Court documents regarding corn oil patent case unsealed

By Holly Jessen | November 20, 2014

Court documents dated Oct. 23, which ruled in favor of 14 ethanol plant defendants, were unsealed Nov. 13, revealing details of a court battle over corn oil separation technology. The cases, which were consolidated in the U.S. District Court for the Southern District of Indiana, concern patents held by GS CleanTech Corp., a wholly owned subsidiary of GreenShift Corp.

The 14 ethanol plants named in the case are: Cardinal Ethanol LLC, Lincolnway Energy LLC, Blue Flint Ethanol LLC, United Wisconsin Grain Producers, Bushmills Ethanol Inc., Al-Corn Clean Fuel, Chippewa Valley Ethanol Co., Heartland Corn Products, Iroquois Bio-Energy Co., Ace Ethanol LLC, Lincolnland Agri-Energy, LLC, Big River Resources Galva LLC, Big River Resources West Burlington LLC and Adkins Energy LLC. Also named in the court documents were defendants GEA Mechanical Equipment U.S. Inc., Flottweig Separation Technologies, Inc., Flottweig AG, ICM Inc., and Dave VanderGrind of ICM.

The 233-page court document filed by U.S. District Judge Larry McKinney revealed CleanTech made 56 motions for summary judgment, 47 of which were denied.  Among the nine motions for summary judgment made by individual and groups of defendants listed above, three were granted and five were granted in part and denied in part. The documents were unsealed after no party showed cause why they should not be unsealed.

The only motion by a defendant that was denied in full was made by Adkins Energy, which asked for summary judgment on an affirmative defense of clean hands, asserting that CleanTech tried to suppress evidence and left the ethanol production company with an unfinished construction project and liens on its property as well as other assertions. According to court documents, the doctrine of clean hands allows for relief after fraud is discovered. Although the judge wrote that he was unwilling to declare the proceedings “manifestly unconscionable” or “fraudulently begotten,” he did say he was “troubled by the evidence that suggests CleanTech has engaged in a pattern of obfuscation, possible deceit and ever-shifting positions.” He added that Adkins and other defendants could, at a future date or trial, argue for application of the doctrine.

Stoel Rives partner Marc Al represents Al-Corn and, in a press release, called the court’s decision a major win for the ethanol industry. The judge ruled that the ‘858 patent family, which refers to multiple patents, was invalid for multiple reasons, including failing to name all of the inventors, the fact that the company recovered corn oil for more than a year before a patent was applied for and that the claims made in the patent are obvious. “The business effect of this ruling, which remains subject to appeal, is that the wider ethanol industry no longer need entertain the substantial licensing or royalty cost demanded by GS CleanTech and its publicly-traded parent company GreenShift Corp. for standard corn oil extraction procedures, with resulting profitability implications,” the company said in the press release.

Edward Carroll, CEO and chief financial officer of GreenShift, told Ethanol Producer Magazine that while the case was being appealed, the company’s patents remained valid.  The next step for GreenShift is appeal. “We think the judge got it wrong,” he said, explaining that district court cases on patents that are appealed go to a specialized three-judge panel that only hear cases on patents. “It’s the only district court that specializes in patent law, only because it’s so complex,” he said. “In our case, we feel that the district judge did not understand the patent law, and hopefully on appeal the three-judge panel will see our view.”