Many entrenched process technology providers are heavily investing in the resources necessary to initiate that greatly anticipated step for ethanol: evolving the nature of its production beyond current limitations. The roll-out of tomorrow's high-tech processes resulting from a diverse portfolio of tailored concepts tied together in commercial production doesn't hinge on that one "good idea" yet to be developed, though. In most cases, it depends on a series of good ideas built on each other over time through the right channels of agreement with trusted partners—and experience. The race is on to develop the future of this industry, say observers and involved parties. Contenders that build efficiency and sustainability into their products will hold competitive advantages, for sure. Therefore, the development and protection of those products of intellect is paramount.

Great ideas foster new and sometimes better lines of thought. The latest, greatest ideas are really fleetingly "final" culminations of improvements manifested in various products or processes available at any given time, which are either perpetually reinvigorated or completely thrown out the window at the hands of those carrying out research agendas behind closed laboratory doors.

It is important for these ideas to be protected. However, it's been said that sharing is the nature of the agrarian base supporting the ethanol industry. Sharing is a survival tactic practiced by some farmers and, for others it's just part of their disposition. Open communication is simply engrained in the culture of agriculture.

Patent Protection
"A patent gives the patent holder the right to exclude others from making, using, selling or importing the invention claimed in the patent," says Brigid Quinn, spokeswoman for the United States Patent and Trademark Office (USPTO). There are three types of patents. "Plant patents, meaning asexually reproduced plants, and utility patents, which involve the way something works, [both] last 20 years from the date the application is filed," Quinn says. "Design patents—the way something looks—last for 14 years from the filing date."

Quinn says very few filed patent applications are reviewed in that same year, mostly due to a backlog of 700,000 applications. This is being addressed through the hiring of 5,000 civil servants in the next five years, including 2,000 that have been or are being hired in 2005 and 2006. "Many of these new examiners will be working in the area of biotechnology," she says. The time it takes for an application to go from being filed to being accepted by the USPTO averages 30 months, according to Quinn.

"The criteria for determining what is patentable is set by Congressional statute and interpreted by courts in case law," Quinn tells EPM. "The law requires that, first, an invention has to qualify as patentable subject matter," which she says must be a "process, machine, manufacture or composition of matter, or any improvement thereof." After the determination is made that an invention is patentable subject matter, it must also be determined that the idea is new, useful and non-obvious to someone knowledgeable in the respective field. This must all be fully disclosed in writing so that one can reproduce and use the invention, Quinn says. This requirement of "full disclosure" is at the core of two equally rational, yet diametrically differing, positions on how to best safeguard intellectual properties in this industry: pantents or trade secret. Essentially, these two options offer different means to reach the common objective of protecting intellectual properties, which begets another common goal—the longevity of a prosperous and sustainable ethanol industry.

Potential Patent Pitfalls
On the surface, patents may appear to offer the most protection from infringement through the fear of recourse as dictated by law, but the exclusive reliance on patents to protect intellectual properties is a bet most companies don't risk wagering.

"Delta-T developed the basics for our mole sieves more than 20 years ago," says Rob Swain, executive vice president of Delta-T Corp. If his company had patented its molecular sieves back then, the patent would now be expired and the proprietary internals of Delta-T's sieve design would be in the public domain. "It's been a trade secret all these years, and the law protects trade secrets through non-disclosure agreements," he says. "A trade secret is whatever you define it to be." Also, Swain tells EPM, in the event that parties involved in non-disclosure agreements already know or have access to the information deemed as a "trade secret" in the contract, then those parties are not bound to the terms of such agreements.

"Intellectual property is a huge issue for us," Swain says. "We've got more than 100 projects on five continents, and over a billion gallons in the U.S. (ethanol plants existing and under development), not to mention those pending projects." Delta-T does extensive research into the laws of a country before taking its technologies there. Swain says nearly two years were spent doing research into the laws and potential partnerships in China and India before establishing operations in those countries. Delta-T is developing a 50 MMgy beverage-grade distillery with its trusted partner Chemtex International in China. "It's going well," Swain says. "It'll be up and running next year. The Chinese government expected us to work with some local designers," which caused some concern with respect to keeping Delta-T's trade secrets safe. "Some of the more proprietary parts of the design are not exposed [to the local Chinese designers]," Swain says.

In addition to the distillery under development, Delta-T is manufacturing its proprietary mole sieves in China … part of them, anyway. One way to avoid complete piracy is to split up operations. "The externals to our mole sieves are fabricated in China," Swain says. "The internals are made elsewhere."

In foreign countries, U.S. patents don't apply. Patents must be filed in the country in which protection is desired. Nevertheless, experts agree that just because patents are granted in other countries, that doesn't mean infringements won't occur. "China and India have laws that protect intellectual properties, and they go back and forth with the U.S. government," Swain tells EPM. "The laws are in place, but practically speaking, it's still hard to sue." That's even a problem in the United States on U.S. patents.
"Trade secrets have their advantages," says Patent Attorney Michael Vander Molen. "Patents expire. The formula for Coca-Cola, for example, is a trade secret. It's been one for years and years." On the other hand, Vander Molen says if a trade secret is discovered through competitive analysis or reverse engineering, then the secret is out.

Raphael Katzen, revered engineer and consummate inventor, encountered such an incident. He tells EPM that he recalls a time when a client jeopardized one of his designs. "The client just handed our drawings of a complete distillation system to one of our competitors," he says. Unfortunately for Katzen, this system was subsequently built. "We couldn't do anything about it—not when the client just handed it over to the competitor."

