Friday, August 08, 2014

The Enzyme Wars

In the last post on Cobalt Technologies we speculated on how they might be coming along in their development of technologies to produce renewable butanol.  They are not the only dog in the hunt so to speak.  Butanol and its variants (isobutanol and n-butanol) it seems are a pretty lucrative business if you can get in and stay in.  Butamax and Gevo (GEVO:  Nasdaq) are two more butanol aspirants.  The two of them have been in a legal battle over patent claims for the past three years.  In the most recent salvo Butamax prevailed in Federal Circuit Court, paving the way for Butamax to resume its patent infringement claims against Gevo.

Source:  InfoHighTech
Butamax is claiming that Gevo has infringed eight of its patents, including five patents covering recombinant microbial host cells that produce isobutanol. The patents involved also cover Butamax’s methods for the production of isobutanol using host cells.  Then there is are patents covering the use of enzymes in E. coli and yeast, among others.

A joint venture between BP, Plc (BP:  NSYE) and Dupont Corp., Butamax is well funded and aggressive.  The company has been developing technologies and processes to make isobutanol from biomass. It has built its own processing plants, but also licenses its technologies to ethanol producers and others. 

That is not to say Gevo is any push over.  Gevo is a public company and recently demonstrated its ability to pull in capital by selling 30 million shares at $0.60 to raise $18 million in capital to pay for upgrades for its plant in Luverne, Minnesota.  Gevo produces isobutanol and ethanol in Luverne.  The company also operates a biorefinery in Silsbee, Texas to produce renewable jet fuel, octane, and ingredients for plastics.

Butamax and Gevo were scheduled to return to court in June 2014 to meet with a mediator.   There has been no news of a settlement, so off to court the two must go.  A trial in the Delaware District Court was scheduled for July 2014 and additional trials are currently scheduled for August 2014. 

There is a great deal at stake in the skirmish between these two.  We expect the outcome to have some ramifications for the rest of the advanced biofuel industry. Even if Butamax can successfully defend the moat around its technology against Gevo, it is not likely to push Gevo out of the industry.  Rather the legal loss will just wear Gevo down as it will have to devote more capital to more development work.  The rest of the industry has to be watching just how far the courts will go to help a company lay claim ownership over the use of one enzyme or another.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.


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