Green Patent Blog is on vacation.

 Happy Holidays!

Previous posts, e.g., here and here, discussed fraudulent biofuels credits schemes in which companies falsely claim to produce biofuels and sell fake credits on the Renewable Identification Numbers (RINs) market.

A RIN is a numeric code generated by a renewable fuel producer or importer that represents a gallon of renewable fuel, and certain “obligated parties” in the fuel industry and related businesses can acquire RINs as a way to comply with the U.S. Environmental Protection Agency’s (EPA) Renewable Fuel Standard Program.

There have been a number of such schemes exposed over the last few years, and some of the individuals perpetrating them prosecuted and punished.

Two such individuals were recently sentenced to long prison terms (121 months and 135 months) for their roles in a multi-state scheme sell fraudulent biofuel credits and fraudulently claim tax credits.

The story, the general parameters of which are sadly familiar to us by now, is that the two men operated shell companies purporting to purchase renewable fuel produced by a co-conspirator companies, on which credits had already been claimed and were not eligible for additional credits.  By a series of false transactions, they transformed the fuel back into feedstock for fuel production and sold it back to the co-conspirator companies, allowing credits to be claimed again.

One of the federal prosecutors who prosecuted the case called the sentence “just punishment” for crimes that “defrauded and undermined a federal program intended to further the energy independence of our nation.”

An Environmental Protection Agencey (EPA) official involved said the agency is “committed to eliminating fraud in the renewable fuels market” and “will continue to hold criminals accountable.”

Indeed, the EPA has promulgated additional regulations to ensure oversight of RIN generation and improve the RIN market and has teamed up with the Commodities Futures Trading Commission in an attempt to improve regulation and enforcement of RINs and renewable fuels markets.

The Justice Department press release can be found here.

REG Synthetic Fuels, LLC (REG) owns U.S. Patent No. 8,231,804, entitled “Even carbon number paraffin composition and method of manufacturing same” (‘804 Patent).

The ‘804 Patent is directed to paraffin compositions containing primarily even carbon number paraffins and methods of making them.  Made from bio-renewable feedstocks, these saturated hydrocarbon chains are useful as phase change materials and can be used for home insulation.

Neste Oil Oyj (Neste), a Finnish oil refining company with a focus on advanced, low-emission transportation fuels, petitioned the U.S. Patent and Trademark Office for inter partes review of the ‘804 Patent.

The Patent Trial and Appeal Board (PTAB or Board) found claims 1, 3, 4 and 8 invalid as anticipated by a first prior art reference (Craig) and also found claims 1-3, 5 and 8 invalid as anticipated by a second prior art reference (Dindi).  REG appealed.

The statutory classification of the Dindi reference is crucial here:  it is a published patent application that qualified as prior art because it was filed before the ‘804 Patent application’s filing date.  This means that REG could remove Dindi as prior art if REG could marshal the requisite documentary evidence to show that the inventor of ‘804 Patent conceived of the invention before the Dindi filing date and was diligent in reducing the invention to practice.

Turns out REG did have such evidence, but the Board excluded critical portions of it as inadmissible hearsay.

On appeal, REG argued that the Board was incorrect to exclude the evidence, in particular Exhibit 2071 which consisted of emails between the inventor and third parties, in one of which the inventor stated:

[He has] had more difficulty than [he] expected trying to recover a 90+% purity nC18 product using [his] lab distillation glassware (80% purity C18 is the best [they] got).

This is significant because the claimed invention of the ‘804 Patent includes an 80 wt% purity C18 product.

The Board considered Exhibit 2061 to be hearsay because it did not verify the actual creation of the 80 wt% C18 product.

In a recent decision, the Court of Appeals for the Federal Circuit reversed this evidentiary ruling of the Board because Exhibit 2061 was not introduced into evidence for the truth of the statement therein.  Rather, the email itself provides evidence that the inventor conceived of the invention, irrespective of whether he actually created the product:

We find that the Board erred to the extent that it excluded the content of  Exhibit 2061 based on hearsay because REG offered Exhibit 2061 for the non-hearsay purpose to show that [the inventor] thought he had achieved 80 wt% purity C18 product. The act of writing and sending the email is, by itself, probative evidence on whether [the inventor] recognized – at the time that he had written the email – that the sum of the weight percentages of even-carbon-number paraffins in his compositions was at least 80 wt% and communicated this to a third party.

The court held, together with two other exhibits, Exhibit 2061 shows that the inventor of the ‘804 Patent “could create a composition with the claimed property of at least 80 wt% even-carbon-number paraffins” and was able to do so before the Dindi reference’s filing date:

[The email in Exhibit 2061] expressly states that he could achieve at least 80% purity C18 product, which was new in April 2008 because this product did not exist in the prior art, given the record before us.

So the Federal Circuit reversed the Board on conception of the invention and the admissibility of the Exhibit 2061 and sent the case back to the Board to determine whether the inventor was diligent in reducing the invention to practice, and REG and its ‘804 Patent survive to fight another day.