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Does cleantech IP matter?

by Michael Levi
April 21, 2010

Slate has a provocative pair of stories on climate change and intellectual property. One of them seems to completely miss the point; the other has some good insights but then takes things way too far.

Lisa Ouellette’s is the furthest off the mark. She takes as a given that patents are a big problem when it comes to clean technology diffusion, and then looks for ways to get them out of the way. (Her one specific claim – that “Chinese car manufacturers are unable to produce low-cost hybrid cars because a small number of companies have patented key components” – comes without any link or reference.) Her main solution is to reinterpret Bayh-Dole, which governs patenting of federally funded university-based research, in a more open way.

But it’s far from obvious that patents are a big problem. Ouellette flags the experience of pharmaceuticals in making her case. Indeed for many drugs, IP dominates overall costs; thus by providing IP on a concessional basis or for free, costs to consumers can be brought way down. With energy technology, though, that’s rarely the case. The main reason that clean technology is more expensive than dirty technology is that it’s more expensive to make, not that its IP costs more. Make IP available for free and the technology may still (for now) be too expensive. (Drugs, in contrast, are cheap to make once you know how to.) Either way, perhaps with some exceptions, IP is unlikely to tip the balance.

Michael Schellenberger and Ted Nordhaus are on more solid ground when they argue that IP isn’t the massive barrier that many claim. Their core arguement is that clean technologies are making it to China, which, they correctly point out, suggests that IP isn’t the fundamental barrier that many claim.In particular, they point out correctly that IP isn’t everything: if companies have other ways of making enough money, they’ll be willing to part with some IP. (They cite the case of Westinghouse selling nuclear reactors into the Chinese market, which everyone who thinks or writes about this issue should study.)

That said, I think they overstate their claim. Just because some technology diffusion is happening doesn’t mean that other desirable flows aren’t getting blocked or severely slowed, whether because of IP issues, or more commonly, other market barriers. (Take a look at IGCC if you  want an example.) We could do with some serious academic work that looks at how IP and other barriers affect the rate of technology diffusion, rather than simply whether it happens or not.

And of course, there’s their usual set of talking points on how China is destroying the United States in the clean technology race, even though the simple metrics they cite, like total investment in renewables, or the creation of a few R&D centers in China, are a poor indicator for the state of that competition. On that count, I particularly liked their case for claiming that future technology transfer will come from China to the U.S., which they base on the (largely debunked) claim that “79 percent of the U.S. economic-stimulus funding for wind turbines went to foreign firms” – a point which, they neglect to mention, has extremely little to do with China.

Which brings me to a final point: even if the technology transfer problem is limited for China, that doesn’t mean that it doesn’t exist in a significant way for other big emitters (like India or Brazil), not to mention for smaller players, such as those in Africa. My sense is that there are real issues that need to be addressed when it comes to technology transfer – they just aren’t primarily about IP.

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