IPRs: The Catalyst to Deliver Low Carbon Technologies

This paper is based on an IPR Annex prepared for Tony Blair’s Climate Change Initiative and the Climate Change Group.

EXECUTIVE SUMMARY

Key Messages

• IPRs, particularly patents, will be a catalyst, not a barrier, to creating and deploying low carbon technologies
• IPRs provide:
  • the incentive for business to invest in risky projects aimed at meeting market needs;
  • the legal clarity and certainty for technology transfer transactions to take place, including creating patent pools;
  • stopping others from blocking the use of an important technology by follow-on derivative inventions.
• Owning IPRs is separate from the decision of how much, or whether, to charge for them
• Without IPRs there is no choice: there is nothing to give, transfer, sell or license so that others can invest in further development.
• Threats to strong IPRs, such as easily-obtained compulsory licensing, are likely to be a strong disincentive to invest.
• Governments are best placed to fund basic research, spreading their funding quite widely, whereas the development of new marketable technologies and products is most likely to succeed quickly in the private sector
• Patent thickets and patent pools – although companies often complain vocally about the complexities and costs of doing so, in practice they usually solve these quite effectively by cross-licensing, by creating standard-setting bodies and by developing patent pools (where these do not breach ant-trust laws).

Recommendations

• Emphasize the importance of IPRs to developing new low carbon technologies
• Plan to create anti-trust ‘safe harbours’ for low-carbon technologies whose owners wish to create patent pools for certainty of access and of price.
• The WTO should be the most effective forum for defining policy, resolving debates and enforcing agreements about access to IPRs.
• If limited compulsory licensing along the lines of the Doha Agreement (for pharmaceuticals) were to be considered for low carbon technologies, an independent assessment of its effectiveness and impact should be carried out immediately.
• Create an IPR Working Group (potentially by the TRIPS Council of the WTO) to address IPR issues and co-opt China as a potential leader in this forum.

WHAT ARE IPRs?

IPRs are legally enforceable rights over inventions and other “creations of the mind”. The most important IPRs for low carbon technologies are likely to be patents, which allow the patent owner to stop its use by others. They do not permit use of the patented technology by the patent owner – a fundamental and important distinction which is frequently not understood. A key concept of patents is that publication of the invention means that others may build upon the ideas it contains.

Other IPRs include copyrights, trademarks and design rights.

With the exception of copyright, IPRs are granted rights (i.e. they have to be examined and approved by a granting body) and they apply only to the country in which they have been granted. Most patents are applied for only in substantial markets where they will be manufactured, sold or used. Most companies do not file patents in most LDCs.

Other than trademarks, which can last indefinitely, IPRs have a limited life which is twenty years in the case of patents. Statistically, radical new technologies take about twelve years after first patenting to reach the market place. Evolutionary technologies, which are usually less dominant, may reach market in five years.

INTRODUCTION

Intellectual Property Rights (IPRs) play a fundamental role in economic growth and underpinned the Industrial Revolution. They will be an essential stimulus to creating the Energy Revolution. IPRs will be the catalyst, not the barrier, for the investments, innovation, diffusion and deployment of the low carbon technologies we need in order to limit and reduce CO₂ emissions. The arguments that IPRs are “a barrier to technology transfer” are, quite simply, wrong (1).

IPRs provide the incentive to innovate – to make risky investments in developing new technologies and then marketing and installing them. History shows that most such investments fail. But business 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.

Part A of the paper explains the importance of strong IPRs. Part B discusses some of the real or perceived issues and approaches to resolving them. Part C reviews potential players.

A.   IPRs: the catalyst for innovation – the Industrial Revolution and today

The start of the Industrial Revolution is a vivid reminder of what we owe to the patent system – and its influence on investment in high risk new technologies.

In 1773 James Watt was a recently widowed surveyor in the Highlands with small children to support. His business colleague John Roebuck (who remembers him?) had been driven into bankruptcy through his unstinting support of Watt’s idea of making a steam engine which would be many times more efficient than the grossly inefficient Newcomen steam engine, then used for pumping water out of coal mines. Watt himself then had personal debts of about £1 million in today’s money.

