Climate mitigation and intellectual property in tension

If climate change is to be addressed effectively in the long run, nations of all descriptions must pursue mitigation and adaptation strategies. But poor countries face a potential hurdle when it comes to clean-energy technologies—most of the relevant intellectual property is held in the rich world. Many observers argue that it's unfair and unrealistic to expect massive energy transformations in the developing world unless special allowances are made. Yet intellectual property rights are intended in part to spur the very innovation on which climate mitigation depends. Below, authors from Argentina, Egypt, and the United States debate this question: In developing countries, how great an impediment to the growth of low-carbon energy systems does the global intellectual property rights regime represent, and how could the burdens for poor countries be reduced?

Round 1

Disputed impact, but not to be ignored

The extent to which intellectual property rights represent a barrier to the diffusion of low-carbon technologies in developing countries has been among the most contentious issues in global climate talks in recent years. No agreement has been reached on the central elements of the issue, and even identifying a path toward constructive dialogue can seem difficult and uncertain.

The debate has been under way at least since the first Earth Summit in 1992. That summit produced a blueprint for sustainable development known as Agenda 21, which dealt extensively with transfer of environmentally sound technologies, including the role of intellectual property rights. Agenda 21 included a reference to the use of compulsory licensing—a mechanism through which a government allows a third party to produce a patented product or utilize a patented process without the consent of the patent owner. This language stemmed in part from some developing countries’ difficulties in implementing the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer. In particular, chlorofluorocarbons were to be phased out under the protocol, but restrictive practices by technology suppliers in industrialized countries had made it difficult for firms in nations such as India to obtain substitutes.

Now as then, polarized positions characterize the debate over intellectual property rights. On one side are those who believe that intellectual property rights are an impediment to the affordable and large-scale diffusion of low-carbon technologies in the developing world. On the other side are those who believe that intellectual property rights play an essential role in fostering innovation and indeed in the diffusion of low-carbon technologies.

A number of developing countries adopt the first viewpoint. They point out that patenting of low-carbon technologies continues largely to be dominated countries belonging to the Organisation for Economic Co-operation and Development. As documented in Patents and Clean Energy, a 2010 report of which I was co-editor, almost 80 percent of patent filings for technologies in clean-energy generation are accounted for by Japan, the United States, Germany, South Korea, the United Kingdom, and France (though a number of emerging economies, such as China, show increasing specialization in some individual sectors.) In addition, the report indicates that patenting in technologies for clean-energy generation increased at a 20-percent annual rate from 1997 to 2008. This reflects increased proprietary ownership of these technologies, which could make their large-scale diffusion on an affordable basis more challenging. Meanwhile, a number of case studies show that some firms from nations such as China, India, and Brazil can remain confined to the lower echelons of innovation systems and production processes because they are forced to obtain technologies from second-tier technology holders.

Consequently, developing countries have proposed a range of measures—some of them also invoked in a similar debate about access to medicines—that would facilitate access to low-carbon technologies. Such measures include the expanded use of compulsory licensing and other flexibilities in international intellectual property instruments; the exclusion of climate change technologies from patentability in developing countries; and arrangements such as patent pools. But enacting some of these measures might entail changes to global intellectual property rules, in particular rules associated with the Agreement on Trade-Related Aspects of Intellectual Property Rights, which sets minimum standards to which all members of the World Trade Organization must conform.

Many industrialized countries and private-sector organizations have strongly opposed these proposals, as well as the premises on which they are based. They argue that intellectual property rights have not prevented firms in emerging economies such as China and India from becoming top global players in particular sectors, as exemplified by the Chinese company Suntech in solar photovoltaics and the Indian firm Suzlon in wind energy. They also point out recent studies which indicate that relatively few patents are filed in the poorest countries in any case. For instance, a 2013 study found that, from 1980 to 2009, less than 1 percent of world patents related to clean-energy technology were filed in Africa. The report thus concludes that patents present little impediment to the transfer of clean-energy technologies to African countries.

