Quantum Catalytics, Inc. and its Houston, Texas subsidiary Texas Syngas, Inc. (collectively “Quantum”) sued Ze-Gen, Inc. (“Ze-Gen”) and New Bedford Waste Services, LLC (“NBW”) in federal court in Boston, Massachusetts last month for alleged infringement of 14 patents directed to gasification technology and misappropriation of trade secrets relating to the technology. 

The patents, which Quantum acquired from the bankruptcy estate of a Massachusetts company called Molten Metal Technology, include U.S. Patent Nos. 5,191,154, 5,322,547, 5,744,117 and 5,866,095. 

The patents describe methods of converting organic waste into syngas using liquid metal reactors.  The patented processes separate carbon dioxide and result in gas that can be used to generate electricity.

Quantum has taken a hardball approach in this case by seeking to expose individual executives of Ze-Gen and the company’s investors and patent attorney to infringement liability.  Thus, the complaint (quantumcatalyticscomplaint.pdf) names as individual defendants the President and Chief Technology Officer of Ze-Gen, as well as Ze-Gen’s outside patent counsel.

In addition, Quantum has accused two venture capital firms, Flagship Ventures (“Flagship”) and Vantage Point Venture Partners (“Vantage”) of contributory infringement and inducing infringement because of their alleged ownership interests and management roles in Ze-Gen. 

According to the complaint, Flagship and Vantage have control of and involvement in Ze-Gen’s allegedly infringing activities because a member of each firm sits on Ze-Gen’s Board of Directors. 

However, Quantum will have to clear a high hurdle to prove that the VCs induced infringement.  Per the Federal Circuit Court of Appeals’ DSU Medical decision, Quantum has to show that Flagship and Vantage possessed the specific intent to induce Ze-Gen’s alleged infringement of the patents-in-suit. 

That is, Quantum has to show more than just the VCs’ intent to cause the acts that it alleges are infringing.  Instead, Quantum must prove true culpability – that the VCs knew of the patents and intended to induce infringement of the patents.

It will be interesting to see how the infringement claims against Flagship and Vantage play out.  Infringement liability for clean tech VCs would be a disturbing development in clean energy financing.  In view of the ever increasing venture funding of clean technology companies, this could become a very significant case, and one the VCs should be watching.

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