TRIPS and Climate Change in the International Economic Order

Abstract

This article analyses the relationship between the industrial property protection system, as introduced by the TRIPS Agreement, and international arrangements relating to climate change. It aims at providing a picture of how legal, structural and policy-related divergences and convergences between both domains influence the achievement of environmental goals. The difficulties in pursuing climate change mitigation objectives are often attributable to the exclusivity of patent rights, resulting in unavailability of needed technologies. Patent law, as one of the elements of the climate change mitigation scenario, if supported by an adequate regulatory framework and effectively employed within the context of the climate change normative structure (the UNFCCC and the Kyoto Protocol), can contribute to achieving mitigation and adaptation goals.

Dr. Agnieszka A. Machnicka is Senior Researcher at the Faculty of Law of VU University Amsterdam.

1 Introduction

1.1 TRIPS and Its Formerly Expected Role in the International Economic Order

The conclusion of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)¹ marked an important point not only in the history of the intellectual property (IP) law system, but also in the creation of the world trade order, in which bargaining power was clearly established and divided between the nations involved. The negotiations surrounding the creation and establishment of the Agreement were conducted in an atmosphere dominated by divisive interests of the countries involved. Those different expectations were straightforward, since it was already in the 1960s that a North–South divide was clearly recognized.² Also, it was no secret that intellectual property protection constituted “a bargaining chip for access to foreign markets”³ of agricultural goods coming from less developed regions. The spirit of these arrangements is mirrored in the remark that “the TRIPS-Agreement clearly assumes that intellectual property rights are the coins with which to pay the entrance fee into free international trade”.⁴ The final text reflecting the vision of the developed countries was accompanied by the norms incorporating what the less developed nations envisioned as a door opening to let in their own interests (in the form of the general provisions of Articles 7 and 8). Accordingly, when the TRIPS Agreement was launched in 1994, apart from the chief objective of protecting intellectual property owners, the idea was to enhance technological development and to increase the standard of living for all the nations, notwithstanding their different levels of technological advancement. Now, 20 years later, it is clear that these ideas were not realistic. The current world economic order is characterized by enormous and steadily growing differences between developed (and consequently rich) countries, on the one side, and developing countries, on the other side of the spectrum.⁵ The introduction of the TRIPS Agreement did not contribute to an equivalent increase of innovation and technological development throughout the countries which acceded to it.

As soon as the TRIPS Agreement was adopted, scholarly voices expressed concerns about the successful realization of the WTO goals framed within this Agreement and relating to facilitation of economic growth and social welfare in developing countries. They evocatively emphasized “the urgency of narrowing the gap in living standards between the rich nations and the poor”⁶ and undoubtedly hoped for positive transformations. Although the array of the WTO arrangements brought different advantages to individual member states, in particular liberalized rules on market access and some preferential treatment of least developed countries (LDCs),⁷ still dramatic changes in the industrial capacities and national economies did not occur as a result of accession to these agreements. What has certainly increased over the past two decades is the degree of protection for IP owners and, at the same time, the level of deterioration of the natural environment, including critical changes in the Earth’s climate, destruction of natural resources and the ever-growing gap between rich and poor nations. The disparities between the countries, when seen from an IP perspective, are reflected in figures which show that patents (and other rights) are granted to holders originating primarily from developed and high-tech countries.⁸ These discrepancies are not only economic, technological, but also what follows—social. They are all the more visible and genuine by reason of constant advancement of globalization in every domain.

Notwithstanding these discrepancies, the problem of climate change—which, due to its impact on global security, health, food safety and living space for humans and animals, is one of the most imminent issues that threaten the entire international community—calls for a united engagement towards its mitigation. This strongly depends on a proper balance between diverse national interests and actual possibilities in the light of mutual environmental goals.

1.2 Enhancing the Debate

This paper analyses the intersection between the intellectual property system (being a part of the international economic order) as reflected in the TRIPS Agreement and the compelling issue of climate change. It aims at illustrating the mutual discrepancies and convergences of both domains (structural, legal, purpose-related) and at setting forth the common ground where they can meet. The links between these seemingly unrelated areas are political, societal, factual and also legal. Concerns about climate change are closely related to the scope of exclusivity built into mitigation and adaptation technologies and, consequently, they overlap with the issues of IP rights and the justified boundaries of IP protection. At the same time, IP has become not only part of the international trade order and trade negotiations, but also an important component in the debates relating to the safeguarding of the environment in general, as well as an almost intrinsic element of the international climate scenario and negotiations in this respect. The extent of IP protection in the environmental sector has a direct impact on freedom of research and access to knowledge and, consequently, to technologies that play an essential role in climate change mitigation and adaptation. It is, therefore, beneficial to examine specific aspects of IP protection system in the exclusive context of climate change.

Although different types of IP rights can be involved in the climate scenario (including plant varieties, or trademarks), the focus of the present analysis is on patents, as they represent the major and the most illustrative form of intellectual property entangled in this problem. Areas such as carbon emission reductions, sustainable development or transfer and dissemination of technologies are directly related to patent protection as an incentive for innovation. Conversely, the provisions in bilateral or plurilateral trade agreements (TRIPS-plus agreements) raise doubts about the practical correlation between strengthening IP rights (IPR), on the one hand, and declarations about “the mutual supportiveness of trade and environment”,⁹ on the other. The need for enhanced environmental protection, on the one side, and for strong intellectual property rights, on the other, are unchangeably listed as core themes within modern trade arrangements. This is so despite serious practical incompatibilities between these two concepts and their respective underlying values. Are these arrangements only the confirmation of a reluctance to accommodate these values into the existing system of the TRIPS Agreement?

