cambridgeip chevening lecture: the economics of climate change - taking the lead in ip ownership

CambridgeIP

The Economics of Climate Change: Taking the lead, IP Ownership

Extracts from Chevening Fellows Lecture Wolfson College, Cambridge

28 January 2010

Quentin Tannock, LLB (Hons), LLM (Cantab) CambridgeIP: Chairman, Co-founder

© 2010 CambridgeIP. All rights reserved

Lecture Introduction – The Economics of Climate Change: IP Ownership, taking the lead (1)

•  This presentation contains extracts from Quentin Tannock’s 28 January 2010 Chevening Lecture at the University of Cambridge, arranged by the Programme for Sustainability Leadership  Considering the research and conclusions presented in the

Chatham House & CambridgeIP report ‘Who Owns our Low Carbon Future’. To download this report, click here

 Presenting Case Studies of the impact on patent activity of the Montreal Protocol on CFCs, and of Feed In Tarrifs in relation to PV and Wind in some countries.

 Discussing options for technology transfer in CleanTech – including options drawn from successful existing cross-licensing, patent-pooling and standards regimes.

2 © 20010 Cambridge Intellectual Property Ltd. All rights reserved

  Much applicable technology exists, and the drivers & mechanisms for technology owners to deploy their technologies can be identified. o  Significant challenges remain - in particular with respect to valuation of, payment

for and deployment of applicable technologies. o  Policymakers need to develop ‘smart’ technology and IP policies that consider the

large diversity in technologies, markets & players; and that draw lessons from past experiences of technology deployments

  Much can be done to improve the transparency and efficiency of the current Intellectual Property (IP) system without radical overhaul – we should urgently address these ‘low energy’ improvements

  The over 50 million patents filed globally represent a global technology library of prior inventions. Many of these patents have expired or have been abandoned, rendering them freely available for use. We should invest in improving access to this wealth of information on existing technologies.


Lecture Summary – The Economics of Climate Change & IP, taking the lead

Contents

•  Context: Technology, IP & Technology Transfer •  Diversity: IP ownership of Low Carbon technologies •  Impact: Policy interventions & international deals •  Case study: Wind •  Discussion: Conclusions, Questions, Options •  Case Study: Licensing Regime Options for a commercial

client •  Conclusions •  Acknowledgements •  Appendix

–  Relevant UNFCCC provisions –  WTO and TRIPS –  Extracts from Stern Review –  CambridgeIP approach –  Contact us

4 © 2010 CambridgeIP. All rights reserved

December 2009 protest against climate change

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Context: Technology

“The problem of climate change is solvable – many of the technologies required are available today while others can be developed if the right incentives are in place.”

UNFCC secretariat report on Technology Needs Assessments (TNAs) 2009 lists:

•  Mitigation technologies –  Energy; Agriculture & Forestry; Transport; Industry; Waste

Management

•  Adaptation technologies –  Agriculture and Forestry; Costal Zone; Systematic monitoring;

Health; Natural disasters


Context: IP regime – challenges & opportunities

“The intellectual property regime can act as an incentive to the innovator, but the granting of the property right can also slow the dissemination of technological progress and prohibit others from building on this innovation. Managing this balance is an important challenge for policymakers.”

The Stern Review, Chapter 16, page 369

Valuing IP – how do we decide what the IP is worth? -  Costs approach (using anticipated costs of maintenance & defense of IP over its lifetime as basis for

calculations of the value of that IP); Econometric approaches (including Productivity; Profitability/Market

Value; Employment & Wage levels)

Patenting rates are significant with over 50 Million patents and patent applications worldwide

–  Relative patenting rates vary from industry to industry –  Not all technology is patented: There are other forms of IP protection –  Many patents never result in commercially successful products, and a relatively high proportion of patents

are abandoned before their term expires: Sound business models and good commercial returns can be more important than patented IP

The patent system is over-loaded –  Anecdotally we glean that there are up to 800,000 patent applications outstanding in the USA, with Japan

and the EPO additionally having a backlog of several hundred thousand patent applications each (see our blog)


Context: IP & Low Carbon Tech Transfer – incentives & disincentives

At the international level there is an expectation that developing countries will undertake mass technology transfer… –  Questions include: Who owns the technology? Who pays? What price? Will

transfer be effective? (e.g. Does the infrastructure exist in transferee states or with transferee companies / entities to take full advantage of the transfer? IP systems, capabilities. Will transferors be motivated to ensure effective transfer?)

