The company making a new biofuel in Minnesota took a turbocharged ride on Wall Street on Wednesday after a judge ruled for the company in a patent dispute.
Shares in Gevo Inc., whose sole production plant is in Luverne, Minn., closed up 31 percent after a judge rejected a competitor's request for a preliminary injunction to halt its sales.
In her ruling, U.S. District Judge Sue L. Robinson of Delaware concluded that competitor Butamax Advanced Biofuels does not hold a valid patent on a yeast to produce the biofuel called isobutanol and that Gevo has not infringed on it.
"We are free to sell to anyone, everywhere," said Brett Lund, executive vice president and general counsel for Englewood, Colo.-based Gevo, in a conference call with analysts.
The ruling does not end the patent litigation between Gevo and Butamax, a Wilmington, Del.-based joint venture of BP and DuPont. But some analysts saw it as a good sign for the smaller company, which began trading publicly in February 2011 at $15 a share.
Many investors agreed. The stock soared from the market's opening, with a record 2.2 million shares traded -- 13 times its average volume. It closed at $7.75, up $1.83. The stock, which has been trading under $6 for weeks, was by far the biggest gainer on the Russell 3000 index.
Piper Jaffray & Co. analyst Michael Ritzenthaler, a chemical engineer who has studied the patent claims, has long predicted that Gevo will prevail in a legal battle that has provoked six lawsuits between the two companies, mostly over patents for genetically engineered yeast.
"To be clear there are several other turns left in this dispute," Ritzenthaler wrote in a note to investors, "but this case was meticulously considered, and the 27-page ruling is an impressive amalgamation of science and patent language that confirms the outcome we had expected."
Butamax said it plans an appeal. Each of the six lawsuits could mean a separate trial. The first two trials are scheduled for next year. The two competitors engaged in court-supervised mediation talks in February without reaching a settlement.
"We remain highly confident in the ultimate outcome of this case and our other cases against Gevo," Butamax CEO Paul Beckwith said in a statement.
Isobutanol is an alcohol, like ethanol, that is fermented from corn. It can be mixed with gasoline or be processed into other chemicals. The military is testing it as jet fuel.
Gevo, which converted a Luverne ethanol plant last month to produce isobutanol, plans initially to sell it mainly to chemical makers as a solvent and a component in paint, cosmetics and plastic soda pop bottles. It also plans to sell isobutanol as fuel for boats, whose engines are not approved for higher-ethanol blends.
Just last week, the same judge issued a temporary order restricting Gevo sales to its two existing customers -- an international chemical company and the U.S. Air Force -- but Tuesday's ruling ended that limitation.
Gevo's Lund said, "two of the biggest companies in our industry," a reference to BP and DuPont, are pressing the case "to derail Gevo's progress." He said the U.S. Patent and Trademark Office has separately rejected Butamax patent claims after Gevo challenged them. The judge relied partly on the Patent Office finding in her ruling.
More conversions in works
Gevo last month completed the first retrofit of an ethanol plant to produce isobutanol. It has said it plans to convert a South Dakota ethanol plant next year, and this week announced a cooperative deal with Malaysia's government to produce isobutanol there using non-food or cellulosic plant material.
Butamax has announced plans to convert up to five ethanol plants, including two in Minnesota, starting with one next year. Lund declined to say whether his company would take legal steps to block the first Butamax plant conversion.
David Shaffer • 612-673-7090