Q: To orient our discussion, what are biofuels and how have they developed?
A: Biofuels are a wide range of fuels derived from biomass, a biological material made from living organisms, used as a reasonable source of energy.
In the biofuels industry, there have been 3 generations of products. The first generation involves corn-based ethanol. Corn-based ethanol yields more cost then benefits. It is an expensive process and uses valuable resources, including water. In addition, ethanol is incompatible with our current infrastructure. It is impossible to pump ethanol with our current pump system for gasoline because of the high vapor pressure of ethanol. As such, ethanol is not a good source of biofuel.
However, the biofuel industry has generally considered that we need to figure out how to produce biofuels that closely resemble gasoline.
The second generation of biofuels is cellulosic-based biofuels. Research is being done now and should take off within the next ten years. Companies I work with in this space include: Catchlight Energy, which is a joint venture between Chevron and Weyerhaeuser; Mendel Biotechnology; and the Energy Biosciences Institute, which is British Petroleum funded research with University of California, Berkeley and University of Illinois.
Second generation biofuels are currently the most promising alternatives to gasoline, but there are challenges and limitations. Because it is very expensive to ship biofuels, a main goal is to keep fuel local and close to the refinery. But to do so you will have to grow the plants close to the refinery. Questions being discussed include: Where are we going to grow all of the plant material? Will we have enough plant material? Will we have enough stuff to grow close by? Where will we place the plants. There are limitations along the way. Ultimately we are trying to figure out how to do it and then scale it up.
Third generation biofuels include algae and seaweed. However, there are many challenges being faced for third generation biofuels. The main challenge for algae is contamination. Algae requires a lot of sunlight. You have to grow it somewhere. Algae requires some sort of energy to grow. When you give energy, you produce sugar. Sugar attracts bugs, the bugs live in the algae, and it gets contaminated really easily. Third generation researchers are considering grow algae in the ocean, but will still face many challenges. Sea weed offers a promising alternative.
Q: Has the economy affected the projections of the biofuel industry?
A: Many biofuel companies have had a long-range view of the industry from the beginning. These companies invested a lot of money knowing they would not have a product for at least ten years. Companies continue to research, but they are more cautious because the price of fuel has dropped. Previously, companies were aggressive in their research and spending. When price of fuel was going up there was a greater interest for fuel alternatives. But since the economy tanked and consumers are buying less fuel, the price of fuel has dropped, having a negative impact on the drive for finding fuel alternatives. However, since the economy is coming back and the demand in India and China is rising, the interest in the biofuel industry will rise again.
Q: Will biofuels be able to be produced domestically or will collaborations with other countries be necessary? What about collaborations with China?
A: With the costs, we have to do it domestically. It is not cost-effective to put plant material on ships and ship it around the world to make fuel. It is possible that they could make fuel overseas and then ship the fuel like they currently do with oil, however, that adds a huge cost. From the business models I have seen, it is about the factory or refinery being close to where you are growing the plant material. The idea is that everything comes in and then you truck it out. There is a real incentive to do this because we want to rid ourselves of our dependence on foreign oil. If we can produce our own, we can keep the jobs and money spent in production here. This is not just possible, but probable. I believe we can build the industries here to do this, but, remember, the big players in this business are global companies. BP and Chevron are not limited to the United States. However, the upside is that their main focus is on the United States right now.
What China really wants to be able to do is build the technologies themselves because they are better at building and can do it for cheaper than we can. We may develop the technology, they may build it, and then it may be brought back here to be sold. Chinese companies are filing more patent applications in the U.S. than anywhere else in the world. With the advent of such a large growth in the Chinese patent industry, the Chinese are protecting their inventions here so that they may ensure control.
Q: Has there been a race to the patent office in the biofuels industry and what about exclusivity?
A: There are a large number of clean technology patent applications. However, I am not certain that it is anymore of a race in this industry than any other. It is a new and developing industry filled with innovation, so it makes sense that so many people are filing patents. That is not to say that people aren’t being aggressive, however people are generally aggressive about filing patent applications in the United States.
Many industries, healthcare in particular, give people the “freedom to operate”. This means you as a company have the ability to sell your product without fear of a patent infringement suit. In the pharmaceutical industry they want high comfort. They want to be extremely secure that they are not going to be sued for patent infringement and enjoined from selling their drug. They have spent millions of dollars to develop their drug and they want to be able to sell it.
On the other hand, in the tech (chip and computer) world, because of the patent trolls (people who buy up patents and sue other people) and all the intermixing of IP, they are much more comfortable with the degree of risk that other industries are not comfortable with. It is said that the life sciences industry tends to be much more risk adverse. If there is a patent out there blocking them, they will not proceed. Industries need to become more comfortable with the risk associated with doing business in an IP area where there are patents all over the place covering all sorts of things. For example, there are carbon patents that regulate the sale and the use of carbon and the value of carbons associated with different things.
The reality is, however, that you are never going to get clearance. No one is ever going to say that you are free to sell and that no one is going to sue you. Lawsuits happen all the time. Becoming comfortable with risk is something that all these industries, biofuels in particular, need because there are so many different parts to the technology. With biofuels there are so many steps: you have plant material, you need to be able to grow it, you need to figure out how to convert it to the fuel, etc. There are going to be patents all along the way. You never know if you are bumping into somebody.
Currently, biofuel companies are not running into these problems because there is no money at stake. We look into these things, but there are no deal breakers yet because there are no real products that people are selling. They only sell when there is money and, right now, it is just too expensive.
Q: Are there limitations that will hold us back in trying to protect our inventions?
A: The factor creating tension right now is that we want to have a stronger and bigger IP program. We think protecting these inventions is very important because we are investing in it and we want to be able to have a business advantage down the road by precluding others from entering that space. If I have invested a lot of money to build a whole new industry, I am entitled to patent protection. The counter to this theory is that this is a worldwide problem shared by everyone and we need to solve it. If you hit the market over the head with a patent, people may not be able to do the right thing and we may not get to a solution as fast as we may otherwise be able to.
The concern in the U.S. is that there are a number of smaller, third world, developing countries, and countries that are less economically powerful that attribute the U.S being a world power to the U.S.’s alleged practices of polluting their country. These countries resent the U.S. for their practices and hold that the U.S. has no right to deter them from doing the same. These countries have gone as far as giving the U.S. an ultimatum that if the U.S. does not like their environmental practices, they will ask the U.S. to give them the technology to be more eco-friendly for free.