Depending on who you ask, compulsory licensing — an option for governments to force companies to license technology if they’re not selling it in a particular market — can be seen as either a doomsday scenario for innovation, or a fair way to ensure distribution of beneficial but expensive tech. The highest-profile examples of compulsory licensing come from the pharmaceutical industry, where the policy is often used to make life-saving drugs more widely available at lower cost than they would be if one company controlled all production. As you might have noticed, drugmakers aren’t exactly going out of business.
But according to Elise Zoli, a partner at the law firm Goodwin Procter who heads up the firm’s energy practice, trying to apply a similar policy to cleantech in the next international climate deal comes with a big risk: widening the valley of death, where many startups collapse because they can’t finance key phases of development or commercialization.
Pharmaceuticals, Zoli told me last week at the AlwaysOn Summit at Stanford, were “already a major industry” when compulsory licensing went into effect. By contrast, clean energy
“is 100 percent emerging.” Compulsory licensing could make it more difficult for startups to raise funds, Zoli said, because “what they sell to VCs is IP.” If rules go on the books that say energy innovators may at some point be forced to license their technology in some markets at low cost, it would remove part of the value proposition for investors. So startups could find themselves entering that valley of death a lot sooner, running out of capital before they ever really get off the ground.
But when we spoke earlier this year with Alan Salzman, CEO and managing partner of VantagePoint Venture Partners, he suggested that this outlook may overstate the threat that efforts among climate negotiators to share IP across borders represents to startups seeking venture capital. “In a world that’s innovating quickly,” he said, “the life cycle of IP is short.”
Some kind of framework for distributing cleantech IP will likely be included in the climate treaty set for negotiation in Copenhagen this winter. As Celeste LeCompte explained recently over on GigaOM Pro (subscription required), “Many countries (Brazil being the latest example) say access to intellectual property (IP) and technology transfer solutions are the buy-in for their participation” in the treaty. At this point, we’re starting to see a few potential alternatives (or additions) to the compulsory licensing model.
Celeste notes one model from a coalition of companies that, in partnership with Creative Commons, have launched a project called GreenXchange to make “environmental patents” for things like materials science and manufacturing processes available to other companies in exchange for attribution, licensing fees, or other compensation with set restrictions.
Instead of the compulsory licensing model often used for drugmakers, Zoli envisions a system with a larger role for government in making cleantech IP more affordable in developing countries. She said she’s working on a proposal for subsidizing licensing for cleantech, and getting a good response on Capitol Hill. The idea is to have developing countries pay a small portion of licensing costs (she mentioned 2 cents on the dollar as a starting point) for key technologies, and then have the U.S. government make up the difference. As countries develop, she explained, they would be required to pay an increasing portion of the licensing costs until they can afford the technology without the subsidy. So taxpayers, it seems, would foot the bill instead of private companies.