A problem, but not without solutions

Patents and other forms of intellectual property are at the heart of a long-running, multifaceted battle over affordable access to medicines. Today, as the international community increasingly turns its attention to climate change, an important question is whether intellectual property will represent a meaningful obstacle to low- and middle-income countries as they seek to acquire the technologies necessary to reduce carbon emissions or mitigate the effects of climate change.

Innovation is critical to the development of alternative energy resources and mitigation technologies. The patent, the form of intellectual property most closely associated with innovation, grants to an inventor the exclusive right, typically for 20 years, to prevent others from making or using the patented product or process. But other forms of intellectual property should not be overlooked in terms of their potential to limit access to alternative energy resources and mitigation technologies. Copyright, for example, is used to protect computer software. Trade secret law protects information, including production processes. And various forms of plant variety protection can restrict access to biological resources.

Patents can adversely affect access to medicines, particularly in low- and middle-income countries. Patents restricted competition when antiretroviral treatments for HIV/AIDS were introduced in the 1990s. No effective substitutes were available and patent owners enjoyed virtually unconstrained market power. Originator pharmaceutical companies could maintain very high prices for products whose production costs were modest. No safety net was provided for the large number of HIV-positive individuals in developing countries who could not afford treatment.

But alternative energy resources and mitigation technologies differ from breakthrough drugs in important respects, and the impact of patents in the two arenas may differ too. First, energy in the form of electricity or heat is fungible. Electricity is the same, from a functional standpoint, whether it is generated using gas turbines, coal, nuclear power plants, solar panels, or wind turbines—so energy producers are constrained in terms of pricing for new technologies. Older technologies can substitute for alternative energy resources, even though they may carry a higher external cost in terms of environmental harm.

Second, while it is not unimaginable that someone will conceive of or discover a wholly new energy source—for example, energy beams from the ninth dimension—it seems more likely that innovation in alternative energy resources will be incremental. After all, the energy-generating wind turbines deployed today represent a series of incremental improvements over the windmills deployed in the Middle Ages. As low- and middle-income countries address climate change, they may not always need the newest technology increment. Price-competitive markets will likely emerge for acceptable substitute technologies that are a few years behind the curve. Ultimately, the owners of patents for alternative energy resources and mitigation technologies may have less power over markets than do the owners of breakthrough drug therapies.

Overcoming obstacles. Early in the debate about climate change, technology transfer, and intellectual property, experts recognized the need for empirical assessments to identify precisely how patents, in particular, might unduly restrict technology access by low- and middle-income countries. The studies completed so far are rather modest in their conclusions. They confirm that most of the patents granted regarding alternative energy resources and mitigation technologies are owned by companies based in high-income countries, principally the United States, Japan, Germany, France, and South Korea (though Chinese and Indian companies are increasing their patenting activities in a few areas). But so far, enterprises in the developing world have made only isolated allegations that their efforts to deploy climate change mitigation technologies are hampered by patents held in the developed world. Still, it is reasonable to assume that, going forward, low- and middle-income countries will face additional obstacles related to patents and other types of intellectual property.

How can these obstacles be overcome? To begin with, this is not a question just now being raised. Parties to the United Nations Framework Convention on Climate Change, as well as nongovernmental organizations and other stakeholders, have engaged in dialogue on technology transfer for years. The UN Framework Convention has rendered decisions on this issue since the mid-1990s. In 2010, under the auspices of the UN Environment Programme, a Climate Technology Centre and Network was established, which provides technical assistance and enables the sharing of technical data. While the work of the UN Framework Convention does not solve the technology transfer problem, it confirms that the international community has identified the problem set.

Beyond this forum, rules governing the international intellectual property system provide low- and middle-income countries the flexibility to override patents when their governments consider such steps appropriate. These countries are permitted to issue a "compulsory license" with respect to a patent, allowing private enterprises to make use of a patent upon payment of a royalty. Nations can also issue a "government use" license, allowing governments to do the same. Potential political reaction from high-income countries restrains poorer countries from using these mechanisms, and political fallout can carry real consequences. But, to be clear, international rules allow the use of these mechanisms.

In any event, "middle paths" exist that may allow poorer countries to gain access to alternative energy resources and mitigation technologies without resorting to compulsory licenses. A prime middle-path candidate is joint ventures between enterprises in developed and developing countries. Governments in low- and middle-income countries can facilitate joint ventures by establishing legal and in­dustrial policy frameworks that make investment attractive to firms in high-income countries, while taking steps to protect technology end-users (including consumers). Governments can provide local industry and technologists with business opportunities and support. With encouragement from governments on both sides of the developed/developing equation, this approach may work best for everyone.

But there are certainly other options. In the area of medicines, the voluntary pooling of patents to improve access in poorer countries has gained traction—for example, through the UN-backed Medicines Patent Pool). Direct voluntary licensing has gained traction as well. Another avenue is product development partnerships, which take advantage of technologies developed by firms in high-income countries to conduct research into diseases predominantly affecting low- and middle-income countries. And a variety of proposals have emerged to establish research and development buyout funds that would purchase technology from high-income countries and share it globally. Each of these basic concepts could be adapted to promoting technology transfer in the climate change arena.

Meanwhile, it is important to recognize that patents and other forms of intellectual property are not the only factors that restrict access to and use of new technologies in poorer countries. In low-resource environments, there is a tendency toward concentration of ownership and control over basic utilities such as electricity generation and provision. Entrenched economic actors may be unenthusiastic about introducing new environment-friendly solutions to energy challenges. So in the end, introducing climate-friendly technologies in the developing world is not simply a matter of overcoming barriers posed by intellectual property.