may be needed.

Maryland Following in New Jersey’s Footsteps with the Offshore Wind Energy Act of 2012

By Margaret M. Welsh

Last month, Maryland Governor, Martin O’Malley reintroduced state legislation to promote offshore wind power in Maryland.  The Maryland Offshore Wind Energy Act of 2012 is an updated version of his 2011 bill.  This bill now establishes an offshore wind renewable energy credit (“OREC”) system, similar to the system enacted in New Jersey last summer by Governor Chris Christie.

Under the OREC model, one renewable energy credit is equivalent to a certain amount of kilowatt hours of clean electricity generated.  The credits are then sold in advance to electricity suppliers to help them meet the renewable energy portfolio requirements of the state.  The OREC system potentially establishes a commodities market for wind farm electricity to be sold at competitive prices.  Industry specialists suggest that a credit could be contracted for approximately $300, similar to the price for a solar energy credit.

In 2008, Maryland committed to a Renewable Portfolio Standard which required twenty percent of electricity purchased by suppliers to be from renewable energy sources by 2022.  The OREC system established in the Maryland Offshore Wind Energy Act of 2012 creates a carve-out within Maryland’s existing Renewable Portfolio Standard.  Thus, electricity supplies could buy a specific number of ORECs annually to meet Maryland’s required portion of renewable energy.

The OREC model provides upfront capital for offshore wind.  Thus, proponents of the 2012 Act suggest that the OREC system could help to facilitate new offshore wind turbine construction and create jobs.   Stay tuned for our upcoming series on renewable energy initiatives of states in the MidAtlantic Region.