The burden of intellectual property rights

By Carlos M. Correa, February 18, 2015

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.

Topics: Climate Change


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