Given all this, the impact of intellectual property rights on low-carbon technologies in developing countries is both complex and hard to quantify. Impacts often vary from one technology to another, and are frequently difficult to isolate from a variety of other economic and institutional factors. The extraordinary diversity of climate mitigation and adaptation technologies makes it difficult to reach categorical conclusions; one is left to examine specific technologies, sectors, countries, and cases. Empirical evidence remains recent, somewhat limited, and focused mostly on mitigation technologies and a few developing countries—emerging economies in particular. And the market situation is itself evolving fast.

Until greater clarity emerges, what’s needed is a structured, incremental, and constructive debate on the issues. The debate could start with an examination of practical initiatives and measures that might encourage the diffusion of low-carbon technologies in developing countries. It could eventually proceed to more controversial discussions regarding norm-setting—and whether the empirical evidence calls for examining possible changes to global rules that govern intellectual property, a course of action that seems a remote possibility for the moment.

More immediate measures worthy of consideration include improving the availability of information regarding patents for low-carbon technologies—an issue on which the European Patent Office is already working. Public-private partnerships hold promise as well. For instance, the World Intellectual Property Organization has launched an interactive marketplace platform known as WIPO Green which "promotes innovation and the diffusion of green technologies."

A recently published report by the Global Commission on the Economy and Climate places particular emphasis on the creation of patent pools, which can ensure access to environmental technologies and eliminate the expense and difficulty of entering into legal agreements with multiple patent owners. The report calls for the development of patent pools for low-carbon technologies—and calls on institutions to provide support to poorer countries to ensure access. In a similar vein, developing countries have proposed that the new UN-backed Green Climate Fund cover developing countries’ costs for acquiring low-carbon technologies if licensing costs are too high.

Ultimately, intellectual property rights should be seen in a broad context of appropriate policies, adequate institutions, and resources that both encourage low-carbon innovation and ensure that its benefits are widely diffused. The importance of intellectual property rights should be neither overestimated nor underestimated. What’s certain is that intellectual property rights cannot be ignored. But discussion of the issues must be structured and incremental. It must focus on practical measures and initiatives. It must be based on empirical evidence and concrete cases. Otherwise, agreement on low-carbon technologies and intellectual property rights is likely to remain elusive, whether at the World Trade Organization or the UN Framework Convention on Climate Change.

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.

The burden of intellectual property rights

Expanding low-carbon energy systems in developing countries requires that relevant technologies be diffused in a timely fashion. A major percentage of these technologies, however, particularly the most efficient and up-to-date, are subject to intellectual property rights—in particular, to privately held patents. This means that, in principle, the protected technologies can only be used if rights holders agree to transfer them, subject to the payment of royalties or fees and, often, to contractual restrictive practices such as export restrictions.

Defenders of intellectual property rights argue that patents do not create a barrier to the adoption of low-carbon energy systems in developing countries because many potential suppliers of technology exist—and, in any event, patents provide a strong incentive to the development of new technologies. This argument overlooks a few key facts. First, the incentive effect of patents is strongly dependent on context; patents do not promote innovation in countries whose industrial or technological base is weak. As a result, companies based in developed countries own an overwhelming majority of patents related to low-carbon energy technologies. Second, from a policy perspective, the objective of an incentive system should not simply be to promote innovation, but also to ensure that new technologies are accessible to all countries. This is particularly true when the need to address global challenges such as climate change exists. When rights holders are reluctant to transfer privately held technologies—often because they are afraid of empowering potential competitors—an incentive system fails to ensure accessibility.

Third, it may be the case that certain sectors of low-carbon energy systems are characterized by a diversified supply of technologies. But at the same time, patents have proliferated seriously in recent years; many patents cover minor or trivial developments and may be used to block genuine innovation and competition. For instance, a 2010 study of several fields within the realm of environmentally sound technology—including solar photovoltaic, geothermal, wind, and carbon capture—found that nearly 400,000 patent documents had been filed worldwide. Another study estimated that between 1998 and 2008, about 215,000 patents with a main focus on renewable energy applications had been filed around the world.

One manifestation of patent proliferation is "patent thickets." This term refers to a situation in which sets of patents around a given technology—thousands of patents in some cases—are owned by one or several rights holders. Proliferation of this sort exists for two reasons. First, some companies deploy patent strategies intended to limit competition. Second, patent offices sometimes apply lax standards and perform only superficial analysis when they assess whether a claimed invention meets the requirements of novelty, non-obviousness, and industrial applicability.