International IP related issues are considered by the UNFCCC’s Expert working group on technology transfer (EGTT)

•  Established under COP7 (2001) to implement Article 4.5

At the national level specific measures exist to improve performance of the patent system in CleanTech –  USA

•  USPTO ‘accelerated examination’ •  Bayle-Dole Act to encourage commercialisatoin of publically funded R&D

–  UK IPO ‘Green Fast-Track’ (GFT) –  China adoption of the GFT (see our blog)


A wealth of technical knowledge

The patent system represents a significant global technological library

•  Patents as data are: –  Structured –  Comparable –  Objective –  Information rich

•  Multiple patent data sources are available (an opportunity and a challenge!), e.g: –  USPTO –  Espace.net –  Google Patents –  Specialists like CambridgeIP


A wealth of knowledge about technology R&D

•  Patents provide –  Specifications of technologies, and their uses, with technical diagrams –  Information on the relationships between technologies, and the R&D

relationships underpinning developments and their intensity

•  Many patents are freely available for immediate use (e.g. expired patents may represent ‘white space’ in which there is freedom to operate)


Linkages of Boeing in Concentrated Solar Power – data extracted from patent analysis by CambridgeIP

An example patent diagram, showing an actuation system for a medical inhalation device

Contents



–  CambridgeIP approach –  Contact us


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CambrigeIP’s Diverse Low Carbon & Energy Focus Areas

Wind Energy Systems

Biomass

Photovoltaic & Component Technologies

Concentrated Solar & Other Energy Storage Systems

Fuel Cells

Advanced Refrigeration

Clean Coal Carbon Capture CO2-EOR

Marine Transport

Smart Grid

Nano Devices & Materials

GeoThermal Energy Systems

Refineries, Power Gen, Co-Gen.

Consortia & Research Alliances


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Chatham House and CambridgeIP have developed a patent database focused on six Low Carbon energy technologies

Chatham House and CambridgeIP have developed a unique collection

of 57,000 patents and related analyses focused on 6 areas of

energy technology

1.  Biomass to Electricity 2.  Carbon Capture 3.  Cleaner Coal 4.  Concentrated Solar Thermal (CST) 5.  Solar PV 6.  Wind

A recently completed patent landscaping research effort by CambridgeIP and Chatham House has sought to identify:

Facts on the ground – to move beyond myths and to practical solutions

Building blocks for technology transfer practices in the low-carbon energy space

Following the patent landscaping exercise, Ilien Iliev of CambridgeIP co-authored a report with Bernice Lee and Felix Preston of Chatham

House: Who Owns Our Low Carbon Future?

Full report available for download at Chatham House’s website: www.chathamhouse.org.uk

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Apart from wind and solar PV, patenting activities growth in other cleaner energy sectors are surprisingly sluggish

Patent applications may be unpublished for 18+ months. Therefore the number of reported patents for the last 2 years may be under-represented.

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Geographical origins of assignees indicate innovation strengths & capacities

•  Aside from China, patent assignees are predominantly from OECD economies

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Patent families indicate the commercial value of inventions

In each technology field there’s 250-500 patent families with >10 members

•  Most commercial value is concentrated in a relatively small number of patent families

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High-carbon companies control some of the key knowledge assets underpinning the low carbon economy

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The public sector is also a key actor, and its role is likely to expand

•  Public-institution owned IP may be the easiest point at which we can implement innovative licensing practices

Universities own directly a relatively small proportion of total patents

The ‘expanded patent footprint’ is likely to be much higher: licensed tech & spin-offs

Patent related barriers to technology transfer – some questions

•  Relative concentration rates of IP ownership? –  Relative volume of IP owned by ‘aggressive’ entities? –  In which part of the value chain does this IP lie? –  What proportion of IP generation comes from University or

public-funded/owned R&D?