A major question in this respect—whether patent law constitutes a suitable setting for a debate about climate change abatement—has become almost a rhetorical device. The distress of this clichéd image of the patent system lies not only in the prosaic answer of both “yes” and “no”, but in an enigmatic acceptance of hopelessness in surpassing certain structural barriers of the system. The evident answer “no” is based on the belief that there are more appropriate fora to better deal with these issues. A positive response, on the other hand, implies a close correlation between patent law and the level of exclusivity in the domain of technologies that play a crucial role in the abatement and adaptation process. Therefore, even though the answer is only partially positive, insofar as patent law is inescapably involved in the climate scenario, the essential question is how patent law and patent practice can for their part contribute to the constructive outcomes in this critical domain. The connection between these two domains is dealt with in this paper.

2 TRIPS and Climate Change: A Mésalliance?

2.1 General Remarks

While the TRIPS Agreement specifies minimum obligations of its Members in relation to IP protection, it simultaneously allows certain flexibilities. These limits to the exclusive rights of IP holders may be based on particular needs of individual countries, on their health policies, social strategies, public order requirements etc. It is framed in general terms in Articles 7 and 8, as well as more specifically for patent rights in Articles 30 (in the form of general normative exceptions) and 31 (individual exceptions—compulsory licences). Because the TRIPS Agreement is based on the principle of territoriality—which in the case of intellectual property rights determines not only their existence (granted by national authorities), but also the scope of those rights and of their protection—individual countries have some room for manoeuvre to accommodate their specific national policies, as referred to in those norms, in their IP systems.

However, environmental issues—and in particular climate change—do not constitute solely national problems, and certainly not the problems of certain countries only. They undeniably are (or should be) a global concern. The TRIPS Agreement is not prepared, in terms of written norms, to face this challenge, which has a large-scale dimension and implications.

The TRIPS Agreement should be seen in a dynamic way, namely not only as a set of legal norms, but as an ensemble comprising all interactions that fall under it, including relations between the members of the WTO system and the policy of the developed countries as dominating actors. This results in a certain phenomenon—of legal and political nature—which is based on written norms (agreement), but undoubtedly incorporates many other aspects of world trade diplomacy, commercial persuasion, and retaliation measures.

Although TRIPS is a trade agreement, focused on trade-related aspects of intellectual property, in practice it strongly influences those domains which—directly or indirectly dependent on commerce—incorporate primarily fundamental societal assets. Those assets are well reflected by the notion of “public goods”. This concept was introduced in the 1950s, when Paul Samuelson explicitly differentiated for the purposes of economic analysis between “private consumption goods” and “collective consumption goods”.¹⁰ Subsequently, this notion was further developed by other scholars (who, amongst other matters, identified the category of “local public goods”¹¹) as well as within the framework of international institutions.¹² It is generally accepted that these goods are characterized by being non-rivalrous and non-excludable, and that they encompass values such as national security, environmental resources or health protection. From there, it was just an obvious step and a natural consequence to talk about “global public goods”¹³ in the epoch of globalization gradually incorporating all the territories of the globe. The idea of “public goods” necessarily also entered the debate within the domain of intellectual property. It touches upon the problems of access to knowledge, share of the benefits that knowledge goods create¹⁴ and, importantly, on the transfer and diffusion of the concrete results.¹⁵ While the aim of the TRIPS Agreement was to introduce harmonization of national IP laws, the objectives of climate change arrangements are global efforts to reduce emissions of greenhouse gases (GHGs) (although each country has its own commitments, they constitute a part of a universal responsibility), thus, there is a structural discrepancy between territorial versus global goals of those different regimes. Nonetheless, the system of TRIPS in practice strongly influences other spheres, including the environmental domain, to the extent that its regulation is partially taken over under the umbrella of this Agreement and the links between TRIPS and climate change have become real.

2.2 Legislative Intersections Between TRIPS and Climate Change Norms

2.2.1 Environmental Provisions in TRIPS

The TRIPS Agreement encompasses provisions which leave room to accommodate values not relating to the protection of IP rights. First, Article 7 frames in general terms the objectives of IP protection. Besides declaring the goals intrinsic to the domain of IP, such as technological innovation and dissemination of technology, it sets them against a more universal background of “social and economic welfare”, additionally indicating that (IP) rights logically entail certain obligations. The location of this norm amongst the substantive provisions of the Agreement and not in the preamble suggests the mandatory rather than only declaratory nature bestowed on it. While the history of incorporation of this norm¹⁶ explains its place in the operative part of the agreement, nevertheless, its general wording does not make it apt for direct application. However, at the very least, it may and even must directly inform the interpretation of other provisions of the Agreement.¹⁷ Article 8(1) proclaims in an explicit manner the freedom of member countries to adopt such instruments that might be vital in the area of public health protection, or for the advancement of the public interest in sectors that are crucial for the states’ socio-economic and technological development. Neither Article 7 nor Article 8 refer specifically to environmental protection, although it can be seen as being encompassed in the broad and imprecise expression of “the public interest”. An explicit reference to the environment is found only in Article 27(2), which provides the exclusion from patentability of certain inventions, namely, those whose commercial exploitation should be prevented in order to protect ordre public and to avoid “serious prejudice to the environment”. This latter provision, although being “ready to use” by the administrative authorities and having been adopted by most of the legislatures of the member countries, is hardly ever applied by the relevant granting authorities (patent offices).¹⁸

The TRIPS Agreement refers to the notion of ordre public, using the French term. This is explained by the difficulty to translate it into English, because the term does not only mean the public order, but more broadly “matters threatening the social structures which tie a society together”.¹⁹ However, the use of the term in its original language can also signify the wish of the drafters to bestow on it a universal character, to create a notion that is not tied to any specific society or values which bind together its members and which naturally may vary among WTO countries.²⁰ Thus, a term that every nation can feel free to fill in with its own set of values was adopted.

