Patent Policy and Sustainable Cellulosic Biofuels Development

Patent Policy and Sustainable Cellulosic Biofuels Development
By Steve Suppan | May 09, 2008
National patents and international rules on patents will be instrumental in the development of biofuels marketsdefining 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 affaira "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."

There is some evidence of jurisprudential momentum for reform that may instigate legislation and/or regulation against patent pathology. For example, in 2007, the U.S. Supreme Court, ruled (KRS International Inc. v. Teleflex Inc. et al.) that patent applicants had to better document that their products met the criteria for granting of a patent. Coming from the most "pro-business" court in the history of the United States, the ruling will set a precedent for cases in which the validity or breadth of a patent is challenged.

What is a Patent Thicket?
Most complex technologies, such as biofuels, are composed of more than one patent. Usually all the patents for a complex product are not held by one company, hence the creation of joint ventures based in part on interlocking patent portfolios and technological capacities to pursue research and development. To take a simple and theoretical example, a genetically engineered biofuels feedstock with a high starch content trait and a proprietary pesticide trait might result from a joint venture that would require patented technology to acquire and "stack" these traits. But if a patent holder pursues a "strategic use" of patents to deny a competitor access to a component technology, then a patent thicket is created against innovation. Remember, there is no legal requirement that a patent be applied or "worked" in industry, only that it is "capable" of being applied. While creative patent and technology licensing lawyers can sometimes circumvent the thicket, the expense of doing so may not be worth the risk and cost for a small firm.

Among the technologies that would create cellulosic biofuels on an economically viable scale, perhaps none is more complex scientifically and legally than synthetic biology. Synthetic biology joint ventures, such as that between British Petroleum and the University of California-Berkeley, hope to engineer plants at the molecular level to break down cellulosic fiber resistance to enzymes. Whereas agricultural biotechnology companies have moved genes between species (e.g., a fish gene into a tomato) to develop certain traits, synthetic biology techniques move molecules to create computer-like "operating systems" in living organisms. The molecular operating systems are first designed on a computer and then are replicated as genetic "circuits" constructed with parts of DNA.

Perhaps as early as 2015, there may be synthetic biology modifications specifically for biofuels production, such as breeding enzymes or microbes into trees or perennial grasses to break down cellulose to extract sugars for ethanol. The designer organisms on the synthetic biology drawing board would bypass much of current ethanol technology. In "Extreme Genetic Engineering: An Introduction to Synthetic Biology" at www.etcgroup.org, Aristides Patrinos, a former U.S. DOE official and now CEO of Synthetic Genomics, says "The ideal situation would be just one big vat, where in one place you stick the raw materialit could be switchgrassand out the other end comes fuel." If the day when such a technology becomes commercially viable is postponed into the distant future, one cause may be patent pathology and/or thickets.

Patent claims on synthetic biology products and processes have been so broad and the licensing of patent use so complex that a May 2006 editorial in Scientific American warned such patent and licensing practices could throttle the discipline in its infancy. Very broad patent claims, if enforced, could result in very expensive licensing, draconian limits on scientific communication among researchers, and/or time-consuming circumvention to avoid prosecution for patent violation. For example, "syn-bio" patents have been claimed on whole classes of naturally occurring bio-molecules (e.g., zinc) commonly used in the computerized simulations to reprogram genes to carry out functions that would not occur in nature. Any contribution that cellulosic biofuels might make to reducing the contribution of transportation to climate change and its devastating anticipated effects, could be delayed or even vitiated by patent pathologies and patent thickets. For example, development of a cellulase enzyme could be made prohibitively expensive if the cost of licensing an indispensable component patent on a class (e.g., fungi or bacteria) of synthesizing molecules were too high, and the validity of such a patent were upheld in court.

Not all synthetic biology developers patent every plausibly inventive step of their work. A few university scientific entrepreneurs have eschewed patenting and the attendant confidentiality agreements that can impede critical scientific communication. Instead, they have sought to develop "open-source biology" along the lines of Linux, the non-proprietary computer software that has been developed cooperatively by thousands of volunteer programmers. Synthetic biologists at the Massachusetts Institute of Technology have made available to researchers a patent-free Registry of Standard Biological Parts (sometimes called BioBricks) used in designer organisms. The registry contains more than 2,000 molecular arrangements of genetic code that can be freely accessed, provided that improvements on them can likewise be accessed and improved free of patent restrictions.

Open-source synthetic biology may avoid some of the impediments to research that broad and overlapping patents create, though not, of course, risks such as the environmental consequences of syn-bioengineered plants.

Conclusion
Whether cellulosic biofuels can become environmentally and economically sustainable does not, of course, depend simply on the technological success of open-source synthetic biology nor on patent reform. Land clearing for planned biofuels feedstock investments in Malaysia, Indonesia and Brazil alone could release greenhouse gases far in excess of any greenhouse gas reductions resulting from the use of second-generation or even third-generation biofuels. Nevertheless, an effective assertion of the public interest in patent reform and technology policy could help make biofuels investments and product use more sustainable. For example, legislation could incentivize local ownership of biofuels firms by requiring relevant patent holders to set preferential licensing fees for companies that source biofuels feedstocks, produce local economic multiplier effects and meet environmental sustainability criteria within a certain radius around a biofuels plant. Such a legislative debate would be informed in part by the broader patent reform community.

Steve Suppan has been a policy analyst since 1994 at the Institute for Agriculture and Trade Policy, a non-profit organization based in Minneapolis with an office in Geneva, Switzerland. He works in the Trade and Global Governance Program (www.tradeobservatory.org), which started work in 2007 on international policy aspects of bioenergy. Reach Suppan at ssuppan@iatp.org.