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Technology in a warming world

In the second part of a series on chinadialogue, Ian Harvey says intellectual property rights will provide a catalyst for the deployment of low-carbon technologies.

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Few people understand that intellectual property rights (IPRs) underpinned the industrial revolution in Europe and play a fundamental role in economic growth. IPRs will be an essential stimulus to creating the new clean energy revolution: the catalyst for the investments, innovation, diffusion and deployment of the low-carbon technologies we need to limit and reduce greenhouse-gas emissions. Strong IPRs will provide the incentive for innovation. Any arguments that IPRs are “a barrier to technology transfer” are, quite simply, wrong. Policy interventions are required to price in the externalities so that the price signals will drive the market.

IPRs provide the incentive to innovate; to make risky investments in developing, marketing and installing new technologies. History shows that most such investments fail. But companies will still invest in risky projects with large potential markets if there is a predictable business climate without the risk of appropriation of the upside (through copying by competitors or compulsory licensing) if the investment is successful.

The fastest and most effective route to delivering new low-carbon products will be through the marketplace. Strong IPRs are necessary for this, with policy interventions required to price in the externalities so that the price signals will drive the market. Any market failures need to be addressed in the context of generally maintaining strong IPRs.

The start of the industrial revolution in Britain is a vivid reminder of what we owe to the patent system and its influence on investment in high-risk, new technologies. The development of the steam engine by James Watt was possible only because the patent system enabled him to raise large sums of money to continue the development of his engine over a long period, despite initial failures and the bankruptcy of his first backer. The Victorian industrialists, using the patent system to its full effect, then went on to transform the economic welfare of the west over the next 250 years.

In short, IPRs provide: the incentive for business to invest in risky projects aimed at meeting market needs; legal clarity and certainty for technology transfer transactions to take place; the choice to the IPR holder how their inventions will be used – owning IPRs is separate from the decision of how much, or whether, to charge for them; and the ability to prevent others from blocking the use of a technology through subsequent invention and associated IPRs. Let’s look at these points in more detail: 

An incentive to invest 

The volume of technology development necessary to make a real difference in low-carbon technology competitiveness is likely to be very high. In order to develop new low-carbon technologies, businesses will need to invest in their development. In order to attract sufficient resources, those investments need the incentive of generating attractive and sustained returns if they successfully create new products. IPRs, particularly patents, provide that incentive. They provide clarity and certainty about the ability to capture the revenue streams which are created when investment is successful. Businesses will invest in risky projects if they have reasonable certainty, provided by IPRs, that they will be able to benefit from success – even if the probability of success is low. 

Developing innovative low-carbon technologies in short timescales will need massive investment in many technologies and products. Most investors will lose their bets, but a few will get very rich – a small price to pay for technology that we need to change the world. Strong and predictable IPR regimes create the environment for generating these big rewards. 

An example is the biotechnology and genetic research industry. Most biotech companies fail, but the combination of relatively modest government funding and the subsequent investment of many hundreds of billions of dollars in the companies is now beginning to generate therapies that benefit patients. A rational analysis suggests that biotech investors, cumulatively, will not have seen a good return on their investments. Nonetheless, the investments have been made in the hope that they will bring a return and some companies, such as Amgen and Genentech have clearly been very successful. In this sector, strong IPRs have been fundamental to progress. 

Compulsory licensing and market failures

A quick way to deter technology development in the private sector would be to reduce the potential returns to the technology developer through the threat of compulsory licensing. This happened de facto on a large scale in the United States in the 1960s and 1970s through consent decrees with about 100 companies with a subsequent depressing effect on their research-and-development and new product development. If we are to stimulate the development of the many new technologies needed to address climate change, then we must create the policy environment for one of the most profound waves of investment in history. That is not likely to happen by interventions that reduce the return on technology development, such as the specific or potential threat that any new technology may be subject to compulsory licensing. Threats to strong IPRs, such as easily-obtained compulsory licensing, are likely to be a strong disincentive to invest. The problem with leaving the market to solve this problem is that most low-carbon technologies are not yet cost competitive at current prices. In the near term, current low-carbon technologies are unlikely to be market competitive compared with fossil fuels, without appropriate price signals or pressures such as cap-and-trade/carbon-credit programmes and emissions cap mandates like those embedded in the Kyoto Protocol or in the California Air Resource Board standards. The primary issue for policy makers is to solve these market-failure pricing problems. Any theoretical “IP constraints” are very minor when compared with the failure to address the carbon pricing externalities. 

Any market failures should be addressed in ways that avoid damaging the benefits brought by the IPR system. 

Legal clarity for technology transfer 

Whether you wish to give away a technology free of charge or to license it, you cannot do so unless you can identify what it is that you want to transfer. You are not entitled to give away something that you do not own. IPRs provide that legal clarity and certainty. Whether that IPR bears a price is a subsequent decision. IPRs provide the framework around which legal agreements for technology transfer can be structured. Without IPRs, agreements cannot be properly defined. 

IPRs enable enforceable global and compatible standards to be established with their associated patent pools. 

Freedom of choice 

The creation and ownership of IPRs are quite separate from the decision of how those IPRs are to be used. Without IPRs, there is no choice: there is nothing to give, nor can you transfer (or sell, or license) rights so that others can invest in its further development. 

With clarity of ownership comes freedom to choose how that ownership right will be exercised. An example is open source software: copyright is an essential IPR underpinning open source. Without it you can neither specify what you are putting into open source nor demonstrate that it is not owned by someone else. Open source is a good example of both confusion in IPR terminology and misunderstandings about the role of IPR. The correct definition of open source is that the source code is open and anyone is free to develop it. Yet many people think it means “free software without IPRs”: open source only works if there are IPRs, because the IPRs define what is being placed in the public domain and that no one else can lay claim to it. The consumer has to pay for much open source software because it is up to the developer of such software whether they charge for it or not. Open source is a different business model for software, but based wholly on the pre-existence of IPRs, predominantly copyrights. 