In the Doha Ministerial Declaration of 14 November 2001²¹ there are several references to the problem of environmental protection. Paragraph 6 proclaims in a declaratory way “the objective of sustainable development”. It is suggested that “the protection of the environment and the promotion of sustainable development” constitute one side of the same coin, the other being “an open and non-discriminatory multilateral trading system”. The declaration evokes the belief that international trade contributes not only to the promotion of economic development, but also to “the alleviation of poverty” (paragraph 2, Doha Ministerial Declaration). The sharp clash between this statement and reality seems to give to these goals a rather ironic touch and, at the same time, it sprouts serious doubts about the authentic chances to reach other aims referred to in this document. These other objectives with regard to environment are expressed in paragraphs 31-33 on “Trade and environment” (constituting a part of the Work Programme). They require further negotiations on the relationship between WTO rules and obligations resulting from multilateral environmental agreements. Although it is specified that future action should involve the reduction or elimination of trade barriers to environmental goods and services (paragraph 31(iii), Doha Ministerial Declaration), the essential purpose of the announced negotiations is to examine “the effect of environmental measures on market access”.²² This does not leave any uncertainty about the predominant importance of trade-related values in this scenario.

While Articles 7 and 8 of the TRIPS Agreement open the door for an approach that is more accommodating towards policy objectives, including climate change abatement goals, their effective role remains unclear. It was declared by the (WTO) Appellate Body in the Canada – Term of Patent Protection case²³ that “those Articles still await appropriate interpretation”. The panel confirmed “the applicability of Article 7 or Article 8 of the TRIPS Agreement in possible future cases with respect to measures to promote the policy objectives of the WTO Members that are set out in those Articles”.²⁴ However, on another occasion, the WTO panel expressed that although the presence of Article 30 TRIPS logically entails “certain adjustments” to the definition of patent rights (in Article 28 TRIPS), the construction of this norm suggests that the Agreement does not make available anything that would amount to “a renegotiation of the basic balance of the Agreement”.²⁵ Therefore, any interpretation of the provisions of the Agreement, even though made in the light of principles enclosed in Articles 7 and 8, must respect and uphold the overall equilibrium of the Agreement. It is not clear, then, how far individual countries may go in the pursuit of their public policy goals and still be considered as respecting the balance imposed by the TRIPS Agreement. No matter what room for discretion these Articles could possibly guarantee, leaving this question undeveloped contributes to depriving these norms of the power they were expected to have within the TRIPS system. They should have an operative, rather than only decorative, character.

2.2.2 IP Provisions in Climate Change Legislation

The first formally proclaimed environmental concern is to be found in the Declaration of the United Nations Conference on the Human Environment (1972).²⁶ Although this document does not refer to intellectual property rights, it mentions the importance of “scientific research and development in the context of environmental problems”. It emphasizes the significance of free flow of scientific information, transfer of experience and availability of environmental technologies in developing countries.²⁷ The objective of “the development and transfer of technology and knowledge” is equally signalled in the treaties relating to the protection of the ozone layer, with no specific mention of the rights protecting the technology.²⁸ Another pre-TRIPS environmental initiative was made in 1992 within the framework of the UN Conference on Environment and Development. The Rio Declaration on Environment and Development ²⁹ emphasized the role of the developed countries (including their new and innovative technologies as well as financial resources) for sustainable development. By contrast, Agenda 21 expressly indicated “the role of patent protection and intellectual property rights” in the access to and transfer of environmentally sound technologies (ESTs), but without imposing any obligations on the countries.³⁰

Emerging concerns about risks of changes in global climate, based on scientific evidence released in the 1980s, led to the establishment by the UN General Assembly of the Intergovernmental Negotiating Committee,³¹ which, supported by the United Nations Environment Programme and the World Meteorological Organization, was assigned to prepare a framework convention on climate change. The Intergovernmental Negotiating Committee, in which delegates from over 150 countries participated, aimed at preparing a treaty that would reflect a consensus and attract support by a majority of countries—both developing and developed.³² The conclusion of the United Nations Framework Convention on Climate Change (UNFCCC) ³³ opened a forum for further debate on this specific issue. It was subsequently complemented by the Kyoto Protocol to the United Nations Framework Convention on Climate Change.³⁴ Following this, the Bali Action Plan ³⁵ of 2007 explicitly voiced the impact of IPRs on the transfer of climate mitigation technologies, pronouncing that countries should “avoid trade and intellectual property rights policies … restricting transfer of technology”.³⁶ The next step in the climate change negotiations scenario was the Copenhagen Accord ³⁷ of 2009, which avoided any precise commitments about global emissions; in addition, under the influence of the U.S., the issue of IPRs was removed from the agreement. In the same way, the Cancun Agreements ³⁸ of 2010 and the Durban Conference ³⁹ of the Parties in 2011 lacked any reference to IPRs.

Eventually, the outcome document adopted at the UN Conference on Sustainable Development (RIO+20 summit)—“The future we want”⁴⁰—assures no formally binding measure. In spite of its reference to intellectual property rights (points 73 and 269), and the emphasis on technology transfer to developing countries, the text does not evoke any commitments.