Katzen has untold experience in the field of intellectual property protection. He tells EPM that he's filed for 30 domestic patents and many more in a total of 15 different countries, most of which were filed while he was with his former company, now called Katzen International. "We quit filing for patents," he says. "We filed a lot of patents, but people would copy them and move on." This was accomplishable, of course, because when a patent is filed, full disclosure in writing must be made public. "We didn't have the money to pursue an infringement case. The big companies can afford it; the smaller companies cannot."

Patent Protection Part II
The full disclosure that is required in the issuance of a patent is concerning to some, while to others, it's really an effective tool that not only complements the practice of trade secrets and caution, but also furthers technical advancements for the entire industry. "Patents have to disclose how [an invention] works," says Vahid Aidun, director of intellectual property with Broin Companies. "By patenting our technologies, we've taken the opportunity to tell the industry, ‘This is how we do [Broin Project X (BPX)] or fractionation (BFRAC),' with the hope that, when other technology companies read it, we'll get new partners to make those processes better."

Just as patents are only part of an overall approach to intellectual property protection, the same can be said for the technologies they protect relative to the entire process of ethanol production. "It's more than just patented technologies," says Mike Muston, executive vice president of corporate development with Broin Companies. "It's the modifications to technologies, construction, know-how and management. … Broin Companies' approach isn't just focused on new technologies, but also how those technologies are deployed and the services provided along with them. At Broin Companies, the difference is having the ability to see it through." Muston says Broin Companies offers an environment whereby these ideas—or technologies—are brought to total and holistic fruition.

While BPX and BFRAC are trademarked and patented, Aidun and Muston say Broin Companies embraces working with others, such as its partner plants. "There's a realization that we can't go at it alone," Muston tells EPM. "This industry is moving so fast that our ability to compete is enhanced by other companies. It's important to identify and develop the right relationships."

Aidun adds, "Protecting how we design and operate our plants is not done through the patenting process, but rather it is protected through trade secrets. We provide our trade secrets to our licensees through our management business. Patents are used to protect our process."

Broin Companies currently manages 17 ethanol plants—soon to be 22, Muston says—all of which are linked 24 hours a day, seven days a week to a common information system. If a new idea is proven at Broin Enterprises Inc., a 9 MMgy pilot plant in Scotland, S.D., then the company can relay that information instantaneously to its partner plants.

Partners, Purposes and Perceptions
Patents and trade secrets, while important, are even more protective when scrutiny is employed in choosing companies with which to partner, according to Swain. "There are laws, and there is enforcement of those laws, but it's also a question of partners," he says. "Are they ethical? Do they have the wherewithal to protect your company's interests—the partnerships interests? Will they go the extra mile? Our partners are skillful, and they have [intellectual property] of their own to protect." Swain says certain approaches to intellectual property protection—other than through the legal domain—can help companies control their own destinies. "It's also about how you deliver your goods and services," he says.

Muston says that it is almost necessary for individual plants to assemble partnerships with technology leaders like Broin Companies if the plants are going to survive. The strong capacity of large companies and their collaborations with industry leaders to develop, source and license new technologies is what will drive that need, according to Muston. "The players are changing dramatically," he says, making reference to big oil companies, Wall Street investment firms, joint ventures and technology partnerships.

ICM Inc. recently bought 49 percent of LifeLine Foods LLC, a food processor in St. Joseph, Mo., essentially creating a partnership to develop sound technological progress toward the same goal sought by its competitors—technologies to carry and integrate ethanol production with its logical agricultural counterparts well into the 21st century. A pilot plant and R&D center, where ICM intends to prove out new ideas, is on the verge of construction in St. Joseph (see Build feature on page 52). "We are going to evaluate various technology companies to partner with, and continue to look for companies to test their processes with us," ICM CEO David Vander Griend tells EPM.

This heightened interest in intellectual property rights, protections and infringements, isn't a random occurrence. "This industry has evolved from many individual plants with little research and discovery to one in which hundreds of millions of dollars are being invested," Muston says. "Companies are aligning themselves with sophisticated partners. The stakes are definitely elevated."
Broin Companies is aggressively developing a viable method to process corn stover into ethanol. Muston tells EPM that the company plans to begin building a commercially integrated biorefinery in Iowa next spring. Similarly, through ICM's relationship with LifeLine Foods, it is preparing to investigate the most viable route to commercializing cellulosic ethanol production, whether that is the gas-to-liquid approach or through fermentation.

"The true era of technological differentiation is just starting," Swain says. "The ethanol industry has a history of borrowing ideas, but as the value of the market gets larger and larger especially with cellulosic ethanol, not protecting [new and emerging technologies] will cost lots of money." Swain says he is seeing a lot more lawyers coming on board and a lot more contracts moving forward recently.

Katzen says a prudent approach to protecting intellectual property can be followed by examining the histories of those with which tech companies choose to partner or do business. "A lot depends on the honesty of a client, or of the people in a company," he says. "Look at the individuals within the company. See what their track records are like."

The ethanol industry is dominated by agriculture, and the business of agriculture is wide open, Katzen says. "Everything belongs to everybody," he tells EPM. "Farmers communicate. They'll have breakfast together and talk about farming and how they do what they do. It's hard to imagine executives in the chemical industry doing this. It's an entirely different atmosphere."

Ron Kotrba is an Ethanol Producer Magazine staff writer. Reach him at rkotrba@bbibiofuels.com or (701) 746-8385.