•  Do Patent thickets exist? •  How to value IP? •  Are national patent offices over-loaded?

–  Can ‘green’ patents be ‘fast tracked’ as in the UK and China?

•  Informational overload & information access difficulties? (Over 50 million patents in 100’s of patent offices around the world)

•  Other patent related barriers?


Contents





Impact of Montreal Protocol on medical inhaler industry

•  Aside from Kyoto, the Montreal Protocol on CFCs was probably the highest impact international climate change deal

•  There was massive industry impact & behavioral change –  To choose just one example in the Health Sector, the CFC ban

impacted many of the inhaler industry’s key players –  We identified two broad strategies for ‘inhaler industry’ adaptation

to the Montreal Protocol •  pMDI space innovations: innovation in propellant formulations leading to

increased propellants-focused pMDI patents •  Moving out of pMDIs: A move into Dry Powder Inhalers, essentially

‘substituting’ the need for a propellant

–  See the next slide for patent trends in these 2 areas

21 © 2010 CambridgeIP Ltd. All rights reserved.

Strategic Analysis of Industry Technology Trends post Montreal

•  The 1987 Montreal Protocol introduced a range of control measures for the production and use of CFCs

•  This had a major impact on the inhaler industry overall, and pMDI manufacturers in particular

•  Two strategies emerged to deal with this market development, resulting in accelerated patenting


Moving out of pMDIs: A number of companies moved out of pMDIs and into Dry Powder Inhalers pMDI space innovations in propellants based on

the 2 HFAs that were allowed to be used (HFA 134a & 227)

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Policy Impacts: Patenting has generally grown with deployment rate

Wind Solar PV

Low-Carbon Technology – Some specific considerations

•  Public public awareness… & public expectation… is unusually high •  Technologies, Market Sectors, Players and Geographical location are

extremely diverse – and this is reflected in the patent data –  Focus is required: Are the ‘Low Carbon’, ‘Green’, ‘CleanTech’ categories too broad

and too inclusive?

•  International ‘deals’ have a huge impact –  Aside from Kyoto, the Monreal protocol on CFCs was probably the largest

relevant deal done, and teaches that there will be a real, and possibly significant, impact on innovation, IP & tech transfer after any deal

•  Young and insecure: Technologies, and business models, are ‘young’ and consequently relatively fragile in some sub-spaces –  Commercial confidence is lacking: Increases the ‘positive impact’ of public

procurements & market guarantees (like Feed In Tariffs). If the market has sector confidence there will be massive private investment, however beware of unintended consequences & ‘negative impacts’ (e.g. the current patent thicket in inhalers)

–  Technology transfer ‘leading practice’ and standard terms are often not yet established (what is ‘fair and reasonable’ is not yet known)

•  Others? 24 © 2010 Cambridge Intellectual Property Ltd. All rights reserved.

Contents





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Wind Energy: A Detailed Look

Wind turbines are complex technology systems

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Wind Energy: Key Components & Applications

Components or application level analysis can help us identify core areas of innovation, or where new activities are emerging

There are significant overlaps between some of these sub-spaces: revealing patents with multiple or systems-level

claims

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Wind Energy comprises many overlapping technological fields

An overlap analysis reveals •  A very close relationship between ‘energy storage’ solutions and ‘generator’ (65.8% of

‘energy storage’ solutions are associated with ‘generator’ solutions) •  The most ‘independent’ components from the Wind Energy technology system are

“energy storage” and “Software/control systems” •  The majority of offshore-related patents are associated with the blades and generator

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Top Assignees: Overall and by Technology Component

It is of interest to understand the extent to which the value chain is ‘owned’ or controlled by the top organisations overall: are there areas where new entrants are making an impact?