The absence of reference to IPRs in final documents and of binding commitments in the climate change scenario does not mean that these issues were not on the agenda at the relevant multilateral fora. In fact, they are being regularly raised by developing countries, which ask for limitations on patent rights in relation to climate technologies. A recent example is the debate on IP and transfer of environmentally rational technology within the first meeting in 2014 of the WTO TRIPS Council (25-26 February 2014, Geneva).⁴¹ Representatives of certain nations continuously raise the issues, such as concentration of environmental technologies in the hands of dominant holders (coming predominantly from Japan, the U.S. and Germany), the insufficiency of transfer of needed technologies if made without their adaptation to the local conditions and without prospective engagement of residents in the process of their manufacture, and eventually the inadequacy of “a business approach to a planetary problem”.⁴²

Many initiatives organized within worldwide settings, such as the UN Climate Summit 2014 held in New York (23 September 2014),⁴³ create an optimistic image and are positively received as they also portray a human side of the climate scenario, but unfortunately they do not offer concrete solutions. They tend to take attention away from the inactivity in those areas that are critically urgent. The summary of the talks that took place during the UN Climate Summit 2014 paints a clear picture of the current international landscape, where the objectives of climate change mitigation and adaptation do not constitute a goal per se, but are rather viewed as modern and more attractive business and investment strategies (including sectors of finance, insurance and pension funds).

To complete the picture, certain scientists further the view that climate change is a natural process which takes place on the planet and is independent of human activity. If such were the case, people would solely need to do their best to adapt to the changing circumstances. On the other hand, if this is not the right hypothesis, still, the changes—even if caused by the anthropogenic impact—are a reality which humanity has to face. Therefore, in parallel to the efforts for climate change abatement, the international community has to undertake steps to adapt to the changing natural circumstances (adaptation technologies). One of the initiatives to deal with these issues is the Cancun Adaptation Framework, which was established as part of the Cancun Agreements.⁴⁴

3 IP-Related Impediments to Furthering Environmental and Climate Change Abatement Goals

Traditionally, a chief argument raised by proponents of strong patent protection, including that in the domain of climate change technologies, is that such protection constitutes (1) an incentive to conduct very expensive research, because it offers (2) an exclusive (temporary) opportunity to exploit the invention in order to recover the investment by the right holders and to avoid free-riding by third parties. While these arguments may possess a certain relevance⁴⁵ as far as developed countries are concerned, where the overall market situation and the technological level of competitors would actually allow beneficial returns for the holders and potential profits from infringements, this might not be true for developing countries. In a developed country an expected alternative to free-riding would be either remuneration received by the right holder or a development of a substitute invention by a competitor to enrich society. In contrast, the commercial players in the poorer countries are unable to pay the price of necessary technologies, and they would most likely not become the clients acquiring or licensing them. A likely scenario is that some of the technologies would be illegally used (hence: free-riding) and the technology owner would have little prospect of recovering damages. Alternatively, if patent protection is implemented and effectively enforced, the innovations will never be applied there. This is specifically true if there are cheaper substitutes for expensive technologies, even if those inexpensive alternatives are more damaging for the environment. In addition to the disadvantages that societies in these countries encounter by not having access to climate technologies, even greater losses are being suffered by the global community. The irreversible damage to the natural environment is a factor affecting all countries in the world, the developing and the developed ones (though—for the moment—with a different intensity). Therefore, the IP system should be properly adapted in order to accommodate the envisaged solution to this problem. It should provide for a possibility to effectively allow the critical technologies to be applied also in the regions which do not possess the necessary resources to buy or license them, but that need these technologies to maintain the lowest possible level of environmental destruction. An already existing mechanism of compulsory licensing within TRIPS has proved so far to be less successful than expected. Compulsory licensing in the health domain has showed a very painful way to arrive at a solution⁴⁶ that, for various reasons, is hardly ever used in practice. It is an open secret that the effective application of compulsory licensing is shunned in this field. Besides, the major players are very unwilling to extend its application beyond patented medicines to other technologies, such as climate technologies. The field of climate change specifically shows that the system of TRIPS resembles a fortress in the contemporary international scene: built to be unconquerable, it staunchly defends its original underpinnings.

Another aspect that fails to be meaningfully addressed by the patent system is the environment-friendly evolution of technology. It has been pointed out in the literature that “as an economic tool, the patent system itself is environmentally neutral, having little concern for environmental protection or degradation”.⁴⁷ Nonetheless, environmental effects of inventions (either detrimental or advantageous) are not to be denied and so the goal should be to promote the environment-friendly developments of the innovation system. In addition, the policy objective should be to avoid a scenario where the IP system constitutes a serious impediment to a wide development and diffusion of much-needed technologies, such as environmentally sound technologies.

Some authors express the view that for the time being there is no concrete evidence that patent protection, and strong IPRs in general, are hampering the diffusion of environmental technologies⁴⁸ and that other factors also constitute possible impediments in this area (e.g., “the level of tacit knowledge not covered by IPR”⁴⁹). Many other authors,⁵⁰ however, see the patent system as directly accountable for difficulties in the access to necessary technologies, especially in developing countries.

