WIPOD – Page Points: Transcript of Episode 4
Intellectual Property and the Mining Industry
Giulia Valacchi: It could be definitely interesting to see, like, you know that your main competitor is in one of these countries and you just have a look and see what's going on there in terms of innovation and maybe to compare yourself or to target yourself to something else.
Lise McLeod: Did you know that your mobile phone is powered by precious minerals? And with the growing populations and growing economies, the demand for mineral products is expected to grow. New technologies are creating an increasing demand for certain minerals. A good example of this is lithium, which is used for our cell phones and electric cars.
Extracting the minerals from the earth is becoming more difficult and the quality of existing mineral reserves is declining. At the same time, the need to protect the environment and prevent climate change is an ever-greater imperative. Innovation holds the key to addressing these challenges.
Welcome Giulia to the podcast. It's a pleasure to have you here today.
Giulia Valacchi: It's my pleasure.
Lise McLeod: Today we are talking about the book 'Global Challenges for Innovation in Mining Industries' for which Giulia is one of the four editors. Giulia, could I ask you to provide our listeners with a general introduction to the subject and to explain why the mining industry is so important to us?
Giulia Valacchi: We actually focused the full book on innovation in the mining industry, which we thought was a very under-studied topic because, as you say, we know about the existence of the mining industry, but we think of, okay, it's something over there where they open up a mine and they start extracting some minerals.
But indeed the mining industry is at the basis of our life, our everyday life. Demand for minerals is increasing over time. When we thought about mining, we thought of something with the industrial revolution, but it is still nowadays a super useful sector because indeed, first of all, the global population is growing. There are more people demanding goods. In addition to that, our living standards are also growing. It's not just that the population grows, but we want to live a better life. And in all of these, the mining sector is a key component.
We don't think about it, but for example, let's think of our smartphone. There are more than 70 minerals inside our smartphone, so this definitely brings the mining industry at a very important level. And of course, minerals are not finite resources in the world. A way for the mining sector to grow is also through innovation because innovation can be a key component in the sector. With this book, we wanted to show to everybody, even the non-expert about the mining sector, that there is indeed a lot of innovation happening in the sector.
Of course, we come from an economics point of view, and again, there were not that many studies about the innovation in the mining sector. And I would say another key contribution of our team and of the book is that we built up a new database, a totally new database composed of all patents within the mining sector.
That's the way we actually look at innovation: through patents, through patent activities. And it was definitely a hard thing at the beginning to put it together. But now we have this database, which indeed records innovation in the mining sector from early 1900s up to nowadays, like most recent days.
This is another big contribution of our book, that it's actually putting together a totally new database to explore this topic. And hopefully also other topics connected to, again, the mining sector.
Lise McLeod: You mentioned patents. Why is intellectual property, and in particular patents, increasingly important for the mining industry.
Giulia Valacchi: Okay. Well, that's a good question. And of course, I think it's a question that always arises to people that are using patents as a proxy, as a way to study innovation. Of course, patents are not the only way to measure innovation, and why we thought that, I mean why we think that they are like a good proxy for this industry in particular. First of all, mining companies tend to be increasingly bigger, almost monopolist in some countries. So there are countries where you find maybe one big company and it's not just their work, but they typically cooperate with what we call in the book, METS, which is an a acronym for all the service companies that produce actual services for the mining sector.
There are the mining companies, the METS companies, that produce services for the company. And indeed they are operating in a world where the demand of minerals is global at this point, in the sense that maybe they produce in one side of the world, but they do export and sell their minerals to a different side of the world. In this integrated global market, I think IP is a very powerful tool. So the possibility to protect your innovation, not just within your country, but also worldwide, I think is a key instrument, if you want to be a big company selling worldwide. I think this is the main argument in support to the idea that, indeed, IP and patents are a good proxy, a good approximation of innovation.
Before starting at full speed with all the analysis, we took other indicators of innovation activity within the sector to be sure that our patents were reflecting well enough the innovation activity within the sector. And we work for example, with R&D investment from the OECD indicators. In addition, we had some countries participating in our studies and they could access from the industry association some private registry indicating expenditure in R&D of these companies.
And indeed, we could see that the patents were approximating very well the path of investment in innovation. We then opted for the use of patents because, I mean, we do work at WIPO, but also they were a way of measuring innovation across time, from a very spread interval from the beginning of the 19th century up to nowadays.
And it was also the best way to compare countries among each other because the patent rights is the same or is very similar across countries, so it was a good indicator for us to measure the innovation activities in all different countries.
Lise McLeod: I noticed that Australia was featured as one of your case studies. If you would take Australia as an example, which indicators did you use to measure increased innovation?
Giulia Valacchi: It's true. Australia was one of our partner countries and indeed our idea to study innovation in the mining sector really started from Australia. I mean, Australia, the mining sector is very, very important, both in term of production, of course also in term of innovation, but their production, their expertise of minerals is super important. And Australia was really the leading country in this study in the sense that they kind of anticipate the way we apply to analyse the full world. And as I was saying before, they use, indeed, patents and that's also what we use in our book, but they have very meticulous information from their industry association about mining companies expenditure in innovation. And so they could really go a little bit even more in detail than just the mining patents analysis.
