try the process on a slightly larger scale, in a plant where the syngas will be fed into a real boiler, for purposes of either heating or electrical generation. Doing that will require a larger partner to help with the financing, and Davis says Ze-gen hopes to announce a joint venture agreement with an as-yet-unnamed company this fall. Who the partner is, or where the plant will be, are secrets for now—but construction is expected to start in the second quarter of next year.
If you raise some money and show some early success, you can expect competitors to come after you—sometimes with lawsuits in hand.
Last September, a Fall River, MA-based company called Quantum Catalytics sued Ze-gen, saying the startup’s gasification technology infringed on patents it had acquired from a now-defunct 1989 MIT spinoff called Molten Metal Technologies. I wrote two extensive stories about the patent dispute, which centered around allegations that Ze-gen acquired confidential information about the patented process by hiring engineers, consultants, and attorneys who formerly worked for Molten Metal.
Ze-gen denied the allegations. If the startup had licensed the Molten Metal technologies from Quantum Catalytics in 2005, when Quantum’s CEO first approached Davis, it might have avoided the suit. But Davis declined to cut a deal then, and Ze-gen said later in legal documents that not only were the two companies’ technologies non-overlapping, but many of the patents Quantum claimed it controlled were expired. (In a motion to dismiss the lawsuit, Ze-gen’s attorney went even farther, describing Quantum’s approach to Ze-gen as a “shakedown operation.”)
The fact that some of the disputed patents were inactive may have decreased Quantum’s leverage; in any case, after months of legal maneuvering and negotiation, the suit has now been settled. In an agreement finalized on September 18, Quantum Catalytics and Ze-gen dropped all claims and counterclaims. Davis says Ze-gen’s settlement payment was so small that it won’t materially affect the company. “I’m not free to disclose what it was settled for, but I’d say we were very pleased with the outcome,” he says.
If your business plan depends on regulatory changes, tread carefully—and try to line up political support.
Unlike some other energy companies we’ve covered—IST Energy, which has developed a cargo-container-sized waste gasification machine, comes to mind—Ze-gen hasn’t had trouble getting the permits it needs to run its demonstration plant. But there is a major regulatory snafu that could prevent the company from growing in Massachusetts. That’s the fact that the Massachusetts Department of Energy Resources has not yet decided whether to classify waste gasification as a form of renewable energy. Unless it does, Ze-gen won’t be eligible to sell renewable energy credits (RECs), which have become an important financing vehicle for most cleantech companies. (An REC is essentially a promise by one entity that its activities will decrease carbon dioxide emissions by a certain amount, offsetting the CO2 emissions of the REC buyer. There’s a growing trade in RECs, with companies like Worcester, MA-based World Energy acting as marketplaces.)
“In my view, it is beyond perverse that an advanced technology like ours, which not only prevents landfilling but prevents all of the uncaptured methane that landfills produce from entering the atmosphere, would not qualify” for RECs, Davis says. The opposition to classifying waste gasification as a form of renewable energy apparently centers around fears that it might