A closer look at the domain of environmentally sound technologies allows us to pinpoint certain practical problems directly related to the system of patent protection. As was pointed out by Ecuador during the WTO TRIPS Council meeting in Geneva (25-26 February 2014), one of the difficulties encountered by commercial actors in developing countries is that the information included in the patent applications is not sufficient to exploit the invention after the expiration of the patent. Since patent applications do not include the information necessary to use the invention, they do not allow for the actual transfer of these technologies to developing countries.⁵¹ This problem directly addresses the functioning of the patent system and the scope of individual discretion of the administrative authorities in granting patents for not sufficiently disclosed inventions. It is no secret that patent applicants, while having to adequately disclose the invention in order to get exclusive protection, wish to reveal “as little as they can”⁵² to create difficulties for follow-on innovators. The importance of this aspect has been directly tackled by the WIPO Standing Committee on the Law of Patents,⁵³ which declared that the enabling disclosure requirement of Article 29(1) TRIPS is fundamental to the effective dissemination of knowledge and for further improvement of existing technology. It further explained that despite harmonization of this requirement by the legislation of the WTO Members, certain nuances in interpretation of these provisions can occur in individual countries,⁵⁴ but no solution has been offered. However, as suggested by the doctrine, the TRIPS Agreement, by providing (in Article 1(1)) that Members are “free to determine the appropriate method of [its] implementation” allows the realities of each country—including their individual practices and experiences—to influence the interpretation of those norms (e.g., application of different standards for the average level of “a person skilled in the art”).⁵⁵ Consequently, the disparities in the level of technological advancement between individual countries can be alleviated by patent examiners in less developed states requiring that applicants furnish additional information to patent specifications.⁵⁶

A desirable solution to the problem as raised is accurately to assess the basic underpinnings of the patent system itself and its actual functioning. The practice of the patent system should guarantee that patent applications—especially in the field of environmental technologies—fully describe the invention. This serves two following purposes: first, it provides follow-on innovators with sufficient knowledge about the state of the art and allows them to advance the technology beyond a precisely delineated scope of patent exclusivity (without fear of causing an infringement), and second, it assures that when the invention enters the public domain after the patent expires it will truly benefit society.

Another answer to address the specificity of ESTs within the patent system is to effectively employ the measures that would prohibit patent holders from applying defensive patenting of important technologies with the sole purpose of keeping competitors from using them and working on the improvements. Since patent ownership in the field of climate technologies is already rather concentrated, it is important to prevent the right holders from strategically blocking certain technological areas. While the effects of patenting on cumulative research and follow-on innovation in certain fields, such as biotechnology, has been widely discussed,⁵⁷ there are differing opinions about the actual effects of strategic patenting in the environmental domain. Certain scholars do not see the danger of blocking further innovation in mechanical technologies,⁵⁸ whereas others identify specific blocking strategies in environmental sectors.⁵⁹

Finally, the consolidation of patent protection through the expansion of regional, bilateral or plurilateral trade agreements (the so-called TRIPS-plus agreements) is being made in parallel to international negotiation settings. Individual arrangements expressly reaffirm the protection of IP rights in line with the standards established by TRIPS.⁶⁰

A bird’s-eye view on an assemblage composed of various international environmental and climate arrangements and of the TRIPS Agreement forcefully demonstrates that some of those international agreements appear to be “less equal than others” when it comes to their accomplishment and the furthering of their main goals. Certain targets, such as climate-related objectives, are relinquished more easily and readily by the majority of countries than those obligations the effects of which can be grasped more instantly, i.e. trade-related goals. This very short-sighted approach—compelling modern nations to respect their mutual trade obligations, while suspending those arrangements which involve the environmental safeguards—is not a responsible strategy, but it rather illustrates the struggles and division between sense and sensibility.

4 Reflection on Peculiarities of Climate Change Technologies

4.1 Specific Character of Climate-Related Inventions

Numerous voices have been raised in international settings to benefit climate technologies with a waiver analogous to the “paragraph 6 system”⁶¹ that was created for pharmaceutical products. Apart from an ardent opposition to this idea from developed countries primarily based on commercial motives, there are also sceptical opinions about this solution built on more constructive arguments. They argue that differences between medicines and climate technologies are so significant that the same path would not work for the latter.

Firstly, is has been stressed⁶² that a large body of useful knowledge already belongs to the public domain and can be used by all. This seems to be very much the case for ESTs. For example, it is recorded that important innovation in solar technology took place in the 1970s and the underpinnings of modern wind technology were elaborated as early as the 1980s.⁶³ Therefore, while in the pharmaceutical sector an individual patent can secure a very strong market position for its holder due to unavailability of substitutes for a specific drug, this—in general—is not the case for ESTs, of which a significant number are no longer protected by patents.⁶⁴ In such a scenario, what is necessary for the diffusion and effective application of these technologies is the know-how and technological capability, supplemented by proper financial resources. Nevertheless, there might be important (patented) improvements of the existing technologies that make them more efficient, more financially viable or better adapted for certain regions (due to their geography or economic situation) and constitute a sine qua non for their application.

Secondly, voices advocating for the general exclusion from patentability of climate technologies encounter certain (apparently constructive) counter-arguments. In contrast to pharmaceuticals, which can be copied and produced with relatively little investment, imitation of environmental technologies requires a considerable amount of capital.⁶⁵ Renewable energy technologies, energy-generating equipment or energy storage modules (especially photo-voltaic (PV) panels) are very complex and expensive to produce.⁶⁶ Weak or non-existent patent protection would discourage licensing of those technologies, and it is precisely a licensing arrangement which brings along a necessary know-how that accompanies the equipment.⁶⁷ What is essential in the development and employment of the majority of ESTs is a combination of high capital investment and know-how, while the method of “learning through imitation” might not be the most advantageous in the majority of cases (though it still is for certain domains such as bio-fuels).

Thirdly, proposals to exclude environmentally friendly technologies from patent protection should be treated with a certain care for another reason, i.e. not to discourage environment-friendly developments. If climate-friendly inventions were to be treated in a way that threatens inventors’ rights, then there is a risk that inventors will move to innovations that are less climate friendly in order to escape the threat of expropriation or unrestricted compulsory licensing.