Defenders of intellectual property rights also argue that, in poorer developing countries, patents related to environmentally sound technology are rarely applied for and granted. Patents, therefore, would represent no obstacle to these countries’ technology acquisition. Indeed, a 2013 study by the UN Environment Programme and the European Patent Office noted that only 1 percent of clean-energy patent applications filed around the world had been filed in Africa. This would seem to undermine claims that patent rights represent a barrier to technology acquisition. The problem with this reasoning is that African countries, with their low manufacturing and technological capacities, must rely on what is produced in other regions. If patents block the production of low-cost equipment in countries such as China and India—where, unlike in Africa, patents are effectively filed—the poorest countries may be unable in any case to gain access to the technologies they need.

In order to reduce the burdens on developing countries that the global intellectual property system creates, governments from both developed and developing countries could promote innovation outside that system—in effect, they could support the development of technologies as a public good. Governments could also reduce patent proliferation by applying more rigorous standards to the assessment of patent applications. Finally, they could grant compulsory licenses—that is, they could authorize third parties to use a patented technology provided they pay remuneration to the rights holder.

Compulsory licenses—explicitly allowed under international law—may be granted for any reason in the public interest, including when the rights holder refuses to voluntarily license a technology on reasonable commercial terms or when he fails to exploit a patent in a country where it has been granted. In the United States, thousands of patents have been subjected to compulsory licenses in order to remedy anticompetitive practices, or simply for the use of the government or its subcontractors. Developing countries, whenever they find it convenient, should use compulsory licenses to ensure access to needed low-carbon technologies.

Round 2

No silver bullet

Carlos Correa, in support of his argument that “patents … create a barrier to the adoption of low-carbon energy systems in developing countries,” has presented several pieces of information that do not, in my view, tell the whole story about the relationship between intellectual property rights and clean-energy technology.

Correa observed in Round One, for example, that “companies based in developed countries own an overwhelming majority of patents related to low-carbon energy technologies.” That is correct. But this phenomenon is not specific to low-carbon energy. The same situation prevails in many sectors of technology—even taking into account the increasing number of patents owned by companies in some emerging economies, particularly China.

Correa also noted in Round One that patents associated with low-carbon energy systems have proliferated in recent years. True again, but this proliferation only mirrors a broader global surge in patent filings that, over the past two decades, has occurred in all fields of technology.

By themselves, global patterns of patent ownership do not automatically or systematically present barriers to the diffusion of low-carbon technologies. Increased patent filings don’t automatically represent barriers either. The same patterns that characterize clean-energy patents are also prevalent in fields such as information and communications technology, but the diffusion of these technologies has not been inhibited.

In addition, Correa identified “patent thickets” as an obstacle to the diffusion of clean-energy technology, but there seem to be no well-documented cases in which patent thickets have prevented access to or diffusion of green technology. Finally, Correa stated that “in the United States, thousands of patents have been subjected to compulsory licenses in order to remedy anticompetitive practices, or simply for the use of the government or its subcontractors.” In this regard it is worth mentioning that the United States is one of the few countries with legislation—the Clean Air Act—that actually contains a provision for compulsory licenses for a category of clean-energy technologies. But it should also be noted that no applications for compulsory licenses have been filed under the Act so far and no licenses have been granted.

Still, Correa was correct to argue in Round Two that developed nations should be willing, either at the World Trade Organization or within the United Nations Framework Convention on Climate Change, to engage in constructive discussions about intellectual property rights and the transfer of low-carbon energy technologies. Developed countries must not simply refuse to engage in discussion, or deny that a problem even exists. But it’s also important for developing countries not to put the cart before the horse. Beginning discussions with proposals for sweeping changes to the rules that govern global intellectual property rights will not necessarily advance these discussions and might only play into the hands of those who defend the status quo.

Both Correa and Frederick Abbott have emphasized the magnitude and urgency of the climate challenge. I fully concur with their sentiments. No one can ignore the challenge presented by climate change, remain indifferent to it, or simply advocate the status quo—and this applies to the intellectual property system. But technologies for low-carbon energy are extraordinarily diverse. Conditions differ significantly from country to country and from one economic sector to another. Such diversity suggests that a broad range of options and measures should be considered for addressing the linkages between intellectual property and climate change, but that no “silver bullet” will address all the issues. The problems that surround intellectual property and climate can only be addressed through an incremental, bottom-up approach based on empirical evidence about access to clean-energy technology in specific countries and economic sectors. In that direction lies the chance for constructive debate.


