This second article in our IPR series, outlines the existing framework for compulsory licensing and how it may be in India's best interest to work within the existing TRIPS framework.
The vast majority of clean energy technology patents are held by residents of developed countries[1]. Many developing and emerging market countries, particularly China and India, are pushing for any global climate agreement to include provisions to ensure that essential patented clean tech innovations will be available at affordable prices[2].
Compulsory licensing could be a valuable tool to facilitate clean energy technology transfer between countries. A compulsory license, issued by a national government, requires a patent-holder to allow that government to use the invention, or to authorize use by another local entity (corporation, NGO, etc.)[3]. The Agreement on Trade-Related Aspects of International Property Rights (TRIPS) already permits compulsory licenses to serve a public interest. Nations have the freedom to determine the grounds for granting them, and a developing country could in theory decide to allow them for all global-warming-reduction technologies without needing additional provisions to international agreements.[4]
TRIPS does place some restrictions on the licensing process. It would not allow member nations to categorically exclude climate-preserving energy technologies from patentability. Also, an attempt must be made to negotiate a voluntary license with the patent-holder. If the discussions fail, the government may compel the patent-holder to license the use or production of the invention. The time-consuming negotiations can be skipped in cases of “national emergencies”and other “urgent situations”; use by a government organization (“public non-commercial use”), or to address “anti-competitive” practices. Reasonable royalties must still nearly always be offered, based on considerations such as the technology's estimated market value, and national economic conditions. Definitions of such concepts as “reasonable compensation” and “emergency” are up to each government's discretion.[5] Overall, these rules are fairly flexible. Rapid and reduced-cost transfer of climate change technologies may be possible within their limits.[6]
Nevertheless, India and China argue that special licensing provisions should be agreed upon for patented climate-change mitigating technologies.[7] Empirical evidence on the current rate of patenting and time until patent-expiration for alternative technologies suggests that without something to expedite the process, these technologies will not come into wide use soon enough to achieve the carbon-level restriction goals for 2025.[8] One option is modeling a policy after the health-related amendment to TRIPS which aims to facilitate rapid, inexpensive, and uncontested diffusion of patented pharmaceuticals to least-developed countries in desperate need.[9][10]
Most of the provisions in the amendment simply make explicit that under the original TRIPS rules it is legitimate for a government to declare urgently needed pharmaceuticals eligible for compulsory licensing, including skipping attempts to negotiate with patent-holders in emergencies, so that countries could issue these licenses with less fear of international condemnation or retaliation.[11]
Adapting from the healthcare scenario
Developing nations could try to simply seek compulsory licenses for climate-change related technologies by taking advantage of the flexibilities of the original TRIPS agreement, but it would be even more difficult than with public health issues to assess when the need for an inventions is “urgent”. As was done with pharmaceuticals, it could theoretically help to make explicit statements recognizing clean energy tech as a legitimate public interest for compulsory licensing, and perhaps to acknowledge climate change as a valid emergency. This would give developing nations more confidence that their compulsory licensing to reduce greenhouse gas emissions would not come under attack.
The health amendment did add one a major policy change. TRIPS originally required compulsory licenses to be used for production for mainly the domestic market. Compulsory licenses can now be issued for a pharmaceutical to be produced for export to a nation lacking the capacity to produce it. Both importer and exporter issue compulsory licenses, and the (presumably wealthier) exporter pays the royalties.[12] This would be helpful in the climate case, as the new technologies are complex and demand a lot of physical infrastructure and know-how to produce.[13] If we wait for developing countries to attain the the capacity to produce them on their own, it may be too late to stop global warming. However, a country would still need the technical skill to operate the technologies.
Another proposal is expedited compulsory licensing process for clean energy technologies so they do not get trapped in bureaucracy.[14] Others have suggested automatic compulsory licensing. WTO member nations would pre-approve compulsory licensing for inventions in certain technological categories (e.g. wind energy technology, carbon sequestration systems, biofuel production methods, etc.), minimizing the risk of developed countries' retaliating against a developing nation's choice to issue a license.[15] Approved technologies would be exempt from time-consuming and often fruitless attempts to negotiate a market price with a patent-holder. However, permitting automatic licensing of all low-carbon technologies across the globe would likely inhibit innovation incentives to the point that the provision would not on net benefit the global environment. The specialized version of this policy proposed in the UNFCCC negotiating text for December 2009 would permit automatic, no-royalties compulsory licensing in least-developed countries (LDCs)--a small group of the world's poorest nations, mostly in Africa.[16]
India uniquely positioned to leverage CL
India may be uniquely well served by policies enabling faster and lower cost compulsory licensing of green technologies invented—and in some cases produced—abroad, so long as the policies are not restricted to LDCs.[17] A large number of low-carbon technologies are under patent in India, so could not be produced or used there without paying royalties to the inventor. However, in contrast to other emerging market economies, a very small percentage of India's numerous clean technology patents are held by her own citizens, about 14% compared to the 40% in China. Implementing these technologies in India would usually require sending money abroad.[18] China actually has more to lose as a rising major patent-holder in the field, and may not remain so enthusiastic about weakenening IPR.[19]
Compulsory licensing is more useful for India than for most countries with few clean tech patent holders, because she has the technical skills and physical capital to produce many advanced technologies, and to operate and maintain imported equipment. Even the strongest CL will do little to help the vast majority of developing countries, where the main hurdles are lack of such technical know-how and physical capital. These nations are already free to copy and produce the inventions--few companies even bother to patent their inventions there. However, this production is not happening, which suggests that IPR are not the central impediment.[20]
But CL may not be the panacea
We should be careful not to expect too much from enhanced compulsory licensing. Developing countries have successfully used the TRIPS health amendment as a bargaining chip to get pharmaceutical companies to voluntarily reduce drug prices. However, the process of applying for involuntary licenses is so onerous that few countries attempt it. Only Thailand and Brazil have actually issued licenses under the pharmaceuticals amendment, since it began in 2001, and they experienced trade-related retaliatory responses from the U.S. Government and the drug company involved.[21] A drastically streamlined licensing process for clean energy technologies and unambiguous automatic compulsory licensing would be necessary to make this method of technology transfer practical on a large scale.
