One of the key questions in technology transfer and climate change is whether intellectual property presents a barrier to technology transfer to address climate change. In some minds the issue has already been settled by studies showing that patenting of the relevant climate technologies is low or non-existent in low-income developing countries, or that where patents do exist, there appear to be few or no reports of patents being a problem. (see chapter 3 of my PhD in the first post on this blog). The problem is that viewing the issue as primarily an empirical one ignores the underlying nature of the problem of technology transfer in terms of scale, timing, and targets. I argue that you cannot empirically assess the nature or extent to which IP may be a barrier until you properly define the goal of technology transfer: getting the right technologies to the right countries at the right time.
The first step however is to actually take seriously the demand by developing countries regarding intellectual property. Why have developing countries consistently raised the issue of intellectual property (IP) in the climate change negotiations? Firstly, one of the great successes of recent international economic law for developed countries was the establishment of an agreement that all countries comply with a common, minimum set of high intellectual property standards. The TRIPS Agreement made these standards subject to the dispute settlement system of the WTO which created an unprecedented ability to enforce the rules on intellectual property. Developing countries have argued that the TRIPS Agreement unduly restricts their ability to take measures to encourage and enable technology transfer, by increasing the subject matter and scope of patent protection while restricting the use of exceptions and limitations. (See p6, South Centre “Submission by the South Centre to the Technology Executive Committee (TEC) on ways to Promote Enabling Environments and Address Barriers to Technology Development and Transfer and the Role of the TEC” South Centre, 2012.)
Since they signed the TRIPS Agreement, developing countries have consistently argued for greater flexibility to address public interest concerns. One of the most frustrating responses to this has been the tendency for developed countries to dismiss these concerns. This dismissal generally comes in two forms 1) you don’t need those flexibilities because the products and processes that you are worried about aren’t’ patented in developing countries 2) even if they are patented, there is enough competition between technologies that prices will be within reach.
These are then supported by patent landscaping exercises at the global level that ignore the core issue:
Precisely because the functioning of patent protection is the prerogative of national industrial policy, the necessity to act to address an intellectual property barrier to technology transfer will arise at the national level, not at the global level. In a global economy, the ability to import, absorb and export a technology is key to ensuring proper technology transfer. The regulatory issue rather than being peripheral, is central to the choices that governments have to make.
Thus the key question with respect to intellectual property and climate change is whether, in a situation where the behaviour of specific intellectual property holders bars, or unduly limits, the adoption, adaptation and replication of a specific climate technology in a specific domestic sector do UNFCCC member states have the tools necessary to address such behaviour or are these blocked, or hindered to an undue extent by the TRIPS Agreement?
It may be that in the aggregate, in a national economy, some sectors may have no such behaviour, whereas in others it may be more prevalent. They key is that such behaviour must address the ability not just to use the technology domestically but to both import and export it.
Considered in this way, it seems obvious therefore that the question of whether IP poses a barrier is not just about whether patents exist in a specific economic sector in the domestic economy, but how they are being used by firms – is licensing occurring, to whom, at what pace, on which terms and at what price? The question above is not really an empirical one but primarily a legal one: is there sufficient legal flexibility for developing countries to act when they encounter such situations.
The definition of what is a barrier is therefore crucial to addressing whether intellectual property is a barrier to technology transfer. We do not ask whether the existing framework poses an absolute barrier to the flow of technologies. While a useful and interesting exercise it is essentially static and does not focus on the question of the capacity to act, the scale of action, the timing of action and the target for action.
In the context of IP interventions to address technology transfer there is a key distinction which is sometimes hidden in the broader rhetoric and debate. It is crucial for the purposes of discussing technology transfer to distinguish between the price of a product embodying knowledge/technology and the price of the knowledge/technology itself. Generally, as a function of normal pricing, the price paid for goods will include the price paid by the producer/seller for the access to the knowledge/technology. The concerns and goals will be very different depending on whether the primary concern is access to the products embodying the knowledge/technology or the knowledge/technology itself.
Where the issue is access to goods there are two levels of concern. The first is ensuring the normal flow of goods by making certain that prices of products are not set so high that it is too expensive for the relevant economic actors to afford. The second level, which applies to climate change the most, is ensuring that prices of products are not set so high that they make it too uneconomical to adopt climate technologies. A model of the access to goods discussion can be found in the access to medicines debate that took place at the WTO, leading up to the adoption of the Doha Declaration on the TRIPS Agreement and Public Health in 2003. (See Abbott, F M “Innovation and Technology Transfer to Address Climate Change: Lessons from the Global Debate on Intellectual Property and Public Health” ICTSD 2009.)