Aggregating capital, addressing climate change

In his second essay, Carlos Correa highlighted the steadfast resistance of developed countries and their industrial interests to discussing intellectual property and climate change technologies in multilateral fora. The reasons for the resistance seem fairly clear—these nations and industries seek to forestall highly contentious discussions such as those that have surrounded the relationship between intellectual property and access to medicines. Developed countries and their industries worry that negotiations will result in a weakening of patent (and other forms of intellectual property) protection, which would reduce future revenue streams.

When intellectual property and climate change first emerged as a topic of discussion, I among others emphasized that, before any dialogue intended to modify trade rules was initiated, it was important to gather empirical evidence about intellectual property's real and potential impact on clean-energy diffusion. To me the issue was, and remains, how time and energy could best be used in the search for solutions to the problems posed by climate change. In the abstract, Correa is correct that intellectual property can act as a barrier to developing countries' access to climate change technologies. But bearing in mind that the Agreement on Trade-Related Aspects of Intellectual Property Rights already provides developing countries with substantial flexibility regarding patents, when might negotiations regarding different rules become necessary or desirable?

An important issue to keep in mind when answering this question is that intellectual property rights bear on how capital will be aggregated to combat climate change. For example, government subsidies play an important role in promoting innovation—and when governments provide funding for research and development, the public should be assured of access to the benefits that result. But should research and development funded by the public in one country result in "free" access to technology's benefits in other countries, regardless of their location on the development spectrum? How should R&D costs be allocated fairly among nations?

The truth is that various fields of endeavor—from health products to smart phones, from high-definition televisions to alternative energy resources—compete with each other for investment capital. Capital may come from either public or private sources. In higher-income countries, large stocks of private capital are available, but they will be invested based on expectations of financial returns.

Patents serve the function of "securitizing," or allowing the purchase and sale, of technological developments. They provide a legal device through which investors can contribute capital either to the development of new technologies or to the diffusion of technologies already developed. In technological enterprises, patents promote the aggregation of capital.

Implementing large-scale projects in energy infrastructure, whether in developed or developing countries, is typically a capital-intensive activity. In nontechnical terms, it costs a lot. Most developing countries seeking to implement transitions to climate-friendly technologies for energy generation will, as a practical matter, have to import capital. These funds could either be public or private, and perhaps sufficient funds to accomplish such transitions will be available from the World Bank or some other entity. But history suggests a bit of skepticism regarding the idea that global public funding will adequately address climate change. Indeed, I am inclined to think that private-sector investment is essential. But the direction taken by private-sector investment depends on incentives. Patents allow above-market returns and thus are a means to attract investment to particular technologies or sectors.

In Round One, I advocated following "middle paths" that might "allow poorer countries to gain access to alternative energy resources and mitigation technologies without resorting to compulsory licenses." That is, the resources of enterprises in developed and developing countries should be combined. Government policies should facilitate joint ventures that would allow enterprises in developing nations to gain access to the capital stock—including technologies—of enterprises in developed countries. As the urgent problem of climate change is addressed, this might represent the best collective use of time and energy.

Patents are an instrument of industrial policy. Inherently, they are neither good nor bad. But patents aren't something whose use should go unregulated—the public interest must be defended. One of the patent system's main difficulties is that proponents of strong patent protection often portray patents as an untouchable property right. But property of all types is regulated. Patents, and the products or services that result from them, are no exception.

The problem is real

Frederick Abbott and Ahmed Abdel Latif both contributed well thought-out essays to Round One. Abdel Latif focused on the notion that discussions about intellectual property rights and climate change must be "structured and incremental." Abbott emphasized "middle paths" that might "allow poorer countries to gain access to alternative energy resources and mitigation technologies without resorting to compulsory licenses." But despite the two authors' measured approaches, their essays together underscore the reality that intellectual property rights are a problem for developing countries seeking to gain access to low-carbon energy technologies.