Unfortunately, negotiating for these policies is likely to be acrimonious and unsuccessful. Many politicians and commentators are implying that the policies suggested by India and China would eliminate patent rights for climate change-related technology. These fears are vastly overblown given the actual proposals, but could still lead to investor anxiety about lack of compensation, and stifle innovation. Developed countries are not waiting to hear the details before jumping up to defend strong IPR. The U.S. House of Representatives has unanimously declared that at Copenhagen, the U.S. will not support any “weakening” of patent protections on wind, solar, and other low-carbon technology.[22]
Countries wishing to use compulsory licensing may do best to work within existing TRIPS “flexibilities”. Strong changes to the licensing regime are unlikely to pass in the current international climate, and it may not be worth spending political capital to fight for the mildly beneficial emeasures that passed in the health arena. It may be more effective and politically viable to expand other methods of working around potential IPR barriers to international clean energy technology transfer, such as jointly funded international R & D efforts, or funds to help developing nations to pay the royalties for patented technologies.
Resources
[1] Bernice Lee, Ilian Iliev, and Felix Prestion, Who Owns Our Low Carbon Future? Intellectual Property and Energy Technologies (a Chatham House Report:), Latimer Trend and Co. Ltd: Great Britain,( 2009). , viii. Accessed here.
[2] “China, India Push for 'Patent-free' Green Tech.” Euractiv PLC (website), November 23, 2009. Accessed here.
[3] “Fact Sheet: TRIPS and Pharmaceuticals Patents: Obligations and Exceptions,” World Trade Organization Website (September 2006). Accessed here. Note: following the terminology in “Climate Change, Technology, and Intellectual Property Rights", this article will use the term “compulsory licensing” to reference all licensing without prior permission of the patentholder, whether for government or third-party use. Some sources use "compulsory licensing" for the third-party variety, as distinct from “government use” the public non-commercial use of the invention, which is permitted without the inventor's consent. On the TWO fact sheet “compulsory licensing” is defined as government authorization of use by a third party without patentholder agreement, The actual TRIPS agreement discusses both types under the section “other use of the subject matter of a patent without the authorization of the right holder”, without explicitly using the term “compulsory licensing”.
[4] Shabalala, Dalindyebo, “Cooperation Not Compulsion on Clean Technology Transfer.” Science and Development Network (website), June 3, 2009. Accessed here.
[5] Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Part II — Standards concerning the availability, scope and use of Intellectual Property Rights accessed here.
[6] International Center for Trade and Sustainable Development, Climate Change, Technology Transfer, and Intellectual Property Rights, International Institute for Sustainable Development: Winnepeg, Manitoba, 2008, 6. Accessed here.
[7] “China, India Push for 'Patent-free” Green Tech.”
[8] “Who Owns Our Low Carbon Future?”, vii.
[9] These provisions grew out of requirements set out in the “Doha Declaration on the TRIPs Agreement and Public Health”, in 2001. The rules were specified in 2003, and were agreed to by member states as amendments to TRIPS, but they still need to be ratified by 2/3 of member states to enter into force. They are currently in force as a temporary agreement.
[10] “China, India Push for 'Patent-free” Green Tech.”
[11] “Fact Sheet: TRIPS and Pharmaceuticals Patents: Obligations and Exceptions.”
[12] Ibid.
[13] Climate Change, Technology Transfer, and Intellectual Property, 2-3.
[14] Ibid., 7.
[15] Do Hyung Kim, “Research Guide on TRIPS and Compulsory Licensing: Access to Innovative Pharmaceuticals for Least Developed Countries,” Globalex (an electronic legal publication of NYU School of Law): (February 2007).
[16] United Nations Framework Convention on Climate Change Negotiating Text (May 19, 2009).
[17] Copenhagen Economics, 22.
[18] Copenhagen Economics and the IPR Company, “Are IPR a Barrier to the Transfer of Climate Change Technology?” Report commissioned by DG Trade, ( January 19, 2009), 5. The Chatham House paper notes that data on India-held patents are limited, so they may be underestimated. Accessed from: http://www.copenhageneconomics.com/Publications/Impact-Assesment.aspx
[19] Copenhagen Economics (2009), 23.
[20] Copenhagen Economics (2009), 4-5.
[21] “AIDS, Drug Prices and Generic Drugs,” website of AVERT, and international AIDS charity, http://www.avert.org/generic.htm
[22] Shaun Tandon, “U.S. Draws Line with China on Climate Technology,” Agence-France Presse (June 22, 2009). Accessed here.
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