Compulsory licensing of green technology: positive development or positively disastrous?

Jonathan Odumeru is a JD candidate at Osgoode Hall and is taking the Patent Law course.

The group of 77 developing nations (G77), led de facto by China, has called for the implementation of a compulsory licensing system to facilitate the transfer of green technologies. These nations posit that such a system would fulfill vital international obligations established under the UN Framework Convention on Climate Change (UNFCCC) and the WTO Agreement on the Trade Related Aspects of Intellectual Property (TRIPS).

Those spearheading the negotiations, namely Brazil, India, China, and South Africa argue that a declaration on climate change should be similar to the Doha Declaration on Public Health, which creates a mechanism for WTO members to issue compulsory licenses for the production and export of generic versions of patented drugs to countries with insufficient capacity to manufacture or access those drugs.

The legal bases on which this group of nations relies are Articles 4.3 and 4.5 of the UNFCCC, which demarcate a clear obligation by developed nations to provide financial resources to enable developing countries to reduce their emissions and to take “all practicable steps” in promoting technology transfer. The G77 also relies on 45 declarations of the October 2007 WIPO General Assembly, which relate to technology transfer.

The bulk of the commentary that I’ve come by passionately disapproves of this proposed approach to green technology transfer. The obvious criticisms to such an approach are that compulsory licenses will stifle innovation in this sector, and that major players in R&D will focus on the inane and frivolous in pursuit of higher profit margins. Less obvious is the difficulty that is posed in attempting to define what in fact constitutes green technologies. Given this, the potential uncertainty that a policy of “forced sharing” could pose to innovators is stifling, as innovations such as watches that tick longer from a single battery, might be the subject of compulsory licensing. Moreover, what would this mean for industries hit hard by the economic crisis, such the already floundering North American automotive industry? If large developing nations could appropriate their patented green technologies, such as those relating to improved fuel economy, mandatory licensing could be spell economic disaster.

Some critics contend that what is in fact at stake is millions if not tens of millions of jobs in developed countries. It has been contended that the EU would likely lose its ability to reinvigorate its economy, create jobs, and lead the world in green technologies, unless compulsory licenses are avoided. Others cite the additional bureaucratic burden that would be the cost of negotiating, implementing and regulating a Doha Declaration on green technologies. Essentially, the sum of the critiques weigh strongly in favour of financial assistance as being the primary, if not only, option in the facilitation of green technology transfer.

Despite the vehement opposition to this approach in the literature, I would like to take this opportunity to play devil’s advocate, and suggest that aspects of this proposal may indeed be meritorious. In Canada, and I suspect most other nations, the public interest is at the core of the justifications for establishing a patent law system. What could be more fundamental to the public interest than the health of the planet? I ask this rhetorical question not to imply that compulsory licensing is the magical solution to climate change, but to suggest that the Doha Declaration on Public Health is a diplomatic acknowledgement of the power vested in the international patent system in relation to human rights and development.

To write off this attempt by the G77 as “hopelessly naive or foolishly greedy,” as some critics have, is farcical. As with most natural disasters, it is the poorest in society, and certainly the developing nations that will bear the burden of climate change. G77 countries argue that exceptional measures are urgently required to speed up technology diffusion to combat climate change, and on this basis invoking the “flexibilities” of the TRIPS agreement is justifiable.

Given appropriate limitations, I tend to agree that the significant challenges posed by climate change could be attacked to some degree by exercise of the flexibilities of TRIPS. In truth, this would require significant international cooperation, such that compulsory licensing would be appropriately regulated to: 1) ensure that reasonable prices are paid for the licenses; 2) ensure that the technologies are truly only diffused on this basis to areas that would otherwise not have even been in the market for these technologies; 3) require licensees not to compete with involuntary licensors; and 4) set out clear limits on what green technologies may be the subject of compulsory licenses. Whether or not such cooperation and regulation is achievable, is an entire other blog topic.