As mentioned by Abdel Latif, the problem was recognized a long time ago—in Agenda 21, a blueprint for sustainable development adopted at the first Earth Summit in 1992. But in 1994, as one result of wide-ranging trade negotiations, developed countries succeeded in imposing on developing nations an international treaty (the Agreement on Trade-Related Aspects of Intellectual Property Rights, or TRIPS) that stipulates minimum standards for the protection of intellectual property—including an obligation to grant patents in all fields of technology. Two years later, the government of India proposed substantial changes to that treaty in order to foster the transfer of environmentally sound technologies. More recently, Ecuador has suggested exempting from patent protection, on a case-by-case basis, inventions whose diffusion could be vital for climate adaptation and mitigation. Ecuador has also proposed that, in certain situations, patent terms for such inventions be reduced. No concrete action has been taken at the World Trade Organization to address the concerns that underpin these proposals.

Developing countries have also raised intellectual property rights in negotiations conducted under the UN Framework Convention on Climate Change, in particular at the 2010 climate conference in Cancún, Mexico. Developed countries, however, have strenuously resisted all proposals that allude to such rights. This holds true even for neutral references to the right, explicit in the TRIPS agreement, to make use of "flexibilities" such as compulsory licensing. Abbott correctly notes that all countries have the right to override patents through compulsory licenses when needed. But developed countries are very reluctant to admit this.

It's not constructive for developed countries to exhibit such unwillingness to address in international fora (whether the World Trade Organization or the UN Framework Convention) issues related to intellectual property and climate change. The message their unwillingness sends is that the status quo in relation to intellectual property is not debatable and that the legitimate concerns of developing countries are not even worthy of discussion. Essentially, developed nations deny that a problem exists. But a problem does exist—insofar as the system of private appropriation of innovations may delay for 20 years (the normal duration of a patent) the introduction of new technologies into developing countries (the majority of the world).

Climate change is one of the greatest challenges that humanity has faced and addressing it requires building a long-term vision grounded in equity and solidarity. A responsible international community cannot simply avoid the problems that surround intellectual property rights and climate change; rather, nations should encourage a serious discussion of these issues and make sure to involve all stakeholders, including in particular scientists and civil society.

Round 3

A bottom-up approach is required

In Round Three, Carlos Correa pointed to biofuels, and concentrations of biofuel patents in developed nations, as an area of potential concern for developing countries seeking access to clean-energy technologies. "Litigation regarding biofuel patents has been quite intense," Correa wrote, "and demonstrates patent holders' determination to exclude possible competitors." But most of this litigation seems to occur between firms in developed countries. In any event—as argued by the late John H. Barton in his 2007 study on intellectual property rights and access to clean-energy technologies—licensing fees for biofuel technologies are unlikely to prevent developing countries from gaining access, assuming their own "systems are adequately efficient and they are not barred by tariffs." Also worth remembering is that a developing country—Brazil—is one of the world's leading producers and exporters of biofuels, specifically ethanol.

Correa also argued—speaking of low-carbon technologies more broadly—that "patent holders are often unwilling … to consider granting licenses, particularly if they prefer to supply the market in question through exports." Generalizations such as this are problematic: Conditions differ from one economic sector to another and also from firm to firm. In the wind sector, for instance, some of the industrialized world's leading manufacturers of wind turbines have indeed been unwilling to license technology to Chinese firms, and instead have opened their own production facilities in China. But other Western companies have granted licenses to, and established joint ventures with, Chinese firms. Also, though this is often overlooked, large wind-related manufacturing firms from countries such as India, China, and Egypt have sometimes acquired small and medium-size wind manufacturers in countries such as Germany and Spain, taking over their intellectual property portfolios. These South-North acquisitions might not represent a broad trend, but they do demonstrate that discussing technology transfer issues only in North-South terms can be too simplistic in the context of a rapidly changing global technology and innovation landscape.

In addition, Correa wrote in Round Three that anyone who argues for the proposition that intellectual property rights "will not create an obstacle to developing countries seeking access to low-carbon technologies" should "provide evidence that [transfers of protected technology] are occurring." Providing such evidence isn't difficult to do: A 2010 global licensing survey undertaken by the UN Environment Programme, the European Patent Office, and the International Centre for Trade and Sustainable Development demonstrated that a non-negligible amount of licensing for climate change technologies was in fact occurring between developed and developing nations. To be sure, licensing remains concentrated in a few emerging economies. But the survey identified significant potential for increasing the flow of licensing to the developing world—and also reported that 70 per cent of technology holders "were prepared to offer more flexible terms when licensing to developing countries with limited financial capacity."