Matthew Bolton, a Birmingham industrialist, was persuaded to invest in Watt’s ideas only after Parliament extended Watt’s 1769 patent (UK Patent No 913) from its initial 14 years to 30 years. Parliament then may not have been the democratic institution that it is today. But the steel-master, textile manufacturer and coal mine owner Parliamentarians understood the role that patents played in underpinning the ferment of new inventions that characterised the Industrial Revolution. As history records, Watt succeeded and started the Industrial Revolution. He died a rich man and a role model for the subsequent Victorian industrialists. They, using the patent system to its full effect, went on to play a key role in transforming the economic welfare of the West over the next 250 years, compared with the unchanging mass squalor and ill-health of the preceding 2500 years.

Although the central role played by the patent system in the Industrial Revolution is well documented, it is not widely understood (2).

IPRs are central to the innovation which drives much of economic growth. There will be little development, deployment or diffusion of new low carbon technologies and products unless there are strong and enforceable IPRs. They will be an essential catalyst to driving the development and deployment of low-carbon technologies. IPRs encourage diffusion through the disclosure of the technology to everyone (patents through publication at 18 months). IPRs provide:

1. the incentive for business to invest in risky projects aimed at meeting market needs;
2. the legal clarity and certainty for technology transfer transactions to take place, including patent pools;
3. 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,
4. the ability to prevent others from blocking the use of a technology from subsequent invention and associated IPRs.

1.   The incentive to invest

The development of low carbon technologies by the private sector needs IPRs, particularly patents. They provide clarity and certainty about the ability to capture revenue streams created if that investment is successful. Businesses will invest in risky projects if they have reasonable certainty that they will be able to benefit from success – even if the probability of success is low. This certainty is provided by the ability to protect and defend their new product revenues through IPRs. Businesses will need to make substantial investments in order to develop new low carbon technologies. In order to attract sufficient resources, those investments need to be able to generate attractive and sustained returns if they are successful in creating new products. The volume of technology development necessary to make a real difference in low carbon technology competitiveness is likely to be very high. The incentive systems necessary to provoke that level of technology investment will need to be robust and broad-based. IPRs provide that incentive.

Developing innovative low carbon technologies in short timescales will need massive investment in many technologies and products. The least-worst route to delivering this is to motivate the private sector. Simplistically, we need many investors to make huge investments and to take the risk on many different technology and product directions at once.  Most of them 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. We need large potential rewards to attract the investment capital of investors and companies and we need competition among technologies. Strong and predictable IPR regimes create the environment for generating these big rewards.

A sectoral 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 which benefit patients (3). 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.

An individual example is Sanford Ovshinsky, a self-taught engineer-physicist who is one of the most prolific inventors and patentees in US history. Regarded as a genius by some and a crank by others, his patented inventions in amorphous semiconductor materials have led to major advances in semiconductors, solar energy and electric cars. He has raised over $500 million but it was over 40 years before his investors saw any profit. It also an example where patents have encouraged diffusion of the technology. The problem that held back large scale usage of his patented diode was poor reliability, caused by cracks. He sold patent cross-licenses to larger electronics companies one of which, ITT Corporation, invented a (patented) solution which solved the cracking problem. The mutual cross-licensing gave Ovshinsky access to further funding for his research, as he was then able to demonstrate working circuits, albeit still initially on a small scale.

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, as happened on a large scale in the US in the 1960s and 1970s (4). 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.  Most carbon emissions still come from the advanced countries and the deployment of low carbon technologies/products remains low in these economies. Low carbon technologies will be developed, deployed and diffused when they are competitive with current energy technologies. In the near term, current low-carbon technologies are unlikely to be market competitive 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 Kyoto or in the California Air Resource Board standards.

In order to solve this problem using market forces, the primary issue for policy makers is to solve these market failure pricing problems, not to meddle with the IPR system with unintended consequences doing more harm than good.  Any theoretical “IP constraints” are very minor when compared with the failure to address the carbon pricing externalities. Regulatory and policy interventions need to be focused on this issue and not on IPRs.

Even where the technology may exist there are not yet enough good, economically competitive products to deploy. We need to develop many better and more cost effective low-carbon technologies and products. These may come from government or private sector funded research. The two are not mutually exclusive. We need competition among technologies, not centrally directed R&D agendas.  History suggests that government is best placed to fund basic research, spreading its funding quite widely (5), whereas the development of new marketable technologies and products is most likely to succeed quickly if left to competition within the private sector (6).

