Developing next-generation biofuels, and marketing the technology and resulting products, is an exciting and potentially very profitable enterprise. Much capital is required to accomplish this, however investors may have legitimate concerns. 

 
 How can investment risk be reduced and profits increased? One approach is to establish and protect technology rights, and avoid losses by respecting rights of others. Technology rights in the form of patents and trade secrets may be used to protect and increase market share by creating a significant barrier to possible competition. Direct profits are available through licensing.
 
 This article provides a general overview of technology rights, but given space limitations, certain details, exceptions and topics are not discussed. For particular situations, readers should consult a properly licensed attorney.
 
 Patents and Trade Secrets Defined
 Patents are national governmental grants of the right to exclude others for a set length of time from making, using, offering to sell, selling or importing an invention in/into that country. Patents often effectively give holders a monopoly in practice, but since patents provide a right to exclude others and not a right to practice per se, patents do not give true monopoly rights.
 
 Trade secrets are information used in a business that may give it an advantage over competitors who do not know them. Multiple entities may legally hold or use the same trade secret if independently developed, properly licensed or properly reverse engineered. There can usually be only one patent per invention per country, however, and licensing is limited accordingly. Many things can be trade secrets, from process technology to customer lists, while not patentable. 
 
 Unlike patents, trade secrets do not involve governmental grants, but both are legally protected. To establish and maintain trade secret protection, a system is needed to keep secure, current and detailed documentation of the trade secret with access limited to "need to know" within the business (absent a secrecy agreement). Trade secret rights are lost if the information becomes public. There may be civil remedies in the form of monetary damages and injunctions or cease and desist orders and criminal penalties available for trade secret misappropriation.
 
 The concealment required to protect trade secrets and the public use that occurs when exploiting them may eventually prohibit their patenting. There is even a danger that "Company A" might patent technology that "Company B" previously established as a trade secret, and "Company A" will then sue "Company B" for patent infringement. 
 
 Basic Requirements for U.S. Patents 

 There are few restrictions on patentable subject matter, and patents may claim processes, machines, manufactures, compositions of matter and improvements on these. "Products of nature" can raise subject matter issues, but such compositions enhanced by human involvement and processes for enhancing them are frequently patentable. 
 
 There are three major patenting requirements found in sections 101, 102 and 103 of the patent code. Any indication of usefulness in the patent application is sufficient to meet the utility requirement of section 101. The section 102 requirement for novelty defines "prior art events" that render an invention unpatentable.
 
 <center><img src="/images/upload/20100405022100.jpg" alt="Section 102 Descriptions" /></center>
 
 Although materials known for centuries, like ethanol, are not patentable since they lack novelty, compositions containing them may be patentable. New processes to make "old" materials may be patentable also.
 
 Section 103's requirement, non-obviousness, is based on the prior art events for novelty, but is distinct. A patent will not be issued if differences between the invention and the prior art are such that the invention would have been obvious at the time of invention to a person having ordinary skill in applicable technology. The U.S. Patent and Trademark Office usually makes an initial determination on a patent claim's obviousness by determining whether all claim parts are present in the prior art (usually some assembly of patents or other printed publications), and whether there was suggestion there for the combination. An initial determination of obviousness by the USPTO can often be successfully challenged. 
 
 U.S. Patent Applications 
 To get a patent, an inventor files an application that must "pass" examination (get through "prosecution") in the USPTO. Important application parts include the "specification" (explaining the invention, uses, how it is made and practiced) and "claims" (which in final form set the scope of any patent issuing).
 
 Applicants must give written description of their invention in their application and cannot later introduce amendments to the claims not supported by their original filing. The law requires that an application be "enabling", that is, contain sufficient information for a person with ordinary skill to make and use the invention without "undue experimentation." The application must also disclose the best mode to carry out the invention contemplated by the inventor(s) at the time of filing; this best mode cannot be kept as a trade secret.
 
 U.S. patent law also charges applicants with a "duty of candor" requiring applicants to disclose any prior art or prior art events discovered by time of filing or later until patent issuance. Failing to do so may render a patent unenforceable. While there is no prior art search requirement, a thorough search before filing is recommended since amendments regarding overlooked prior art may be impossible.

 Applications are usually published after 18 months. Patent term is generally 20 years from the earliest filing date. By contrast, trade secrets are private and without term limit, but rights are lost if made public.
 
 Patent Infringement 
 Direct infringement is the unauthorized making, using, offering to sell or selling a patented invention when/where a patent is in force, or importing the invention into a country when/where the patent is in force. There may be liability for inducing or contributing to infringement by others, and even for certain activities outside the granting country. Defenses may include claim invalidity and inequitable conduct (breaching the duty of candor) but ignorance of the patent is often no excuse. Remedies may include monetary damages and injunctions. 
 
 International Differences 
 Patent law worldwide is fairly consistent, while trade secret law is more variable. Patents are only really effective in the country where granted, but most countries routinely grant patents on inventions made elsewhere upon proper application. The "absolute novelty" requirement is probably universal outside the U.S. Generally in the U.S., "first to invent" is the standard, and elsewhere "first to file" is probably the rule. The duty of candor and best mode requirements are probably unique to the U.S.
 
 Managing Technology Rights
 Portfolios of technology rights may include patents or trade secrets from one or more countries derived from internal research, licensed or purchased. Portfolios are managed to maximize value and can facilitate trade and manufacture in the U.S. and abroad, while offering protection from competitors and bringing in licensing revenue. 
 
 Separate business entities are often formed to develop and market technology and resulting products such as next-generation biofuels, as well as to hold related technology rights. The type of entity selected may be important. For example, general partnerships may offer tax advantages and require few formalities, but do not shield owner personal assets. Classic corporations usually shield owner's personal assets from liability for corporate bad acts, but there are usually double taxation of profits and many formalities. Limited liability companies usually avoid double taxation, owners assets are generally shielded from liability for LLC bad acts and formalities are often minimal. Regardless of entity, owners are usually personally liable for their own bad acts and taxes on profits received. 
 
 Businesses and specific technology rights may be owned by one or more entities. In the U.S., joint patent owners may exploit a patent without the permission and with no accounting to other owners, absent a prior agreement. Inventors are considered the owners of U.S. patents, unless assigned, and there may be a contractual or implied duty to assign (and similarly for trade secrets). Inventions made involving U.S. federal funding or state university research may have ownership restrictions.

 
 A survey of U.S. patents and published applications shows much recent activity in areas of interest to readers. In one major U.S. patent class/subclass for cellulosic ethanol, there were 11 patents issued and 45 patent applications published in 2009 alone. There are numerous other patent class/subclass groupings in related technology areas. The situation internationally is similar. And while it can't be tracked as patents are, trade secret activity is likely very high as well. EP 
 
 Charles R. Richard is a patent attorney and attorney-at-law based in Washington, D.C. Reach him at <a href="mailto:crobrich@yahoo.com">crobrich@yahoo.com</a> or www.crichardlaw.com.

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Patents and trade secrets may protect and profit owners, but do they not guarantee a monopoly.

Next-Generation Biofuels: Establishing, Protecting and Profiting from Technology Rights

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Upcoming Events

2024 International Fuel Ethanol Workshop & Expo

Biodiesel Summit: Sustainable Aviation Fuel & Renewable Diesel

Carbon Capture & Storage Summit

North American SAF Conference & Expo

2024 National Carbon Capture Conference & Expo

Next-Generation Biofuels: Establishing, Protecting and Profiting from Technology Rights