In discussions of climate change and intellectual property rights, it's important to maintain a focus on the actual views and needs of technology recipients in the Global South. The Climate Technology Centre and Network, an entity established under the auspices of the United Nations to accelerate the transfer and diffusion of climate change technologies to developing countries, has received more than 30 requests for technical assistance from developing countries—and none of these requests has concerned intellectual property rights. If such requests emerge in the future, the Centre and Network should be in a position to assist countries in a pragmatic, solution-oriented manner. Such assistance should ensure that nations can avail themselves of all options available under existing international intellectual property rules.

In the meantime, several developing countries have submitted proposals related to intellectual property rights ahead of the UN conference on climate change to be held in Paris this year. These proposals have focused on concrete ideas such as using resources available through the UN-backed Green Climate Fund to defray—if needed—the cost of licensing climate change technologies.

Technologies for climate mitigation and adaptation are extraordinarily diverse. The effects of intellectual property rights vary according to sector, technology, and country. Nuance and differentiation are therefore required when these issues are examined. Generalizations don't achieve very much. Discussions about climate change and intellectual property rights should proceed incrementally, and focus on effective solutions to real-life problems.


Let a thousand technologies bloom

In his third roundtable essay, Carlos Correa reiterated his belief that patents are an obstacle to developing countries as they seek access to technological solutions needed for addressing climate change. He stressed the need for concrete action to address this problem, and referred to negotiations ongoing within the UN Framework Convention on Climate Change, specifically proposals for a "technology facilitation mechanism."

Such proposals have been discussed within the UN Framework Convention for many years. The results to date are rather limited. Many people, myself included, would welcome some form of global technology development fund that could be used to incentivize research, along with a plan for distributing technical solutions equitably. But even if such a mechanism were established, I would be disinclined to abandon market incentives (such as patents) that can function as alternative policy approaches. The dynamism of market-driven systems may (or may not!) produce better solutions, more quickly, for the problems associated with climate change. (I am reminded of the race to sequence the human genome, in which a large government-subsidized effort was pitted against a private effort.)

Focus on competition. Correa also correctly noted the difficulty of proving that patents act as an obstacle to technology transfer. How does one identify the climate mitigation or adaptation efforts in developing countries that are abandoned in the face of intellectual property obstacles? It is difficult to do so in the absence of a counterfactual world that lacks patents—or a world with both patents and an automatic system for licensing them. So Correa's thesis that patents are an obstacle to climate initiatives in developing countries is not "proven." Neither is Ahmed Abdel Latif's thesis that patents may not be an obstacle. But both authors would likely agree that the world shouldn't wait to confront climate change until one thesis or another is proven.

One analytic approach for addressing the apparent conflict between Correa and Abdel Latif may be gleaned from the competition (or antitrust) policies applicable to intellectual property licensing in the United States and the European Union. In both jurisdictions, government licensing guidelines acknowledge that patents (and other forms of intellectual property) are property rights that, by definition, exclude competitors from making or using covered technologies. This is inherently anticompetitive. However, guidelines in each jurisdiction also observe that patents, by encouraging investment in innovation, may facilitate the entry of new products into the market. This creates new competition for existing products, benefits consumers, and is inherently procompetitive.

From the standpoint of competition law enforcement, these effects are generally viewed (and assessed) through the lens of a balancing test (a so-called “rule of reason”). Are the anticompetitive or procompetitive effects predominant? Also, and perhaps more important, competition authorities in both the United States and the European Union lay out minimum levels of market concentration that must be reached before licensing deals may be subject to government scrutiny under the rule of reason, a kind of “safe harbor.” These generally stipulate that if a patent licensor and licensee together control 20 percent or less of the market for the products, technologies, or research and development covered by a licensing arrangement, they are presumed to lack the power to suppress competition or maintain prices above competitive market prices over a sustained period. From the standpoint of competition law enforcement, they will be left alone (unless the arrangements include certain provisions that are deemed unlawful on their face per se, for example, price-fixing between horizontal competitors.)

