Gevo Wins Another Battle in War with Butamax

Andrew Klips  |

Gevo Inc. (GEVO), an upstart biofuel manufacturer backed by tycoon Richard Branson and Sun Microsystems cofounder Vinod Khosla, scored a victory in a bigger battle with Butamax Advanced Biofuels LLC late Tuesday as U.S. District Judge Sue Robinson rule in Wilmington, Delaware that Gevo doesn’t infringe on a Butamax patent under what is called “doctrine of equivalents.”  Butamax, a joint venture between BP Plc (BP) and DuPont Co. (DD), is arguing that the difference is technology is so insubstantial that it qualifies as infringement on their protected intellectual property.

The case isn’t over. Judge Robinson said that there will not be a resolution without a trial, which is scheduled to begin in August.

The latest decision follows a ruling last June by Judge Robinson permitting Gevo to enter the automotive additives industry when Butamax had filed a preliminary injunction looking to stop Gevo from entering the market based upon claims of infringement.  Judge Robinson concluded at that time that Butamax did not “hold a valid patent, nor would the defendant (Gevo) infringe if it did.”

Following that decision, Gevo said in a corporate statement, “This decision replaces the previous court order, and means that Gevo is once again free to sell in any market, to any customer, in any region.”  Gevo has a plant in Luverne, Minnesota capable of producing 18 million gallons of isobutanol per year that is undergoing a retrofit to modify it from an ethanol producing facility to an isobutanol producer.

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Englewood, Colorado-based Gevo and the two partnered industrial giants have been slugging it out since January 2011 when the lawsuit was first initiated by Butamax alleging Gevo was using its process to genetically engineer microorganisms in producing biofuels.  Butamax has even made sure that details of the litigation have been delivered to analysts covering Gevo in an attempt to put its thumb on the smaller competitor.

Between the two companies, six cases of patent infringement are currently pending.

Butamax filed its first lawsuit a month before Gevo’s initial public offering. Starting trading around $16 per share, GEVO climbed as high as $26.36 three months after the IPO, but has been falling ever since, shedding about 92 percent of its value from those highs.

Both companies hold patents on genetically altering yeast in the manufacturing of isobutanol, but it appears that there are common areas between the patents for which each company contests ownership.  Isobutanol has a number of industrial applications such as a fuel additive (in gasoline and jet fuel) and uses in butyl rubber.

What it looks like is that Butamax is using its deep pockets to try and crumple Gevo and keep it from any meaningful market penetration, not exactly the first time a major has employed that strategy against an upstart.  Gevo has raised more than $200 million since it filed its documentation in mid-2010 to go public.  As of December 31, 2012, Gevo had $67 million in cash and equivalents, according to filings with the SEC, so it has some capital to continue to fight.

Revenue during the fourth quarter of 2012 for Gevo, revenue was only $1.9 million, down significantly from $17.2 million in the year prior quarter, primarily because the company suspended ethanol production at its Luverne plant as it concluded the initial startup for isobutanol production.  Gevo said it expects production to begin in 2013 and that market development with key customers such as Coca-Cola Co. (KO), Sasol Ltd. (SSL) and the U.S. Air Force is “moving forward.”

On Tuesday, Gevo reported added Dr. Stephen P. Toon as EVP of Operations and Process Development, tasking him with the overall responsibility of the Luverne plant from startup through commercialization.

Shares of closed Tuesday at $2.06, up 6.7 percent for the day and have charged ahead in premarket activity on Wednesday, up by about 16 percent at $2.40 in early action.

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