My dad’s a farmer and will turn 80 this year. His marketing method is very effective although not high-tech; he stores grain in his own bins for a couple of years or more until he’s ready to sell. This year, he’ll be emptying those bins. But, I work with ethanol plants. I know corn prices are not fabulous for the ethanol business. What to do? Well, maybe ethanol plants can also reap the benefits of what’s in the “bin.”

The key is to generate revenue without taking on business endeavors far-removed from ethanol production.

There are many who have developed ways to salvage and create value-added products from the byproducts of ethanol production, some with great success. How did they move from concept to marketability? By buying waste streams from ethanol production plants at very low prices for their research, and, perhaps by continuing to pay little for those waste streams as inputs into their own products. So what’s wrong with that? Well, nothing, really, except that when a marketable product produces its own revenue stream, the ethanol producer should be able to share in the revenue. Sure, the market drivers of supply and demand will eventually drive up the price of the waste stream. But why should the plant providing the waste stream have to forego or wait for its share?

Clairvoyance would be helpful in knowing what research will pay off. Most of us don’t have that gift. Yet the possibility of sharing the wealth—selling the stuff in the “bin”—is not unattainable. There are ways to capture the revenue stream of new products that require ethanol production waste inputs before either party even knows what the research will show. Following are some things to consider about the key strategies:

1.  Sole Supplier Agreement: Capture new revenue by entering into a sole supplier agreement before research begins. If the other party creates a marketable product that requires a waste stream, your plant will benefit from being the supplier of up to its entire waste stream. Include terms to allow the other party to purchase from other sources only if yours cannot meet demand and terms that provide you favorable market pricing for the waste stream.
 
2.  Research and Development Agreement: Partner up with the other party to assist in development of the product. This may mean tweaking your process to create more desirable waste stream profiles, providing equipment or personnel to assist in testing, treating the stream in some way before it ships, or collaborating on ways to achieve the project goal. Cooperative development often results in jointly owned intellectual property. This agreement must have terms addressing commercialization of joint developments, how each party will benefit and conditions allowing either party to transfer its interest in the developments. Whether research results in a trade secret or patent protection, these terms are key to a profitable endeavor.

3.  Independent Contractor Development: No doubt many involved in the plant have agronomy backgrounds. Great ideas are probably walking around the plant in employees’ heads, trapped there forever because, well, ethanol plants are not equipped to develop improvements except to ethanol production. Consider creating a program to reward employees for disclosing those ideas. Hire independent contractors to assess the viability of submitted ideas and then pursue the most viable. The right contractor may be interested in conducting research in exchange for a first option on the results. Alternatively, researchers are available at hourly or project fees to design and conduct the research to obtain data. But be careful! Ownership of inventions defaults to the researcher. Therefore, the contractor’s agreement must include assignment to the ethanol producer of all work products. Then, license/sell the intellectual property to a company with a solid presence in a relevant market, collect the revenue and retain the focus on ethanol production.

And that’s how to reap the benefits of what’s in the “bin.”

Author: Camille Urban
Attorney, Patents, Trademarks and Copyrights
BrownWinick Law Firm
(515) 242-2451
curban@brownwinick.com