Transposing US and EU competition standards to technology transfers among countries at different points on the development spectrum is not a linear matter. In different technology markets, the levels of concentration or control that give rise to anticompetitive concerns may well differ. Nevertheless, the basic theory used by US and EU competition authorities would seem to remain valid—that in technology markets with multiple competitors, the possibilities for blocking access and suppressing competition tend to be limited.

With respect to climate change mitigation and alternative energy technologies, an active market for these technologies may be established if there is sufficient competition among privately developed technological solutions. This should limit opportunities for suppression or excessive pricing. If things seem to be otherwise, it's important to ensure that competition law enforcement is robust enough to address the situation—and this includes ensuring that developing countries have sufficient resources to police against anticompetitive abuse.

In the end, the optimal approach may be for competitive private markets to operate alongside a publicly funded system for research, development, and technology transfer. Let a thousand technologies bloom.


Needed: Concrete action

In Round Two, Ahmed Abdel Latif wrote that I had “presented several pieces of information that [did] not … tell the whole story about the relationship between intellectual property rights and clean-energy technology.” But Abdel Latif then presented information of his own that buttressed rather than undermined my main argument in this roundtable: that developing countries will face obstacles as they attempt to gain access to low-carbon technologies.

Abdel Latif observed that, though firms in the developed world dominate patenting in technologies for low-carbon energy, “this phenomenon is not specific to low-carbon energy. The same situation prevails in many sectors of technology.” Abdel Latif is correct—but this only emphasizes the North-South asymmetry that characterizes technology ownership. Likewise, when Abdel Latif wrote that patent proliferation in low-carbon energy systems “only mirrors a broader global surge in patent filings,” he confirmed that an increasing number of patents are being filed for low-carbon technologies. For firms in developing countries, and indeed for any party interested in patented technologies, proliferation makes it difficult to determine what is patented and by whom. It complicates the negotiation of licenses. And patent holders are often unwilling in any event to consider granting licenses, particularly if they prefer to supply the market in question through exports.

In a similar vein, when Abdel Latif noted that in the United States no compulsory licenses have been granted under the Clean Air Act, he really emphasized the narrow scope of the Act—which deals only with air pollutants. As noted in 2007 by Harvard University’s F.M. Scherer, a leading scholar in industrial economics, thousands of patents have undergone compulsory licensing in the United States.

But a broader point is salient here: When people argue that intellectual property rights, particularly patents, will not create an obstacle to developing countries seeking access to low-carbon technologies, they often ask for empirical evidence that transfers of protected technology are not taking place. Instead, they should provide evidence that such transfers are occurring. As attorneys and judges are well aware, proving a negative is always difficult, and often impossible. Still, evidence is accumulating that patents in green-energy technology will lead to real problems. Take biofuel technologies, which hold out the promise of generating low greenhouse gas emissions throughout their life cycles and thereby reducing fossil fuel consumption. The biofuel arena is crowded with patents, the overwhelming majority of them held by companies from developed countries, notably the United States (though a growing number are emerging from China as well). As the Nuffield Council on Bioethics has argued, “Given the range of technologies likely to be involved in the production of new biofuels, the area seems particularly prone to patent-stacking and patent-thickets.” Litigation regarding biofuel patents has been quite intense, and demonstrates patent holders’ determination to exclude possible competitors.

The international community will do little to address the problems associated with intellectual property and green technology if these problems are dismissed or minimized. This could make it much harder to achieve goals for climate mitigation and adaptation. And not only developing countries would be affected—when it comes to climate, the world is deeply interdependent. Therefore it would be wise if all countries, developed and developing alike, agreed to concrete actions that removed actual and potential obstacles to the diffusion of green technologies.

Within the UN system, discussions are currently under way regarding the establishment of a “technology facilitation mechanism” that would promote “the development, transfer, and dissemination of clean and environmentally sound technologies.” These discussions should not overlook the fact that intellectual property rights—no matter what their role may actually be in promoting innovation—by their very nature confer on private firms the power to decide who may use a technology and under what conditions. This power must be subordinated to a global interest—that of achieving environmental sustainability for the entire planet.

Topics: Climate Change


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