A recently issued patent could make the use of master limited partnerships (MLPs) more difficult in wind projects without a license or reliance on the patent owner to provide software / services to enable transactions.
Entitled “Apparatus and method for combining easements under a master limited partnership,” U.S. Patent No. 8,700,517 (’517 Patent) describes a master limited partnership as follows:
A master limited partnership (MLP) is a business organization governed by a contract between management (e.g., general partners) and investors (e.g., limited partners). A master limited partnership combines the tax benefits of a limited partnership with the liquidity of publicly traded securities. The master limited partnership was originally conceived as an organizational structure to capitalize on mature, low growth, cash generating businesses. Accordingly, master limited partnerships have been used in such industries as oil, gas, real estate, and natural resources.
Presently, this type of investment vehicle is being deliberated by the U.S. Congress as a mechanism to help facilitate the deployment of renewables. The implication would be that a broader base of potential investors that do not require accreditation could become partners / investors in wind farms or solar parks.
We have seen recent trends towards crowd-funding of wind parks in Europe, and some developers here in the U.S. believe MLPs could be a useful tool.
The ’517 Patent describes a business method for using a computer system to store data and information related to property easements secured under the MLP structure:
A computer includes a processor and a memory connected to the processor. The memory stores capital data characterizing capital raised for the purchase of real property easements, operating data characterizing fees collected in connection with the real property easements, and a master limited partnership module with executable instructions executed by the processor to designate master limited partnership income based upon the capital data, the operating data and terms of an easement ma[s]ter limited partnership.
An easement is a property right under common law, and is often sought by a renewable project developer from a landowner so that valuable consideration is provided to the landowner for the use of the property for renewable project construction.
An examination of the breadth of claim 1 of the ’517 Patent shows that the inventors propose a computer system and a means for cataloging and storing information related to easements of specific projects with an MLP structure:
1. A computer, comprising: a processor; and a memory connected to the processor, the memory storing capital data characterizing capital raised for the purchase of real property easements, operating data characterizing fees collected in connection with the real property easements, wherein the fees are from aggregated real property easement rights and associated rental fees from rent generating fixtures, and a master limited partnership module with executable instructions executed by the processor to designate master limited partnership income based upon the capital data, the operating data and terms of an easement ma[s]ter limited partnership.
The implications of this claim breadth would be to make the assignee of the ’517 Patent, American Infrastructure Funds, LLC, the owner of a de-facto standard for many MLP deal structures, even outside of renewables.
The ’517 Patent might be treated similarly to a “standards essential” patent, and compulsory licensing may be required since it would appear that many investment management companies and project developers would utilize computer systems and software which comprise this method.
Interestingly, while many companies may propose to argue against the obviousness of something so broad, the method described would have likely been treated by investment companies and project developers in the past as a company trade secret. Thus, there may be little public domain disclosure of relevant prior art to this method, and their original priority claim from the patent family dates back over 12 years.
It will be interesting to see how enforcement of the ’517 Patent unfolds as renewable projects attempt to get on the MLP bandwagon.
*Philip Totaro is the Principal at Totaro & Associates, a consulting firm focused on innovation strategy, competitive intelligence, product development and patent search. To find out more, or get in touch please visit www.totaro-associates.com.