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Wind Energy Case Study: Enercon

Enercon has been actively pursuing its IP position: •  Enercon vs. ITC & Zond Energy Systems (1998) •  Possible cross-licensing deal with another Top 5 Wind Energy player

Founded in 1984 by Aloys Webben, Enercon is a privately owned German company that has become a key player in the Wind Energy sector with revenues of $2.5bln

•  A key innovation of Enercon is the direct drive wind turbine: arguably a more reliable alternative to gear-driven turbines

•  Recently Enercon has extended its activity downstream into desalination and combined wind-diesel systems

Suzlon case study: India

•  Indian wind turbine manufacturer –  Established in 1995 with 20 people –  Now employs 14,000 in 21 countries –  Market leader in India (which is 5th globally in installed Wind), 3rd

largest wind turbine manufacturer in the world

•  Strategy of acquiring leading European technology companies (and their IP) in the space… –  Rotor-blade design house: AE Roter Techniek (2000) –  Gear-transmission systems: Hansen International (2006)

•  Subsequently sold a large stake in Hansen International (2009) but retained IP rights

–  Turbine manufacturer: RePower (2009) –  Now has 12.3% of global wind turbine market globally

•  … and then manufacturing in India from a low-cost base


Low-Carbon Technology – Some specific considerations

•  ‘Multiplier effect’: High degree of cross-over from technology in once space to another –  Plane wing materials become Wind blades; Biotech becomes

Biofuels

•  There is an increasing risk of IP related litigation as markets mature (e.g. Wind, PV)

•  Enormous opportunities for developed and developing countries to develop world leadership & own key IP, especially in emerging spaces –  E.g. Suzlon in India (Wind); Suntech in China (PV)

32 © 2010 Cambridge Intellectual Property Ltd. All rights reserved.

Contents





Diverse Low Carbon Solutions & IP: Research conclusions (1)

•  Innovation predominantly arises within the OECD & China, India is also a strong player

•  Patent ownership is concentrated with incumbents in established spaces (such as CCS, Super Critical Coal) and is more dispersed in emerging spaces (such as Wind)

•  There is huge diversity across sectors, players and technologies; coupled with relatively large amounts of ‘cross-over’ between technologies and sectors

•  Enormous opportunities exist for developed and developing countries to develop world leadership in emerging spaces –  E.g. PetroBas in Brazil

•  Time to mass deployment is far too long: Our research shows that it takes between 19 to 30 years for top cited low carbon technologies to reach the mass adoption phase


•  Many Low Carbon market and technology sectors are young & relatively fragile

•  Policies have a large impact on technology development and diffusion –  Support to nascent Wind & PV sectors has resulted in ‘hockey

stick’ innovation growth rates in some geographies –  Banning CFCs resulted in high rates of innovation in inhalers…

and a patent thicket •  There is an increasing risk of IP related litigation as

markets mature (e.g. Wind, PV) •  National level patent offices appear to be overloaded:

Are there measures that can accelerate the consideration of ‘green’ patent applications?


Diverse Low Carbon Solutions & IP: Research conclusions (2)

Measures proposed by UNFCC member states

•  Global technology pool for climate change •  Mandatorily exclude from patenting climate-friendly technologies

held by Annex II countries which can be used to adapt to or mitigate climate change

•  ‘Any international agreement on IP shall not be interpreted or implemented in a manner that limits or prevents any party from taking any measures to address adaptation or mitigation of climate change...’