Any market failures should be addressed without significantly damaging the benefits brought by the IPR system.

2.   IPRs create 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 – see B.1.

3.   IPRs create 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/license) rights so that others can invest in its further development (7).

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, including many UK and EU parliamentarians who argue for Open Source, 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 Dalian Institute of Chemical Physics in China. This is the fourth such technology research centre to be funded by BP, following those at Cambridge, Princeton and Berkeley/Caltech. It is one of the largest international collaboration projects for the Chinese Academy of Sciences. BP plans to invest about $10m over 10 years. It took two years to discuss, negotiate and agree how the IPRs were to be handled (including background/sideground/ 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.

4.   Early IPRs encourage diffusion and can prevent subsequent blocking patents

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.

Not patenting can lead to a technology being blocked or constrained in its use. In the 1930’s penicillin was invented in the UK. At the time it was not possible to patent medical inventions and was anyway often thought to be immoral. The technology was passed to the US government in the early 1940’s 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-1940s, 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.

Another example is Magnetic Resonance Imaging (MRI). BTG, the UK technology transfer company (8), owned the fundamental patents on MRI. As soon as the invention had been made public, it was relatively straightforward to design and develop MRI equipment. The technical risk in developing a workable product was low. BTG therefore decided to license the technology non-exclusively at low royalty rates, because the potential of creating high profits was not necessary to induce development of products by each manufacturer. Had BTG decided not to patent MRI, then any of the dozen manufacturers might have been able to block development by others if they had developed an essential component of the final system. This non-exclusive licensing of MRI created competition between companies, drove prices down, prevented blocking patents by any single manufacturer and was a stimulus to further developments (currently “functional MRI” which provides real-time imaging of the brain). Even with hindsight, the commercial decision that BTG took almost certainly maximised financial returns to the IPRs – very high volumes at a low royalty rate and low risk, rather than a higher royalty rate from a much smaller volume of high priced products and higher commercial risk.

Fundamental 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.

B.  Issues and solutions

1.  Patent thickets and patent pools: there are many sectors where large patent numbers and complexities create potential problems. These include computers, mobile phones, audio and video compression, digital and high definition televisions. Although companies often complain vocally about the complexities and costs of doing so, in practice they usually solve these quite effectively by cross-licensing, by creating standards-setting bodies and by developing patent pools (where these do not breach ant-trust laws). Where standards are created, patent pools may be formed. Examples are the MPEG set of audio and video standards and the MPEG-LA patent pools. In these cases IPRs are clear and the cost of access is uniform and open. Well defined IPRs enable such global and compatible standards to be established and made available on Fair and Reasonable Non-Discriminatory (FRAND) terms. These agreements are legally enforceable and provide a well-defined structure for business to make its investment decisions. Arguably the rapid diffusion of mobile telephones in Europe compared with that in the US was largely due to the standards agreed by the industry.

Creating patent pools runs the risk of breaching anti-trust laws. It may be necessary to create ‘safe harbours’ for low-carbon technologies whose owners wish to create patent pools for certainty of access and of price for them and any others. Whereas in the US and Japan licensing is generally seen as pro-competitive, in Europe the presumption (under the Treaty of Rome) is that licensing is a distortion of trade and therefore anticompetitive unless demonstrated otherwise. Historically, the US has thought more coherently and logically about the IPR-competition interface. This competition issue will need to be addressed in Europe if it wishes to be an effective participant in this game. The signs are not good, witness the current EU enquiry into the pharmaceutical sector where the basics of the patent system appear not to be well understood.

2.  China’s Coal: A major issue is the coal-powered growth of the Chinese economy. Outside the “advanced” economies, China has quickly become one of the world’s largest sources of carbon emissions. If it is clear that reducing the high cost of licensing low carbon technology is part of a solution to Chinese coal consumption, we should consider mechanisms for technology diffusion, such as increased liquidity in the shape of global energy technology patent pools, which could be securitized to improve their tradability and define a market clearing price .