In spite of all the above arguments, it should be observed that environmental problems, and especially climate change, constitute a very distinctive issue. As has been rightly observed, strong efforts undertaken by one country or a group of countries will benefit the entire global community, because they will provide climate improvements for everyone (since it is not possible to exclude the others, it creates a free-rider situation).⁶⁸ Conversely, some countries can equally hinder the endeavours and positive (global) environmental effects that have been reached by other nations. Therefore, this complex situation requires a set of rules involving and binding all nations. In this scenario, the IP system constitutes only a small part of such a necessary undertaking. Within this setting, different countries have different (political and social) responsibilities as regards climate change abatement, depending on (1) their technical capabilities, (2) their financial resources and importantly (3) their individual contribution to environmental degradation, including climate change, and the resulting social costs.

In this light, even if a significant amount of knowledge in the field of environmental technologies already belongs to the public domain, certain innovative and most recent solutions might be more cost-effective in their exploitation or simply more adapted to particular geographical areas. Therefore, it would not be appropriate to exclude at large, as not necessary, any limitations on the patent rights based on this argumentation.

The discussions in international fora and academic writings principally focus on the problem of technology transfer to poorer countries. This approach is certainly not complete and neglects (maybe intentionally) some vital aspects. The actions relating to ESTs should go in two directions and be focused on two channels in parallel. The first channel is the transfer of technology to developing countries (which would take place within the structure offered by the UNFCCC). The second channel consists of a more extensive diffusion of these technologies within the industrialized regions themselves, namely, between more market players in the developed countries. The value of the second aspect is not sufficiently recognized or promoted despite the fact that it is what actually contributes to the development of knowledge and innovation in this very sector. In this light, it is useful to reconsider the deficiencies of the modern patent system against the background of climate-related inventions.

4.2 Embedding TRIPS into the Framework of UNFCCC

The statistics on global emissions of greenhouse gases (GHGs) demonstrate major shares coming from industrialized countries, but at the same time rising quantities from growing developing nations (such as China and India). The data on GHG emissions show that the biggest world polluters are the following: the U.S. (20.6 % of the world’s emissions), China (14.7 %), the EU (14 %), Russia (5.7 %), India (5.6 %) and Japan (3.9 %).⁶⁹ In 2008, the United States Environmental Protection Agency showed the contribution to the global CO₂ emission (fossil fuel combustion) to come from China (23 %), the U.S. (19 %), the EU (13 %), India (6 %), Russia (6 %), Japan (4 %), Canada (2 %) and other countries (28 %).⁷⁰ Also, the International Energy Agency calculated that the five largest world emitters of CO₂—China, the U.S., the EU, India and Russia—account for two-thirds of global emissions.⁷¹

Although the global use of energy decreased in 2009 due to financial and economic crises, the projections are that the world energy demand will grow progressively after 2015.⁷² Today, the major shifts in the energy demand chart go towards the emerging economies, such as China, India and the Middle East. Their energy use pushes global energy consumption one-third higher.⁷³ The statistics for Asian countries demonstrate that CO₂ emissions calculated per capita more than doubled between 1990 and 2010 in China, Indonesia, Malaysia, Thailand and Vietnam.⁷⁴ Energy efficiency, which is a pivotal aspect in the relationship “energy – the environment – climate change”, heavily depends on the technologies that are being used.

Because the industrialized countries have long been and still are the major actors responsible for environmental destruction, including climate change, it is justified that they should also play a primary role in the abatement scenario. This is not only based on a compelling moral obligation, but also emanates directly from the international norms, which can be found both in the TRIPS Agreement as well as in the UNFCCC. Article 4 UNFCCC sets up in general terms obligations of the developed countries to assist the developing countries in meeting costs of adaptation to the adverse effects of climate change (Article 4(4)), to promote, facilitate and finance the transfer of environmentally sound technologies and know-how to developing countries (Article 4(5)). In addition, it also declares that the effective implementation of the commitments under the Convention by the developing countries will depend on the actual implementation by developed countries of their commitments relating to financial resources and transfer of technology (Article 4(7)). For its part, the TRIPS Agreement in Article 66(2) proclaims in the most general manner that developed countries shall create incentives for their enterprises and institutions to promote technology transfer to LDCs. Despite unoptimistic assessments of Article 66(2) TRIPS owing to the fact that little has been achieved so far about transfer of technology based on this norm (which is designed as mandatory),⁷⁵ and notwithstanding the general language of the provisions referred to, there is a strong parallel between them. They can be seen as constituting a link between these two international arrangements—the TRIPS Agreement and the UNFCCC. Notably, this highlights that, as regards climate change abatement goals, countries have “common but differentiated responsibilities” (Article 4(1) UNFCCC) and the burden is clearly placed on industrialized nations. Proximity between these norms as reflecting obligations of technology transfer constitutes a base upon which to provide more specific actions.

Those specific measures can and should be undertaken within the framework that is offered by the UNFCCC and the Kyoto Protocol. They include, amongst other options, the clean development mechanism (CDM), joint implementation (JI) and the system of emissions trading. These mechanisms are intended to offer to industrialized countries a significant level of flexibility in their choice on how to achieve the goals of climate change mitigation in a cost-effective way. The CDM was established by Article 12 of the Kyoto Protocol. It gives an opportunity for industrialized countries (so-called Annex I Parties⁷⁶) to meet the terms of their emission limitation and reduction commitments by founding (emission reduction) projects that would benefit developing countries towards more sustainable development. In turn, the mechanism of joint implementation (Article 6 of the Kyoto Protocol) allows the industrialized countries (Annex I Parties) to transfer between each other emission reduction units resulting from emission reduction projects carried out with other industrialized countries. The emissions trading system, introduced by Article 17 of the Kyoto Protocol, allows the countries with the emissions reduction commitments to trade between them their unused quotas. It does not effectively limit the actual emissions of the GHGs, but only shifts the figures in their universal calculation mode; nor does it equip the poor regions with the needed climate change abatement tools.