•  ...ensure sharing of publicly funded technologies and related know-how

•  ...exclude from IPR protection and revoke existing IPR protection in developing countries and least developed countries on environmentally sound technologies…

•  Developing countries have the right to make use of the full flexibilities contained in TRIPS, including compulsory licensing


Measures proposed elsewhere

•  Business as usual •  Establish R&D and tech transfer incentives for low carbon

technology (e.g. tax rebates/reductions, investment incentives, grants)

•  Establish price incentives to give the private sector the confidence to invest (e.g. PV Feed In Tariffs in Germany)

•  Encourage commercial cross-licensing & standards regimes –  Support voluntary pooling / cross-licensing efforts

•  Leave it to markets to decide prices & terms OR Subsidise licenses OR Ensure special access terms for certain types of players (LDCs, SMEs)

–  Establish compulsory pooling / licensing (like TRIPS) •  Pool all ‘green’ technology OR Pool publically funded technologies (Making them freely

available OR available at reduced cost)

•  Engage in patent buy-outs of key technologies •  Additional limits on IPR ownership in some sectors e.g. by profits

realised (i.e. once sufficient profits are realised, the relevant patent lapses)


Some of my suggestions – ‘low hanging fruit’

•  Develop model contracts for R&D collaboration, IP acquisition and IP license deals

–  Transactional costs are reduced when parties can work from standard model templates, negotiations start from a fair and well-understood basis

–  A good example are the ‘Lambert’ Agreements implemented by the UK government for University/Industry R&D collaborations

•  Establish a global database on licensing terms & leading practice in relevant sector(s)

–  Establish benchmarks, encourage transparency & standardisation, share leading practices –  Organisations like WIPO might play a role, and countries could support the initiative through

legislation –  Adopt Alternative Dispute Resolution (ADR*) measures to set ‘fair and

reasonable’ (FRAND) license terms *(e.g. Mediation, Expert Determination, Arbitration)

•  Manage commercial risk through the establishment of specialist insurance mechanisms

–  e.g. insurance to manage IP litigation risk in particular technology sectors

•  Capitalize on the existing, massive, global technology library represented by over 50 million patent documents – it’s currently under-utilised

–  Sectoral mapping & multi-ontology database creation –  Technology mapping: IP Landscapes ®


What are our options?

•  What options exist in relation to Low Carbon IP?

•  What ideas do you have to facilitate technology development and adoption in Low Carbon Energy spaces?


Contents





•  We analysed patent related activity in the client industry and a comparator industry to reveal innovation trends, providing empirical evidence of the gap in innovativeness and increasing litigation risk in the client’s space.

•  A series of interviews with experts and senior executives from the client’s and comparator industries helped relate the risks and benefits of moving to a cross-licensing approach.

•  We developed a ‘checklist’ of indicators for pressures of change, as well as strategic considerations that support a move towards a cross-licensing & standardisation regime.

•  We also developed a sequencing strategy aimed at preserving our clients industry leadership and protect traditional revenue sources during transition to the new regime.

•  The client was concerned that R&D resources were invested into inventing around other incumbents, rather than on innovations to meet end-user needs. As a result key market niches remain unexplored, whilst regulatory pressure increased

•  Key questions posed by our client were: •  evidence that the industry is ripe for change? •  What are the Pro’s and con’s for moving to a cross-licensing approach, based on other industry experience? •  What scenarios can be identified, resulting from a move to a cross-licensing regime? •  How to initiate change toward a cross-licensing regime?

Business Situation

Our Approach

•  Our results showed the take-off in innovation rates in the comparator industry after the introduction of industry-wide licensing agreements.

•  We also compared patent citation rates and showed an increasing inter-relatedness of technology in the clients space relative to the comparator space: increasing litigation risk in the absence of licensing agreements

•  Our client is using our outputs to build internal and external stakeholder support for the proposed cross-licensing regime

Results and Benefits

A Fortune 500 medical devices company asked us to help identify a transition strategy to help move an industry with a highly proprietary and litigious culture toward a more open cross-licensing approach

Client Profile

Case Study: Licensing Regime Options for commercial client


Contents





My conclusions: Low Carbon IP & Tech Transfer

•  Much applicable technology exists, and we can identify drivers & mechanisms for technology owners to undertake technology deployment

•  There are many pressures, and much can be done to improve the transparency and efficiency of the current IP system without radical overhaul

•  The technology world is complex, and we should develop ‘smart’ technology and IP policies that consider the diversity of technologies, markets & players

•  We should work to urgently improve access to the global technology library represented by over 50 million patent documents, this global resource is currently under-utilized