3.  Access by the developing world: This has been the most emotive and appears the thorniest of issues. It should not be. The concerns of the developing world are principally about whether they will have access at fair or affordable (not the same thing) prices to technologies being pressed on them by the developed countries. The perceived issue may be hypothetical in many situations and having no IPRs or easy compulsory licensing (with the consequent risk of freeriding), is not the solution.

For most technologies, patents are not filed in the least developed countries, because the small potential market does not justify the cost of obtaining patents there. In such cases domestic companies are free to use the invention in that country but not for export to a country where there is patent protection. Therefore IPRs are not likely to be inhibiting within the LDCs. If these manufacturers are permitted (through compulsory licensing) to produce for sale in a country where there is patent protection, (i.e. for commercial reasons) then that will begin to damage the incentive structure that IPRs create and should not easily be permitted.

Generally companies will sell at differentially low prices in the LDCs if there is no leakage of these products back in to their main markets where they will sell at higher prices, as the Doha Agreement provided in the case of pharmaceuticals (see below). Some countries, such as Japan, would need to change their laws/regulations to prevent such trade.

If there are relevant IPRs which do inhibit otherwise legitimate take-up in the developing countries, there are several solutions:

1. if the IPRs are publicly held and need to be used by local LDC firms they could be licensed at preferential or zero costs, provided that does not do significant damage to the broader objective of promoting investment in quickly developing low-carbon technologies/products by the private sector for global use in countries where they will have a bigger carbon reduction impact.
2. If the IPRs are privately held there are several solutions:
   1. Their use can be paid for or subsidized by governments
   2. They can be paid for or subsidized by charities (cf the Gates Foundation, or the Global Fund in the area of pharmaceuticals)
   3. Guaranteed off-takes at specified prices to provide incentives for developing low cost solutions in these countries (as the World Bank and the above charities have done in the case of health)
   4. Compulsory licensing may be possible as a last resort, but with substantial downsides.

4.  Compulsory licensing was introduced as an exceptional measure to limit the ability of an owner of IPRs to stop others from using the IPRs in cases of abuse of monopoly or a national emergency – its use is constrained by WTO agreement and it is intended to be used as a last resort. A reasonable return in the form of royalty must be paid to the IPR owner and so compulsory licensing is not a low or zero cost option.

The IPR landscape in low-carbon technologies is likely to be significantly different from that of “effect chemicals” such as pharmaceuticals where a single patent for the active pharmaceutical agent can effectively dominate use in several disease areas. Low carbon technologies and particularly low carbon products, are likely to be more complex where many developments and technical components are necessary for the end beneficial effect and no one patent is likely to dominate. In these cases the industry participants are usually perfectly capable of negotiating cross-licences with each other. In this industrial structure, competition is likely to be intense – as it is in, say, the computer or mobile phone industries. With competition driving down prices, there will be little rationale for compulsory licensing. If the issue in the developing country is the “ability to pay” for any technology (as it was in the case of antiretrovirals in South Africa), then either a Doha-type agreement (see below) or financial subsidy/grant will ultimately be necessary.

If compulsory licensing were to be considered, the practicalities are substantial. It is difficult to be precise about where boundaries should lie. A technology that was valuable for a low carbon product might also be used in quite different products where there was no rationale for compulsory licensing. The dilemma then is whether to have a blanket compulsory license which would expropriate returns from other uses or to try and define where the boundary should lie – usually virtually impossible.

In the case of antiretrovirals, the underlying concern was that drugs already being sold at low prices in South Africa were finding their way to higher priced developed country markets and damaging those markets for the manufacturers, as well as creating health problems in both markets because the products were being used improperly. This so-called “parallel trade” was largely rendered illegal by the Doha Agreement, where a compulsory license by a country which has a public health emergency was tied to a prohibition on selling those low priced drugs in developed country markets where there was patent protection. Successful criminal prosecutions in Europe show that this has some teeth. Others argue that it has not been effective at minimizing such trade or preventing outright counterfeiting.

If limited compulsory licensing along the lines of the Doha Agreement were to be considered for low carbon technologies, an independent assessment of its effectiveness and impact should be carried out immediately (9).

A crude estimate of the market costs of licensing low carbon technologies would be in the range of 2 – 20% of the plant or product cost.

