Analysis | IPRs and Climate-Related Technology Transfer: Risks, Opportunities and Policy Options

14 December 2010

Technology transfer has long been associated with classic justifications for participation by developing and least-developed countries (LDCs) in the global intellectual property system. For these countries, access to new technologies, including environmentally sound technologies, is integrally linked to long-standing development priorities. This link is now compounded by anticipated significant shifts in resource endowments due to the existing and expected effects of climate change. However, developing countries, LDCs, and leading technology producers disagree over the role of intellectual property rights (IPRs) in addressing the complex challenge of inducing optimal levels of innovation, dissemination, and deployment of environmentally sound technologies - this disagreement has emerged as a significant fault line in negotiations under the United Nations Framework Convention on Climate Change (UNFCCC).

The policy emphasis on the relationship between IPRs and access to environmentally sound technologies presumes a number of critical points that, as yet, have no empirical support:

1)       IPRs in industrialised countries sufficiently induce research and development investments in environmentally sound technologies;

2)       such investments and resulting technologies will be easily adaptable to conditions in developing countries and LDCs; and

3)       developing countries and LDCs can effectively take advantage of opportunities to utilise doctrinal limits on proprietary rights over technology that may arise from reforms of multilateral environmental and IPR treaties.

In addressing these points, we note that the effectiveness of IPRs as incentives to develop environmentally sound technologies and deploy them in global markets depends on how well the innovation policies of industrialised countries currently function and whether developing countries and LDCs have invested sufficiently in domestic institution-building to facilitate the absorption of new technologies. A commitment from industrialised countries to ensure an appropriate balance in their own domestic IPR regimes, and to recognise and implement appropriate doctrinal corollaries in the multilateral IPR system, will be an important step for facilitating knowledge diffusion to countries that most need such inflows. Similarly, a commitment from developing countries and LDCs to establish domestic policies - including competition law and associated limitations and exceptions to IPRs - to encourage the development of licensing markets and facilitate domestic innovation efforts and the absorption of new knowledge by local firms, will be a crucial factor in capturing the development gains of any global IPR reform.

Within the multilateral framework for IPRs governed by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the relationship between legal protection for innovation and mechanisms for technology deployment is, at best, tenuously represented. The process and instruments of international technology transfer are viewed, on the one hand, by industrialised countries as predominantly market-based, relying on freely negotiated licenses between firms or diffusion through inflows of international trade and foreign direct investment (FDI). On the other hand, a number of developing countries and LDCs, while acknowledging the increasing role played by trade and investment flows, tend to approach the issue of access to technology as requiring a mix of institutional variables that include options for involuntary transfers of technology utilising compulsory licenses. Neither an approach dependent solely on markets nor one that emphasises the primacy of compulsory licenses is an adequate or sustainable response to the technology needs of developing countries and LDCs.

As the experience of developed countries illustrates, compulsory licenses are a valid tool to facilitate access to technology under well-defined conditions. Compulsory licensing will likely play some role in access to environmentally sound technologies, as it does in other fields. But given existing and well-known institutional limitations in developing countries and LDCs, there is little room to expect that CLs will be any more successful for environmentally sound technologies than they have been historically in other areas.

Second, the challenges presented by climate change will require new models of innovation and new methods of financing that make resorting to compulsory licensing a less meaningful tool to address the variety of challenges attendant to climate change. In light of these considerations, among others, we suggest that the significant challenge of addressing climate change requires public finance models that offset the costs of research and development by private firms. Such financing arrangements should be combined with new models of innovation structured around principles of coordination and openness, open source or particular forms of licensing that enable access with minimum transaction costs. To encourage dissemination of environmentally sound technologies, important supporting principles combine "hard" access mediated through market transactions and "soft" access alternatives that include allowing novel approaches to research and development financing, making use of limitations to IPRs and supporting the exercise of national discretion in areas left unregulated by the TRIPS Agreement.

We view compliance with climate change policies as a public good. Accordingly, reducing the costs of access to clean technologies is particularly important for inducing compliance with greenhouse gas (GHG) emissions targets for developing countries and LDCs, which least value climate change mitigation and are typically also those that can least afford the preconditions for effective technology transfer. We suggest that generalised IPR reforms are less likely to affect measurable benefits for innovation in environmentally sound technologies, while entailing high political costs. Nevertheless, we conclude that there is some value in targeted IPR reforms to support access to new technical knowledge necessary to assist mitigation and adaptation efforts and improve prospects for domestic innovation in developing countries and LDCs, while also facilitating a more balanced global IPR regime.

Adjustments to IPRs necessary for stimulating access to and the diffusion of environmentally sound technologies should be coordinated with other policy initiatives to supply a range of incentives for firms to develop, use and transfer these technologies. Further, alternative incentive models must be considered to address particular problems, such as small markets where IPRs are unlikely to induce innovation, the differentiated adaptation costs for these technologies in developing country and LDC economies, and the need for sustainable long-term investments in research and development to ensure the commercialisation of climate change adaptation and mitigation technologies. The role of fiscal-policy measures that can induce relevant and development-appropriate innovation in industrialised countries for the deployment and use of technologies in developing countries and LDCs should not be overlooked either. In sum, differentiated conditions across countries and sectors will require flexibility in the range and design of the domestic and international policy options necessary to ensure adequate access to environmentally sound technologies.

Determining the appropriate global response to climate change and its associated effects is obviously a dynamic process, complicated by shifting political interests, the risk of free-riding from all countries, and strong tendencies to design innovation (and other) policies that discriminate in favour of domestic industries. Coordinating these concerns in light of the legitimate challenges of access to environmentally sound technologies for developing countries and LDCs requires careful analysis of the range of options available within existing multilateral accords. The emerging climate change regime provides opportunities for effective and flexible cross-bargains over the terms and conditions of access to technology in ways that support the fundamental balance of welfare considerations that, in turn, justify the global international IP system.

This article is drawn from a longer issue paper by Keith E. Maskus and Ruth L. Okediji, which can be accessed here.

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