Change leads to debate. For the biofuel sector, the debate ranges from whether biofuel production competes for land resource with food producing to whether biofuel production damages the environment by, for example, converting rainforest to farmland.
Some of these problems are eminently solvable. Methods for converting bio-wastes such as used cooking oils avoid competing for land altogether, while different biofuel crops can be developed to grow on land of insufficient quality for arable croplife: algae, and grasses such as Miscanthus are current favourites among this second generation. Similarly, inefficient processes are nothing unusual in an early-stage technology, and innovation driven by competition can be expected to improve both the yields and the energy consumption over time. This work is already in progress, as evidenced by the increasing number of patent applications being filed for biofuel-related inventions: improvements of gasification, for instance, can both increase efficiency, reduce production of unwanted side-product pollutants and, with a net product in gaseous form, offer the option of transportation by pipeline rather than by freight. Indeed, biologically derived products are under development to substitute for petroleum derivatives in other areas of clean tech - for instance, the use of biomaterial as backing for solar cells is in development at BioSolar, Inc and is the subject of a pending patent application.
The effectiveness of patents in an industry requiring such a complex sequence of treatments to produce the consumable end product, however, may be less than the guaranteed monopoly rights so beloved of industrialists and detested by green campaigners. One important limitation is where the product, or intermediates in its production, cross national borders before reaching the end consumer. Since the fuel itself, such as ethanol, is likely to be well-known and therefore not protected as such, the developer must rely upon protection for the processes of manufacture and the principle of patent law that importation or use of a substance such as biodiesel, however well-known in itself, infringes a patent for a process of which it is the direct product. But the question of what is a direct product of a process is a problematic one, and its interpretation varies from country to country. If the patent relates to the genetic manipulation used to produce a strain of bacterium for use in the initial digester/fermentation, considerable further processing is likely to have taken place to produce the marketable product. Thus, despite the glamour of biotechnology the patents at that stage of production may be of limited use in controlling the market downstream. It can be difficult to predict which markets will or will not be effectively protected if the IP covers intermediate stages of production, but this is increasingly essential for assessing the global viability of a biofuel business.
An illustration of this issue was a narrow decision in the case of Monsanto Technology LLC v Cargill International & Anr considered by the English High Court in July 2007. The process Monsanto had patented was for genetically modifying soya plants to render them resistant to its leading herbicide, RoundUp®, enabling crop spraying to improve productivity at the first stage. Cargill imported into the UK soya beans from plants grown in Argentina from seed containing Monsanto's genetic modification, but which themselves were merely offspring of the plants originally produced by genetic modification. The judge, Mr Justice Pumfrey held that under s60(1(c) Patents Act 1977 only the original plants which had been produced by genetic insertion of the new gene sequence could be said to be "directly obtained" from the process of genetic engineering claimed. Since the plants from which the beans were taken were several generations down the line from the original plant, they were no longer products directly obtained by that process.
The immediate application to biofuels is clear: fuel products produced from genetically modified crops grown elsewhere, or produced through the action of a protected bacterium cultivated elsewhere, will not infringe in the UK any patent for the development of the material from which they are fashioned. But even where the source crop is produced by breeding rather than genetic engineering, and therefore is protected by plant variety rights rather than by patents, the principle applies to the product of a process for extracting the energy. If the product passes through a series of treatments, it may have lost its identity as a direct product of the original extraction process. As a result there are tensions between the owners of rights in the upstream and downstream stages of the process, since the former will have no opportunity for collecting royalties from the ultimate consumers but must either integrate vertically the complete process or obtain their value from their immediate customers notwithstanding that those customers themselves may not be selling. A recent US ruling, in LG v Quanta, confirmed that limited licensing, giving the intermediary a licence for their own use but not for their customers' use, is not compatible with patent law: once the intermediary is licensed so too are their customers. More disputes, such as Novozyme's recent US claim against Genecor for infringing rights over an enzyme used to break down the biomass for processing into ethanol, are inevitable as the industry matures.
In one way, this business model simplifies matters since patent licensing between industrial users tends to be done on a regional if not global basis. Such transactions, often cross-licences of the parties' respective portfolios of intellectual property rights, do not delve into the minutiae of potential value differences for the same patent under one national law or another, but assess the overall value of freedom to operate in all relevant markets. But the issue of value ultimately hinges on the patentee's ability to block commercialisation, and here the politics of biofuels once again surfaces. A patentee which refuses to license could in principle hold alternative markets to ransom in the same way that the holders of large reserves of oil and gas hold the existing transport and energy industries. Competition law can moderate the terms upon which licences may legitimately be granted, and may ultimately provide an answer to the thorny question of royalty stacking where the end-user is faced with an uneconomic royalty burden from holders of numerous rights over contributory technologies. But it cannot under existing international norms force a patentee who is unwilling to license to do so save in very specific circumstances, including a failure to meet market requirements through their own production. This unwelcome prospect has led some politicians to call for biofuels to be treated as an exceptional case, where compulsory licensing could be enforced for the public good. At the European Patent Forum organised by the European Patent Office in May 2008, EPO President Alison Brimelow was among conference speakers arguing that the practice of using patents to handicap or block the efforts of competitors must not be allowed to creep into the sector of eco-innovation. But to introduce such an exception is bound to affect the industry's willingness to invest to develop viable, non-contentious biofuels (in the face of increasing investment in solar, wind, hydroelectric and even heat pumps as alternative renewable energy sources), and may lead to a need to increase incentives through other mechanisms such as public funding, prizes for particular target developments and additional periods of patent exclusivity analogous to those enjoyed by the medicinal biotechnology industry.
In other industries, where the making of a single consumer product requires the use of intellectual property held by multiple players, standardisation has been used as a tool to ensure that all participants have access to all essential rights, on payment of a "fair and reasonable" royalty. Whilst this has been extremely successful in enabling the development of second and third generation mobile phones, the global litigation over what royalties the terms "fair and reasonable" encompass is still raging.
Biofuels may or may not prove to be the Holy Grail of a sustainable solution to the energy needs of a growing world population, but at present they look set to be treated as part of the solution for another decade or more - by when the politics of oil and gas ownership may be diminishing in line with those reserves themselves. For the market to develop economically-viable products without compromising agricultural needs, the intellectual property issues need to be addressed well before that economic balance shifts. Companies operating without a detailed awareness of the IP landscape over their particular market sector can be more sure of trouble than of profit lying ahead.