Compulsory Licensing for Green Technologies: A realistic threat?

Introduction

Climate change has emerged as a global crisis, with increasing reports of climate-related catastrophes such as typhoons, extreme heatwaves, and devastating wildfires. As the urgency of addressing climate change grows, some are beginning to question whether compulsory licensing (CL) for green technologies, similar to how it is used in cases of health crises, might be appealing to some governments. While there has been no such action for climate-related technologies yet, it's a legitimate topic of discussion. This article explores the legal basis for compulsory licensing in climate-related emergencies, the potential implications, and alternative approaches to incentivize green innovations without compromising intellectual property rights.

Legal Basis for Compulsory Licensing of “Green Patents”

The TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement signed in 1995 in the context of the World Trade Organization is the most comprehensive multilateral agreement on intellectual property. It creates standards and provides enforcement provisions and dispute settlements between WTO Members. Article 31, often referred to as the "compulsory license article," allows for licensing and governmental use of patented technologies without the authorization of the right holder in situations of national emergency or other circumstances of extreme urgency. What constitutes a national emergency or a situation of extreme urgency is to be determined by the country party to the TRIPS agreement and wanting to impose the compulsory license.

Historically, compulsory licenses have been granted in the context of health related emergencies such as the AIDS epidemic. The most recent case of compulsory licenses discussions occurred during the COVID-19 pandemic, also a case of epidemic.

Has climate change the same characteristics as an epidemic, and if not, does it need to in order to be subject of a compulsory license under a situation of emergency?

Epidemics have the characteristics of arising sharply, affecting the population at large and of need of an immediate response.

Climate crises may be similar to an epidemic in the sense that it affects a large portion of the population, whether in terms of sickness or death. However, the immediate nature of epidemics may seem distinct from the slow, ongoing nature of climate change. Epidemics are not the only situations that have been subject to compulsory licenses by governments. In the past, we have seen compulsory licenses being granted for chronic health issues, such as heart medications and lung medicines. As a result, the non-temporary nature of global warming does not qualify it automatically as a "non-emergency" situation which would not be susceptible of compulsory licensing.

Even if not considered as epidemic type, climate crises can be assimilated to health crises to some extent. Degradation of the environment leads to chronic diseases and premature deaths caused by pollution. And since situation of emergencies have so far been attributed to health crises, one may argue that the climate crisis is just another health crisis.

There is thus a plausible basis for compulsory licenses of green technologies under the premises of climate urgency.

Inadequacy of Compulsory Licensing of “Green Patents”

Given the legal basis for climate-related compulsory licensing, there is a possibility that governments, particularly those in heavily polluted regions, may opt to invoke compulsory licensing for key green technologies. For instance, they may seek to compulsory license carbon emission reduction solutions, or for an energy related solution.

How attractive this might be, compulsory licensing schemes are neither adapted nor efficient.

First, there are key differences between green technologies and innovations developed by the pharmaceutical industry. Innovations in the energy sector often face competition from existing technologies, unlike drugs, where a single patented molecule can have significant monetary value and dominate a market. The fragmentation of the market can reduce the potential impact of compulsory licensing.

Second, compulsory licensing will not enhance the rate of technological innovation which is crucial to fight global warming. In fact, it will work against it. Innovation by improvement is made by building upon existing technologies. These technologies are readily available to the public by the publication of patents. Patent publications are actually a good information dissemination tool: patent databases are searchable, inventors can get inspired from a technology they even have not seen, and patent offices have started to provide specific classifications for green technologies (e.g. CBC classification Y02). If less patents are filed, less publications and knowledge sharing will happen.

Third, compulsory licensing may even inhibit technological innovation by discouraging companies from investing in research and development, as the economic rewards for innovation diminish when intellectual property rights are weakened. This in turn would hinder progress in green technology.

Compulsory licensing would also deter foreign investments, joint ventures, and tech transfers. Private companies may be reluctant to invest in regions where compulsory licensing is imposed. In the past, there has been backlash from private companies on which compulsory licenses were imposed. For example, in 2002, Pfizer canceled plans to build a manufacturing facility in Egypt after the country issued a compulsory license for the manufacture of Viagra to a local company.

Finally, patents are often not the blocking factor in a dissemination of technologies crisis. What the COVID-19 pandemic taught us is that patents are not the primary barrier in emergencies, and that instead manufacturing and distribution play a more significant role.

While being a seductive short term solution, compulsory licenses for green technologies would in the long run work against the common goal of spreading useful technologies to the greatest number.

Alternative Approaches to Encourage Green Innovation

If compulsory licensing is not the optimal solution for promoting green innovations without undermining intellectual property rights, alternative approaches should be explored.

If the punitive route is favored, governments can consider imposing tariffs or taxes on polluting technologies, thereby making them less economically viable compared to green alternatives. Similarly, pricing mechanisms can be implemented to encourage consumers and businesses to opt for environmentally friendly technologies can be an effective way to drive green innovation.

Should a positive incitation route be favored, one could imagine governments collaborating with industry-specific standard-setting organizations to establish green norms and standards, encouraging the development of green technologies as industry standards. This could lead to the creation of standard essential patents (SEPs) and drive innovation in the green technology sector.

Conclusion

While the concept of compulsory licensing for green technologies in response to climate emergencies is legally feasible, it raises several practical and economical concerns. Compulsory licensing would likely prove not to be effective or even sustainable for addressing the climate crisis, and alternative, preferably positively inducing, measures would provide more constructive paths toward incentivizing green innovations while preserving intellectual property rights.