The ownership and use of IPRs should be agreed before any collaboration starts. A good example is BP’s clean energy programme at the Dalian Institute of Chemical Physics in China. This is the fourth such technology research centre to be funded by BP and one of the largest international collaboration projects for the Chinese Academy of Sciences. It took two years to discuss, negotiate and agree how the IPRs were to be handled (including background, sideground and foreground IPRs and new IPRs). Both sides are pleased with the structure. It is clear, fair and balanced, providing the incentive to both parties to collaborate, invest and work effectively together. 

Diffusion 

Patents require the publication of the technology. This is a valuable tool for those doing research because it is an easily accessible resource, although often underused. Companies have the alternative of keeping their ideas secret for as long as possible, which reduces the ability of others to build upon them. The patent publication requirement forces early dissemination, promoting diffusion of the technology. 

Preventing blocking patents 

Not patenting can lead to a technology being blocked or constrained in its use. In the 1930s, penicillin was invented in the United Kingdom. At the time it was not possible to patent medical inventions, as this was thought to be immoral. The technology was passed to the US government in the early 1940s for further development and production. The US companies who produced it patented the production technology. When the UK wanted to produce penicillin in the mid-‘40s, UK companies had to pay large royalties to the US companies for the right to use their patented production technology. If they had chosen to, the US companies could have refused to license and blocked the UK companies entirely from the market. Had the UK patented penicillin itself, it would have controlled what happened to penicillin. Even if they had not charged the US companies for the right to manufacture and sell penicillin (which a patent would have entitled them to), the UK could have negotiated a royalty-free license to produce it. 

Important technologies, even when funded initially by the public sector, should still be patented. The patent owner has ownership of the rights and can then decide and control how they are to be used. 

This article is the second part of a series about intellectual property. Read the other parts here:

Myths and legends

Technology and IP: problems and solutions

IPR and low-carbon technologies

Ian Harvey is chairman of the Intellectual Property Institute. This article includes work undertaken for Tony Blair’s “Breaking the Climate Deadlock” initiative and the Climate Group.

 

© Ian Harvey, October 2008   

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Default avatar
匿名 | Anonymous

正确的政策将……

专利制度能促进观念和技术的传播,同时,也能保证相应的发明家有权决定专利如何被使用。我同意,我们需要强制政策鼓励绿色技术的投资、研究和推广。然而,制定并维护这些政策将需要环保意识和政治意愿的一致。
本评论由Yuexia.Guo翻译。

with the right political will...

Patents can encourage the dissemination of ideas and technologies then, at the same time as ensuring that deserved inventors have the say on how the patent will be used. I agree, we need strong policies that will encourage investment, research and dissemination of green technologies. Getting these policies and maintaining them though, will require environmentally conscious and concerted political will.

Default avatar
匿名 | Anonymous

只是在转移注意力吗?

中国与印度提出,技术转让是达成哥本哈根协议的一个障碍,但真正的问题是在此吗?一直以来,我们获悉中国在太阳能与风能技术上领先,中国政府也正投资于多个低碳技术。因此,在寻求技术方面中国确切想要的是什么?是否已和西方一样,这不再是个部署配置上的问题?如同1楼所说的,这是缺乏政治意愿的问题。坚持技术转让主张,却又阐述不细,这已开始看起来象个谈判中使用的拖延战术。

本评论由Ming Li翻译

Is this just a red herring?

China and India raise technology transfer as an obstacle to reaching an agreement in Copenhagen. But is this a real problem? We are always being told that China is a leader in solar and wind technologies and the Chinese government is investing in many low carbon technologies. So what exactly is it that the Chinese need in the way of technologies? Is it not more a question of deployment, as it is in the West? It is political will, as the first comment says that is lacking -- and the insistence on technology transfer, without the details, is beginning to look like a delaying tactic in the negotiations.

Default avatar
匿名 | Anonymous

给种子授专利权正在毁了小农户

这篇文章的作者连一点反对的观点也没有提及,而实际上反对的观点并不少。毫无疑问,保护知识产权可获益,可就全球看来,知识产权在环保方面的影响,更多是负面的。举个例, 想想跨国公司孟山都(Monsanto)是怎么以知识产权为武器,在世界范围上对付小农户的吧。孟山都通过给种子获取专利权及收购其它种子公司的手段,逼着小农户不得不从它那买种子,要不然就得从别的地方花更高的价钱买种子。这一手段正在世界上摧毁着小农户,也摧毁着对全球环境至关紧要的可持续农业发展体系。我们已有解决当前环境问题的技术方案,只是还需要执行这些方案的政治意愿与决心。从人民手中夺走更多的力量却将之交与公司,只会让我们与有持续发展能力的地球渐行渐远。

本评论由Ming Li翻译

Patenting of seeds are destroying small farmers

The author of this article makes no reference to any opposing points of view, when in fact there are many. While there are no doubt benefits to protecting IPR, in the context of the global environment IPR seem to have a more negative effect. Consider for example how the multinational corporation Monsanto is using IPR as a weapon against small farmers around the world. By patenting seeds and buying up other seed companies, Monsanto forces small farmers to have to buy seeds from their company or pay much higher prices to buy them anywhere else. This is destroying many small farmers around the world and the sustainable agriculture systems which are of crucial importance to the global environment. We already have the technology to solve our current environmental problems, we just need the political will and resolve to implement the solutions. Taking more power away from the people and putting it into corporate hands will only bring us further away from global sustainability.