Patent sharing within defined areas could be encouraged by creating predefined “safe harbour” patent pooling areas which were accepted by anti-trust authorities. Provided that there was clarity and certainty about the future constraints, it is likely that companies would be prepared to invest. There would naturally be some correlation between their propensity to invest and the attractiveness of the pre-defined licensing terms.

C.  Potential Players

1. Institutions
   

The World Trade Organisation (WTO) is the organisation administering the key international treaty on intellectual property – The Agreement on Trade Related Aspects of Intellectual Property or ‘TRIPS’ which came into effect from 1 Jan 1995. The WTO is actively involved in trade and business issues as well as broader economic ones. The TRIPS Council within the WTO would be the forum to establish an IPR working party to deal with low carbon IPR issues. The WTO has procedures for resolving conflicts and should be an effective forum for resolving debates and enforcing agreements about access to IPRs.

The lead institution in IPR matters is World Intellectual Property Organisation (WIPO).This has been an effective organisation in constructing legally workable global systems for IPRs. But WIPO is not the right organisation to become deeply involved in solving complex trade, economic and business issues involving IPRs, because it has neither the experience nor the staff to do so, nor does its constitution allow for enforcement mechanisms, which the WTO does.

Business organisations such as the CBI in the UK and the International Chambers of Commerce (ICC) have shown that they can think constructively about climate change (the CBI) and IPRs (ICC). These and similar business-related organisations should be used in helping develop solutions to potential problems or where there may be market failures.

It would be useful to create an international IPR working group (if one does not already exist), where the issues specific to the Energy Revolution and climate change can be analysed based on facts and data, discussed and economically sensible solutions developed. It would also be useful for such a group to disseminate the facts about IPRs, as this paper has aimed to do. The author’s experience in IPR discussions related to climate change is that open hostility to IPRs is often removed entirely by a factual explanation, with real examples, of what IPRs do, how they are used, and why they are so important for creating solutions to problems.

2. China

China has the potential to play a key IPR role in finding structural routes to low carbon solutions. Contrary to common perceptions, China has embraced at the highest levels the importance of IPRs to a modern economy (10). Its IPR laws are broadly satisfactory by global standards and the IPRs acquired under those laws are of good quality, inexpensive and quite quick. Enforcement varies widely across China, with it being generally very good in most areas of the Eastern seaboard ranging to poor in the inland and least developed areas. It is well ahead of where Japan, Taiwan or Korea were at comparable times after they introduced strong IP laws. Prime Minister Wen Jiabao has said on many occasions – including with Tony Blair in 2007 – “Competition of the future is competition in IP”. In discussions with the Chinese over the past few years it is clear that they see IPRs as an essential building block for an innovative society.

China has been one of the most innovative societies for most of the past 2000 years, the last two centuries being somewhat of an aberration. Professor Needham, the Cambridge chronicler of China’s scientific milestones (11), identified China’s failure to embrace the Industrial Revolution as stemming from “inhibition by the scholarly bureaucrats” – the classically educated mandarins who did not understand the science, technology or market place for the products of the Industrial Revolution. That is a useful warning as we think how best to promote the development of low-carbon technologies.

China is also becoming the largest carbon polluter. It recognises this and has expressed its willingness to address this in various ways including through Carbon Capture and Storage (CCS) from the rapidly growing number of its coal fired power stations. In a recent discussion between Chinese and a large western company, it was the Chinese who were asking for clarity in the ownership of IPRs in a proposed CCS project. Given the high level of investment by both sides the input of existing IPRs and the likely creation of new IPRs, they reasonably asked who was going to benefit from what. In this case it was the western company directors who said “IPRs don’t matter”. They did not understand and they were wrong.

The development of low-carbon technologies is an opportunity for the developed countries to work with the China in creative ways. The G8, for example, should acknowledge how far China has come in creating an environment supportive of IPRs and should work with China to map out how best to create an IPR environment that will stimulate the creation and deployment of new low-carbon technologies. Such a move would almost certainly be welcomed by China, who would take it very seriously. This joint developed-developing country approach would also counter the efforts of interest groups in certain countries who work to minimise IPRs on largely protectionist grounds.

