National patents and international rules on patents will be instrumental in the development of biofuels markets—defining how fast that development takes place and who controls and benefits from the next wave of biofuels. Patents granted by governments to applicants confer commercial (often monopoly) privileges in exchange for a product or process that meets three main patent criteria. The patented product or process, in the words of Article 27.1 of the World Trade Organization agreement on intellectual property, must be “new, involve an inventive step and [be] capable of industrial application.” In U.S. law, these criteria are usually characterized as novelty, non-obviousness and utility.

Investment plans for biofuels component products, such as in joint ventures, include patent portfolios as a key element. Yet the patent policy debate from which changes in patent law and regulations emerge goes unmentioned in global biofuels market planning. This article outlines some of that general debate and its application to the synthetic biology (sometimes called nano-genomics) patents that will be instrumental in the development of cellulosic biofuels.

Taken for Granted in Global Plans
In the Brazilian Agroenergy Plan 2006-2011 there is not a single word about patents. In the United Nations Energy Task Force report “Sustainable Bioenergy: A Framework for Decision-Makers,” neither patent policy, patent enforcement, royalty and licensing fee costs nor the role of traditional knowledge and genetic resources in patented biomass products are considered to be sustainability factors. The UN Food and Agriculture Organization’s International Bioenergy Platform does not consider patent issues to be part of its “knowledge management” program.

There are at least two reasons why patents are left out of such public planning for a global biofuels market. First, patents are considered in law and trade policy to be a private and individual right, even though the “natural persons” applying for patents are typically corporations, universities or governments, all of which are chartered, subsidized and/or financed by the public. Public subsidies, tax exemptions, research grants and fuel blending mandates power much bioenergy development. However, the patenting application, renewal and enforcement process that converts public support into market privileges for the patent holder is largely a private affair—a “dialogue” between governments (patent examiners or courts) and lawyers representing patent applicants or holders.

Second, patent issues are absent from public planning for the biofuels market because the economic costs and benefits of patents are held as confidential business information. Even the World Intellectual Property Organization (WIPO), which registers patents for international application and is the venue for intergovernmental patent negotiations, has little data for research about the economic costs and benefits of patents. Hence, the claims made about the contribution of patents to innovation and research are often hortatory, without specific evidence about legal, licensing and royalty costs relative to non-patent innovation incentives.

Patent Pathology, Reform and Thickets
As the U.S. government tries to globalize the U.S. patent process through WIPO negotiations and bilateral trade agreements (“harmonization” in the regulatory jargon), there is mounting criticism by patent scholars that patents, particularly in the United States, are being granted on dubious or occasionally even fraudulent grounds that fail to satisfy basic patenting criteria. Adam Jaffe and Josh Lerner in Innovation and Its Discontents, have characterized the legal culture in which such patents are granted as a “patent pathology” that could impede the innovation that patents are supposed to reward. An October 2003 Federal Trade Commission report, “To Promote Innovation,” cautiously ventured that the increasing rate of U.S. patents granted and their strategic use to prevent research by competitors might be stifling innovation.

One sign of such pathology is a too liberal granting of patents by understaffed patent examiners’ offices whose financing depends in part on patents granted, registered and renewed. For example, a “Resources for the Future” study in 2003 reported that the U.S. Patent and Trademark Office examiners had just 20 to 30 hours per application to determine whether the applicant met the basic criteria of patent. Even with the aid of computerized patent search databases, it is often exceedingly difficult to determine in such a short time whether a product or process really is truly innovative and ready to commercialize or contribute to a commercial product. Hence, the tendency, noted by one agriculture biotechnology lawyer cited in Peter Drahos’ and John Braithewaites’ Information Feudalism, for the examiner to rule in favor of the applicant, meaning “you can get utility if you can spell it.”

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