Handling Proprietary Information in Biodiesel Plants

By Todd Guerrero and Timothy Keller | August 03, 2007
Intellectual property is at the heart of virtually all businesses today. Industries that were once considered low tech now utilize high technology in essentially every part of their function, from manufacturing to accounting and everything in between. Obviously, this is also true for the biodiesel industry. While the process of converting vegetable oils and animal greases to methyl esters is relatively straightforward, biodiesel production is a sophisticated business, and technology providers take great pains to protect their proprietary information and technology. Intellectual property law gives those providers powerful tools they can use for that purpose.

Intellectual property law can come into play in several ways with respect to the design of biodiesel production plants. The drawings, specifications, calculations, data, notes, and other materials and documents used by the builder will all be subject to copyright law. With the right protections in place, the information incorporated in those works might also be considered trade secrets. If elements of the plant design meet certain requirements, including innovation and originality, those elements might also be patentable. Copyrights, trade secrets and patents can be used to control how information about the design of a biodiesel plant can be used or shared, and how design documentation can be copied or distributed to others. The person owning intellectual property rights will be the one with that control. That person might be the builder, but often the builder obtains some or all of the technical information used in the construction of the biodiesel plant from a technology provider. The technology provider will grant the builder a license to use its intellectual property as part of the builder's services to the owner.

So how does the biodiesel plant owner get the rights necessary to operate, maintain and repair the plant? Each biodiesel plant is constructed under the terms of a design/build agreement. These agreements cover a wide range of issues, including the assignment of responsibilities between the builder and the owner, how the work will be performed, pricing, indemnification, production and quality warranties, and insurance requirements. The use and ownership of intellectual property related to the plant and its design is another key issue addressed in the design/build agreement.

The design/build agreement will clarify who obtains ownership of the intellectual property necessary for, or resulting from the design and construction of the biodiesel plant. The plant owner rarely acquires ownership of that intellectual property. Instead, ownership typically remains with the builder or with the builder's technology provider. The owner will have certain limited license rights, which are either granted by the builder to the owner, by the technology provider indirectly through the builder, or directly from the technology partner to the plant owner.

The owner should be certain to obtain rights that extend beyond just the actual construction of the plant. In addition to the owner's obvious need for physical access to drawings and specifications regarding tanks, piping and other elements of the biodiesel plant, it is also necessary for the owner to have intellectual property rights for the use and reproduction of such materials. Typically the owner is granted only limited rights that apply to the operation and maintenance of the plant-any other use, such as plant expansion, is likely to be excluded.

Intellectual property issues associated with biodiesel technology already are significant issues in the construction of biodiesel plants. They will continue to take on even greater relevance for biodiesel and related businesses as the industry grows (and perhaps consolidates) and as technology changes.

Todd J. Guerrero and Timothy Keller are members of Lindquist & Vennum PLLP, a leading provider of legal assistance on biofuels projects throughout the country. For more information, visit www.lindquist.com or call (612) 371-3211.

This article is only a general summary for informational purposes and does not constitute legal advice. Consult a qualified and experienced legal advisor for your specific situation or particular questions.
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