For more information see:

International Centre for Trade and Sustainable Development, “Lobby Group Opposes Proposed Changes to Green Technology Patents,” (2009) 9:21 Bridges Trade BioRes , online: < http://ictsd.org/i/news/biores/62272/>

Kogan, Lawrence, “Climate Change: Technology Transfer or Compulsory License?” (2010) presented at The American National Standards Institute (ANSI) Monthly Caucus Luncheon on January 15, 2010. Online: <http://www.itssd.org/LKogan%20-%20Climate%20Change%20-%20Technology%20Transfer%20or%20Compulsory%20License%20-%20ANSI%20Luncheon%201-15-10.doc>

Parliament of Australia, “The object and purpose of the United Nations Framework Convention on Climate Change (UNFCCC),” online: <http://www.aph.gov.au/library/pubs/climatechange/governance/international/unfccc/unfccc.htm>

Rosenzweig, Sidney, “Compulsory Licenses & Green Technology,” (2009) The Progress and Freedom Foundation Blog, online: <http://blog.pff.org/archives/2009/03/i_just_wrote_a_lengthy.html >

2 Comments
  1. China, India and Brazil have proposed that new green technologies be made subject to compulsory licensing which is tantamount to waiving IPRs. In other words, under compulsory licensing, a government can authorize the use of patented technology by third parties without the consent of the owner but with appropriate compensation. Compulsory licensing has to date only been authorized by the WTO TRIPs Agreement in emergency situations where patent-protected pharmaceuticals were seen as prohibitively expensive. Should we apply the same logic to the climate crisis?

    This blog post raises the question: what could be more fundamental to the public interest than the health of the planet? So stated, there is little room left for argumentation. Who in their right mind would deny developing countries the ability to protect their public health? However, opening the door to compulsory licensing in fields that are considered of “public interest” might easily lead to abuse. For example, why limit compulsory licensing to pharmaceutical and green technology? Why not extend it to other industries such as automotive, electronic or software that are also important to struggling countries who have limited resources? On the one hand, fighting climate change is fundamental to protect the health of the planet for future generations. On the other hand, removing patent rights would undermine the incentive to research and develop newer and more efficient technologies. How can this apparent deadlock be broken?

    I tend to agree with Mr. Odumeru that the attempt made by the G77 cannot be completely written off. Climate change may not yet be a short-term problem but it will become one if no action is taken now and the spread of environmentally sound technologies is one way of achieving that goal. The solutions to this impasse proposed by the G77, such as ensuring that reasonable prices are paid for the licenses or that the technologies are made available only to those countries that have no market for these technologies, together with international cooperation might achieve the right balance and without stifling future inventors.

    This said, I suppose that I were working in a big patent law firm, I would certainly be inclined to a different view but as I am still a poor student, I still have the one luxury of being able to cling to perhaps more objective if not taint unrealistic ideals.

  2. Interesting post, Jonathan, and one that I think gets at some of the core issues of patent law. In general patent law seeks to balance an incentive for innovation on one hand with dissemination of information on the other. Ultimately the public interest is at stake, i.e. how can technology be advanced and spread most efficiently? This utilitarian policy rationale for patents has been endorsed by the SCC in the Harvard College case, among others, and is somewhat implicit in TRIPs. The interesting thing about green technology (along with pharmaceuticals) is that it raises the stakes on both sides of the equation. Unlike say, the electronics industry, green technology and medicine are vital for the public’s welfare. It thus becomes all the more important to both promote innovation and to increase public access to new technology. We’re not merely talking about getting the latest and greatest cell phone technology (or whatever) into consumers’ hands;
    lives are at stake.

    The question then becomes: Does the inherent importance of green technology call for a different balancing of IP rights compared with less vital technologies? I would argue “no”. Compulsory licensing is ultimately a weakening of the monopoly rights of a patentee in favour of competitors. Logic would dictate that the same balance of IP rights that promotes optimal innovation and development in non-socially important industries would hold true for green technology as well. The exact same issues are at play, and weakening patent rights in this crucial area may have the effect of cutting off the nose to spite the face. However well-intentioned developing countries may be regarding spreading green technologies to their citizens, it is something that needs to be done cautiously and not at the expense of innovation in the first-world.

    I would throw in the important caveat that we may not have reached an optimal balance of patent rights in other industries, either. If anything, this issue clarifies the importance of not extending overly broad patent rights in general. The goal is always to promote innovation from a purely economic perspective, and not to bestow some sort of God-given inventor right to enjoy the fruits of their labour. When patent rights are too strong they work counter-productively and actually hurt society as a whole, locking up new technologies without providing any additional incentives for innovation.

    China, India, Brazil et al. argue that green technology is unique in the sense that it is basically a solution to a problem created by developed countries. The argument can essentially be boiled down to “you created this mess, now you clean it up.” Without knowing that much about the causes of the climate change crisis, I would venture to say that this argument seems weak on its face. With massive populations and rapidly increasing industrialization in the aforementioned countries, it seems naive to say that carbon emission is a first-world problem. To impose compulsory licensing along this line of argument would essentially punish innovators in developed countries for the carelessness of past industry, a solution which is neither fair nor reasonable.

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