It would be advisable to establish a more consistent relationship between the IP protection system (reflected in the TRIPS Agreement) and the endeavours within the CDM to bring about meaningful measures. The industrialized countries should encourage within their territories and their national systems the development of inventions made specifically with the purpose of benefiting and complying with the needs of the countries which are to receive technologies for climate change mitigation and adaptation actions within the CDM. How should they go about encouraging research and development of those technologies that are principally useful for those geographical areas where developing and LDCs are located (parallel with research and development of medicines for tropical diseases)? It would need to be in the form of publicly funded research programmes engaging equally big enterprises as well as less dominant market actors. The technology development lines should not be left to the total discretion of the inventors, but determined by the public authorities (co-operating at the international level with other contributors as well as with the countries that are to benefit from these programmes). These robust actions should be undertaken by the policy makers, because the patent system alone cannot stimulate the development of those technologies; instead the demand for them should be created and supported by specific regulatory measures. The state authorities should not only contribute financially to those climate technology projects (creating a relevant economic environment), but also provide a sufficient coordination framework.

Although the CDM offers certain solutions, it is a voluntary framework. In addition, an empirical analysis of a number of projects shows that the contribution of the CDM to technology transfer is relatively modest (technology transfer, in fact, not constituting its objective).⁷⁷ For that reason, all hopes and efforts should not be focused on the CDM scheme, but further, far-reaching goals set up by the worldwide community are necessary. What is needed is a proper coordination on a global scale of different interests, namely, national (which are various for different countries) and international.

An important initiative toward this goal is the Green Climate Fund (GCF)—established by the Cancun Agreements (at the 16th session of the Conference of the Parties of the UNFCCC, COP 16).⁷⁸ It has the status of an operating entity of the financial mechanism of the Convention. In the years following its establishment, the subsequent Conferences of the Parties took decisions relating to the governing instruments of the GCF (COP 17),⁷⁹ localization of its headquarters (COP 18),⁸⁰ establishment of the secretariat and selection of the Executive Director (COP 19).⁸¹ The plans are to achieve an effective operationalization of the GCF when the required threshold (i.e. 50 %) of pledged financial contributions is fully executed by the contributing Parties (COP 20).⁸² The GCF functions under the guidance of and is accountable to the Conference of the Parties (UNFCCC). It is governed and supervised by the Board composed of 24 members, of which equal numbers come from developing and developed countries. The financial inputs for the Fund are to be received principally from developed country Parties to the UNFCCC.⁸³ The financial resources are intended to support developing countries’ climate-change-related actions and projects, such as low-emission development strategies, mitigation projects, national adaptation action plans and similar activities.⁸⁴ The actual functioning of the GCF and the efficacy of its strategies and their implementation is still to be seen. An international scheme in which each country contributes a different amount according to its resources and its share of global emissions is a fair and reasonable starting point. However, this worldwide scheme should be designed taking into consideration that certain rapidly growing developing countries equally constitute substantial polluters in a global chart, but for the time being are not committed to specific emission reductions (the UNFCCC and the Kyoto Protocol from their inception impose unequal obligations on the developed and developing countries). In addition, they have demonstrated substantial interest in protecting their emergent IP values (e.g. China and India), so in the end the negative perception of strong protection seems not so clear-cut.

The Technology Mechanism of the UNFCCC,⁸⁵ which was established in 2010 (COP 16),⁸⁶ aims at facilitating technology development and transfer. The Cancun Agreements expressly proclaim that priority areas encompass deployment and diffusion of ESTs and know-how in developing countries, increased (public and private) investment in technology development, strengthening of national systems of innovation, and development of national technology plans for mitigation and adaptation.⁸⁷ The schemes run within the broad framework of the Technology Mechanism should effectively implement the flexibilities offered by the TRIPS Agreement. Projects—involving research—which are (nationally or internationally) developed with the aim of achieving the goals of the UNFCCC and sponsored by the Green Climate Fund should be covered by a special regime. This research, together with its innovation output, should fully benefit from the compulsory licensing system, including cross-licensing, in order to achieve the widest diffusion of relevant technologies.

5 Concluding Remarks

The present paper is based on the belief that scholarly and political attention should not only focus on the excessively protectionist approach of the developed (industrialized) countries on the one side, and resulting disadvantages of poorer nations on the other, but also on the factual divisions within society itself, where the ever-growing domination of big and powerful corporations leads to a serious weakening of the position of individuals and their interests. Allocation of benefits that come from technological development and innovation is not uniform amongst the nations, but likewise, it is often not uniform across different groups within the same country. When these differences touch upon (public) goods—such as access to health, medical methods, quality of food, access to information for research purposes or a clean and safe natural environment—the issue becomes a major concern.