Acknowledgements

•  CambridgeIP –  The entire team but especially contributions by my

colleagues, Ilian Iliev (Energy) and Arthur Lallement (Inhaler Devices)

•  Chatham House

–  Bernice Lee and Felix Preston •  Read the Chatham House / CambridgeIP report: Who Owns

Our Low Carbon Future? Intellectual Property and Energy Technologies (download from www.chathamhouse.org.uk)

•  University –  Programme for Sustainability Leadership


Contents

• Appendix – CambridgeIP approach – CambridgeIP team – Contact us


46

•  Competitive Intelligence: Database-driven analysis and custom reporting on who the competitors are, where they are located, when they became active and who they are partnered with – extracted from science literature

•  Prospective Partners: Information on top corporate, university and governmental partner candidates operating in your area of interest – informed by data from patents and other science literature

•  Technology Roadmapping: Unpacking technology components and ‘value chains’; Using published facts to verify and augment expert opinion on drivers, trends, milestones, barriers

•  Benchmarking innovation & competitiveness: Identification of key trends and geographical hot-spots, together with key players and their R&D relationships; Using literature to measure innovation outputs

•  IP Landscape & FTO Input: Our global IP databases, proprietary methodologies and consulting provide unique patent landscape coverage, highlighting technology gaps, “white space”, and informing due diligence efforts

CambridgeIP Fact-based IP Strategy Consulting

The CambridgeIP

Advantage: -  Proprietary Tools &

Methodologies

-  Multifaceted Team

-  Deep Technical Expertise

-  Global IP Coverage

-  Fact-based Advice

-  Extensive Network

-  Referrals & Introductions

-  Rapid turnaround


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Our tools & methods are applicable to the full spectrum of high-technology developments

Our work experience in 70+ projects per year has given us particular expertise in the following fields:

• Energy –  Wind Energy, Biomass, Fuel Cells, Advanced Refrigeration, Photo Voltaics,

Clean Coal / Carbon Capture, Concentrated Solar, Marine Transport, Waste Reduction

• Health & Life Sciences –  Drug delivery; Medical devices; Medical imaging; Nanotechnology;

Pharmaceutical formulations; Aerosols; Stem Cells & Regenerative medicine; Surgical materials; Wound healing

• Nanotechnology –  Measurement innovations, Nanocomposite materials, Pharmaceuticals,

Photonics, Photo Voltaics, Sensors

CambridgeIP Expertise


Cambridge IP’s approach

Fact-based •  Our technology platform enables us to gather and analyse a huge

volume of published facts, informing your strategies

Comprehensive •  Integration of data sources (e.g. market & financial data) with data

from science literature informs understanding of markets and risks

Transparent and thorough methodology •  Ensures repeatability and improves stakeholder confidence in and

understanding of results •  Improves uptake of results across your departments

More than text •  Graphical and statistical analysis aids your rapid understanding of

spaces, and improves accessibility for non-technical stakeholders



Selected team members

Quentin Tannock

Chairman & co-founder

IlianIliev

CEO & co-founder

Dr. Daryl Boudreaux

Senior Associate

Dr. Andrey Shigaev

Senior Associate

Eren Ore

Associate

Karishma Jain

Associate

Dr. PhumzileLudidi

Life Sciences Manager Dr. Phil Coldrick

Senior Associate

Angus Fox Technical Director

Sir Walter Herriot

Advisor

Miranda Weston-Smith Senior Associate

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Our contact details

Quentin Tannock (Chairman and Founder) [email protected] GSM: +44-077-8621-0305

Ilian Iliev (CEO and Founder) [email protected] GSM: +44-077-863-73965

Corporate Office

Cambridge Intellectual Property Ltd

Sheraton House, Castle Park

Cambridge CB3 OAX UK

UK: +44 (0) 1223 370 098

Fax: +44 (0) 1223 370 040

Internet Resources

Website: www.cambridgeip.com

Blog: www.cambridgeip.com/blog

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