Given the large number, high quality and creativity of Chinese scientists and technologists, it is quite likely that important new low-carbon technologies will come from China. It will be in China’s own interests as well as ours to come up with solutions which will work for everyone.

© Ian Harvey

v x16 24.7.8

Ian Harvey is Chairman of the Intellectual Property Institute. He was CEO of BTG and Chairman of the UK Government’s Intellectual Property Advisory Committee. These are his personal views and not those of the Institute. This paper is based on an IPR Annex prepared for Tony Blair’s Climate Change Initiative and the Climate Change Group.

Acknowledgements: to Mark Blaxill, Ralph Eckardt, Steve Smith for their thinking and comments

Glossary

CCS           – Carbon Capture and Storage

FRAND       – Fair Reasonable and Non-Discriminatory (licensing)

ICC            – International Chambers of Commerce

IPR            – Intellectual Property Right

MPEG        – Moving Picture Experts Group, a set of audio and video standards

MPEG-LA   – A firm which licenses patent pools relating to audio and video standards

TRIPS        – WTO Agreement on Trade Related Aspects of Intellectual Property Rights

USTR         – US Trade Representative

USPTO      – US Patent and Trademark Office

WIPO         – World Intellectual Property Organisation

WTO          – World Trade Organisation

(1) The arguments that “IPRs are a barrier” are too often caused by a lack of understanding of what IPRs are and the role they play. This is fostered by a surprising lack of understanding of IPRs and related issues by many business leaders who should know better. At least some of the negative public perceptions of IP are caused by business leaders taking inappropriate actions which they would not have taken had they understood the IPR issues better. The pharma industry suit against the South African government over antiretroviral drugs is an example.

(2)  Contemporaneous writings by Watt, Edison, Lincoln and Jefferson take the importance of the patent system as axiomatic. Later writings include: The Patent System and Inventive Activity during the Industrial Revolution: 1750-1852, by H.I.Dutton, Manchester University Press, 1984; Inventing the Industrial Revolution: The English Patent System, 1660-1800 by Christine MacLeod, Cambridge University Press, 1988; Invention and Economic Growth by Jacob Schmookler, Cambridge and Harvard University Presses, 1966.

(3) These include cancer drugs such as Herceptin and Avastin, Benefix (a treatment for the genetic disease haemophilia B) and Campath (for the treatment of Chronic Lymphocytic Leukaemia and, probably, for Multiple Sclerosis). Many others are in the pipeline.

(4) The US Department of Justice Consent Decrees and Settlements with about 100 major industrial firms (IBM, Xerox, ITT, ATT, RCA et al) had a significantly depressing effect on the level of investment in research and the development of new products by those companies over the next 10-15 years. The Consent Decrees typically included de facto compulsory licensing at almost zero cost to anyone who wished to take a license to both existing and new technologies, reducing the returns to investment in innovation by those firms.

(5) Note that several years ago the US government decided that 30 years of the “War against Cancer” had not proved effective. One action was to reduce the use of “peer group review” for allocation of its research funding because it tended to reject radical new research directions outside the accepted research wisdoms. Thomas Kuhn, the MIT science historian, who coined the phrase “paradigm shift”, argues persuasively in support of this view.

(6) Development of the atom bomb is often cited as an example where government is best placed for massive technology development. However, nuclear fission was a single phenomenon, with the practical problems of making it into an explosive device. The likely broad spectrum of low carbon technologies argues strongly against the narrow focus usually brought by governments.

(7) In his 19 years as CEO of BTG plc, the world’s largest technology transfer company, the author of this paper saw many technologies with substantial market potential that would never be developed because the IPR position either did not exist or was badly compromised – no company would risk investing when free riders could copy the product if it were successful.

(8)  The author of this paper was CEO of BTG from 1985 until 2004. BTG was a public sector company until 1992 when it was privatised. BTGplc has been quoted on the London Stock Exchange since 1995.

(9) The IPI could carry out such a study very quickly if required.

(10) For a more complete analysis see: Intellectual Property: China in the global economy – Myth and Reality, Ian Harvey, April 2008

(11) Joseph Needham is revered (and was honoured) in China for his monumental work in cataloguing China’s history in science and technology