The most relevant period in relation to the aforesaid problems is the era opened by the important developments in the U.S. patent law that took place in the 1980s. These changes marked a move towards strengthening protection at the national level (e.g., extension of patentability to new areas, such as biotechnology; creation of a specialized court to deal with patent issues—the Court of Appeals of the Federal Circuit; possibility for universities to patent and license inventions made with federal subsidies—the Bayh-Dole Act 1980),⁸⁸ which in turn influenced the developments in the international arena and the introduction of the TRIPS Agreement. As demonstrated by scholarly analysis and noted by several nations, the international harmonization of IP rights (and specifically patents) generated great shifts of revenue between different countries, and the U.S. is by far the main beneficiary of these changes.⁸⁹

When the vast movement towards expanding patent protection took place in the U.S. legal system in the 1980s, and—with a focus on specific technologies only—within the EU system in the 1990s,⁹⁰ and when the TRIPS Agreement was adopted (1994), the emergence of environmental problems was not as intense and critical as it is now, in the year 2014. The rules drafted 20 years ago neither intended to anticipate any such problems, nor envisaged a possible integration of these values and concerns into the structure of the patent system as embraced and designed by TRIPS. The question is whether the nations should be eternally bound by what was decided during the Uruguay Round or rather the legal framework should adapt to the changing circumstances, especially in the light of already revealed general problems relating to the (not perfectly) functioning patent system as such.

Additionally, this paper argues that the TRIPS Agreement does not provide an adequate framework to address the issues relating to the safeguard and supply of necessary public goods. Nonetheless, the availability of these goods strongly depends on the structure of the patent system. Climate change is a field that exemplifies this shortcoming. The deficiencies affecting the patent system in general⁹¹ also influence the domain of climate-related technologies. The specific elements which need to be taken into consideration as regards climate-related inventions include: structuring the patent system and patent policy so that they better favour small and medium enterprises (SMEs), effective requirement of full disclosure of inventions and limitation of the possibility of monopolistic appropriation (by private corporations) through the exclusive licensing agreements of inventions made by universities and with public funds. The guarantee of full disclosure of patented inventions should be secured through restrictive controls and checks by the (national and regional) patent offices. Further focus should be on avoiding strategic patenting and accumulation of huge patent portfolios in the hands of leading enterprises that do not use them (administrative control of such activities and implementation of effective compulsory licensing strategies to combat and discourage this would be desirable; in turn, the application of competition rules, as an ex post control, would come only when the harm was done to competitors and to innovation⁹²). The fear of inventing around existing inventions (because of the unclear scope of patent exclusivity) and, consequently, waiting for patent expiry in order to improve current developments is disadvantageous both for society (which will not get an improved technology from other inventors in the short term, resulting in no alternatives and high prices) and for competitors (the original patent holder can advance innovation in this field without competition and thus monopolize current and future innovation). In modern fields—such as ESTs—the innovation process is very rapid; waiting for patent expiry slows down the parallel developments within a given domain and hampers the positive effects that improved technology can have on the environment. A viable solution could be the efficient application to climate-related inventions of the concept offered by Article 31(1) TRIPS—a compulsory licence for improvements. In turn, the strengthening of the position of small and medium enterprises (SMEs) and their active involvement in the creation and application of climate-relevant innovation would be positive both socially and technologically. Although it is argued that climate-related technologies are better handled by big corporations with substantial economic resources, it seems worthwhile to effectively engage the research potential of SMEs in this sector as well. This would be important for developing countries, but not only for them. In the developed countries, the position and perceptions of SMEs are often closer to the social reality and, consequently, they can better recognize not only the demands of the market, but also current social values and consumers’ needs.

The patent system is one of the elements in the climate scenario and must be supported by multiple strategies and examined together with other issues. One of the important aspects is the states’ contribution to the development of needed technologies, especially in the form of publicly funded research. This research, subsidized through public grants and performed by universities and research institutes, should fall under a specific regime, in the sense that its results could not be exclusively licensed to and appropriated by dominating actors in the field. This would constitute a significant segment towards building a more effective system of climate-related innovation.

The environmental problems occurring on our planet pose a serious challenge to patent law and prompt the question whether it should embrace public policy of climate change as an inherent value and as its integral component, rather than seeing it as a limitation to the scope of protection of the right holders. Given that neither the amendments to the black-letter rules of the TRIPS Agreement, nor the establishment of a separate legal protection regime for climate technologies can soon be expected, these problems call for certain improvements; they require that the existing norms of TRIPS be read in a more flexible manner and that necessary policy adjustments take place. It was argued at the dawn of the TRIPS Agreement that the effects of IP protection are case sensitive,⁹³ strongly depend on the specific industry and vary significantly across sectors. Consequently, the “context-sensitive role” of IP rights constitutes a strong argument for a flexible implementation and interpretation of TRIPS.⁹⁴ The role of patent protection in climate-related technologies should be seen differently than in other sectors.

The WTO, although having admitted the absence of climate change problems in the context of its activity and work programme, has nevertheless signalled the intersection of climate change measures with international trade. The voice of the WTO in the sustainable development scenario lacks any substantive and concrete qualities and is of a rather rhetorical character.⁹⁵ Nevertheless it is clear that it wishes to secure its say in the climate-change setting for the purpose of being able to control its developments. Following this, dominant enterprises focus their attention more on cost-efficient activities and their own profits rather than on a long-term approach regarding the environmental safeguard. An answer to this deficiency could be found in a decentralization of the climate technologies amongst more actors on the market. Currently, those technologies are characterized by a strong concentration in the hands of few leading players within their sectors.

A major problem with furthering global environmental goals is the dimension of the actions that must be undertaken so that required results are reached. Within a domestic system, thus on a smaller scale, it is easier to strike a balance between different, even conflicting interests, such as public interests and private commercial advantages involved in innovation activity. The same objectives become more dispersed and nebulous when set out for the international community. While profits are not immediately available, a free-rider position is often the most convenient and opportune choice.