Where the issue is access to the knowledge there are multiple concerns, primarily related to those situations where there is a need to change production processes themselves. In such cases, where access to technologies is required to change the nature of a production process, some of the most difficult problems to overcome are refusals to license, the high cost of licensing, and patent owners maintaining a monopoly on the knowledge so as to prevent competition. The final element is particularly undesirable as without it, countries or firms can produce competing products, thus more efficiently achieving widespread dissemination of the knowledge and products. The knowledge about the technology may then be used to adapt it to local market conditions. For a full transition to a low carbon economy, the best available existing technologies need to be incorporated into production and consumption processes in developing countries. Achieving low carbon economies in developing countries cannot be achieved through sale of products alone into developing country markets. Such an approach would result in the complete absence of developing country firms and 100% market share of the domestic economy by developed country firms. The only way in which low carbon economies can reasonably be achieved is by transforming firms in developing countries rather than pushing them out of business.
All these concerns prompt responses from governments to address supply problems. Intervention I would argue, then, need only occur when there is a market failure – based on the principle that intervention is justified either:
- where there is insufficient distribution of products embodying a technology in the national market to meet demand at a price that is affordable. This justification may be even stronger in a situation of emergency, threats to survival, the environment, health, human rights and other fundamental needs that economic policies such as intellectual property are designed to achieve;
- where there is insufficient distribution of knowledge to enable a critical number of producers in the market to adopt climate technologies and ensure their participation in the market in the face of regulatory or market requirements to lower carbon emissions.
To a significant extent, the necessity for a developing country to take action to address intellectual property would be alleviated by developed countries providing full financial support for developing country actions addressing climate change mitigation and adaptation, including local adoption, adaptation and reproductive capacity. This is clearly true for those actions meant at ensuring access to goods, but also true for those actions related at addressing the cost of licensing. Where developed countries provide all the funds necessary to pay the costs of licensing for technologies, much of the necessity to act is absent.
However, there are limitations to what pure financial support can accomplish especially when the primary need is for adoption, adaptation and replication of the knowledge/technology. In those circumstances, it is likely that firms in developing countries may run into broader problems such as refusals to license, restrictive licensing terms (grant-back conditions, geographic and export restrictions; non-compete clauses), non-availability of trade secrets and know-how. While there may be a market price to get around these restrictions, there are significant circumstances in which that market price may be prohibitively high and creates such an opportunity cost that it may make other actions or the commercial viability of the venture or the firms involved questionable. In addition, there may be structural limitations to licensing, such as the tendency for licensees to prefer exclusive licenses that limit the diffusion of technologies to one or two firms rather than all relevant actors in the market.
Where foreign firms engage in foreign direct investment and joint ventures, host countries may still see a need to encourage spillovers into their domestic markets, beyond subsidiaries, joint ventures or single supplier or purchaser firms. Countries may seek to exercise interventions that address these issues as well.
This discussion above identifies crucial elements to defining the intellectual property barrier: are there market conditions that create a necessity to act at the national level and does the TRIPS Agreement limit the kinds of action that would address the full scope of that necessity?
The nature of the climate challenge is precisely one that requires a dynamic understanding of what constitutes a barrier. The operational definition that I believe we should all be working with is one that defines an intellectual property barrier as one that prevents countries from:
- Appropriately defining necessity as:
- Affordability – ensuring that prices of products and/or know-how are not set so high that it is too expensive for all the relevant economic actors to afford.
- Adoptability – ensuring that prices of products and/or know-how are not set so high that they make it commercially unviable for all relevant actors to adopt climate technologies.
- Adaptability – ensuring sufficient distribution of knowledge (information, skills, know-how) to enable a critical number of existing producers/service providers in the market to adopt, adapt and replicate climate technologies and ensure their participation in the market.
- Taking actions that:
- address the full scope of technologies required by them to meet the climate change mitigation and adaptation needs;
- at the rate and level of diffusion appropriate to achieving those mitigation and adaptation needs;
- in the developing countries and regions that most effectively meet the climate change need.
My argument is that with this definition, if we properly take into account the timing of climate mitigation peaking dates and adaptation impacts; the scope of technologies to be addressed; and the scale of money and investment required: that developing countries really only have regulatory and market structuring responses available to them to effectively address the climate challenge. Thus, as one of a set of market creation and regulating mechanisms, developing countries will have to address intellectual property in structuring their technology markets.
The next couple of blog posts will address a key part of the definition of barrier discussed here: the timing of action; the scale of action, and the geographic targets for action.
Recommended Citation: Dalindyebo Shabalala, “What do we mean when we say Intellectual Property is (or is not) a barrier to technology transfer?”, Technology Transfer for Climate Change (Jun. 29, 2015, 03:00 AM) http://wp.me/pLpnk-O
Technology, Sustainability & Human Rights 