Of course this data is very sensitive so they didn't release them fully. But in the book you will find a chapter fully dedicated to Australia with graphs and indicators about this expenditure in innovation from their companies. But again, they confirmed the idea that patents were good enough an indicator, and we could use them to apply for the global study, let's say.
Lise McLeod: What was included in the research and development indicators?
Giulia Valacchi: That's a good question. So in the sense that, what is actually R&D in mining? And we had a lot of discussion about this at the very beginning, because one of our editors, David Humphreys, was a former leading economist in the Rio Tinto Group.
Innovation in a mining company could take a different form in the sense that it'll be difficult for a mining company to innovate in the products, in the sense that, you have to invent a fully new combination of minerals that takes a form of a new method or a new mineral, and this is very unlikely. So product innovation in the sector is not super spread.
But we can think, as an innovation for a mining company to invest in opening up a new mining site, and I think this is very peculiar to this specific sector because manufacturing chemical products is totally different. I mean, when you invent a new medicine, that's just a new medicine, no? But in the mining sector, when you go and dig a new hole in the ground, you are not sure you will find something there, but you are investing in trying to see whether there is a good mineral site or not. And of course there are a lot of technologies that can help you improve your likelihood of finding good mineral sites rather than finding just the ground.
Indeed, in the R&D expenditure of a company, the company’s record as well investment in opening new sites or looking for new sites. And of course, then you have the more typical form of R&D, which is just like producing or innovating new technologies, which can maybe help reducing the cost or increasing the products, for example. It's the more standard part, but I would say it's very peculiar in the sector because there is also this side of just opening up new mines and you don't know whether you will be successful or not, but you still try. And eventually your return will be very high if you find a new mineral site.
Lise McLeod: In the book, it's stated that mining innovation has been booming for more than a decade. What is believed to be behind this boom?
Giulia Valacchi: Indeed that's what we study in Chapter Seven. We study the innovation pattern together with the price. Is there any causality between prices and innovation? With the composite price between short cycle prices, long cycle prices, so there are different components of the price. So the ones that oscillate very fast are the short cycle, but the big tendency of the price are the long cycle ones. And indeed we found that also innovation is cyclical inside the sector, which means that in a period of price boom, also innovation tends to increase. On the contrary, in periods of reduction of prices, innovation tends to reduce.
And of course there is definitely a lot of messages that we can transfer through these, because this is natural for the industry, because as an industry, when you see the prices going down, so your returns start to diminish, you kind of stop your activities, stop your innovation. But as a policymaker, like looking at the big picture, knowing that also innovation is cyclical, maybe you can invest in periods where prices are very low.
You can support the sector, the innovation in the sector, to reduce this cyclicality. In periods where prices are low, you can subsidize the sector to keep the level of innovation still high enough that they can maybe develop some cost cutting technologies, so that they can help the sector go through these bad periods in term of prices.
Lise McLeod: Can you now briefly outline the important parts of the mining life cycle and the relevant patent-related sub-sectors?
Giulia Valacchi: We decomposed the life cycle of a mine in three big parts. First of all, the first stage is exploration. When you start digging in the ground, you look for the deposit. Then after this comes the mining operation, what we think of as the mining activity, so actually extracting the ore. And at the end, the metal production, you refine the ore, you create whatever is needed from the market, so that you can actually put that product on the market. And indeed, we transport these different stages in our patent analysis because we assign through a strategy that includes the use of IPC codes, keywords. We were able to assign patents to different parts of these cycles. And indeed we have patents assigned to the exploration part, then blasting patents, which could be patents in the exploration part, but also in the mining operation, so are a little bit transversal to the two stages. Then processing patents, which are more related to mining operation stage. And then to the final stage, so the metal production, we had metallurgy patents and refining patents.
And then we have three categories of patents, which were a little bit more transversal, so were not that easy to just assign to one stage or the other. And we are talking about transport patents because, of course, transport can be at any of the stages. Automation patents, so like patents that relate to automating technologies. And then environmental patents, which is a very interesting and developing topic within the sector because the sector is undergoing more and more strict environmental standards. So countries are asking the companies, of course, to adopt these standards to try to reduce their pollution.
And so, in environmental patents we have seen, there is a specific chapter dedicated to it, a big growth in very recent years because companies need to comply to these rising environmental standards. And again, these environmental patents can happen at any stage of the, of the mining operation.
Lise McLeod: Could I ask you now to provide an overview of the top and more relevant countries that have been innovating in this area?
Giulia Valacchi: Okay, sure. At the top innovating countries, we found two sets of countries: countries where the mining production and the mining sector is very important, and I'm just mentioning, like Chile, Brazil, Canada, South Africa... so countries, which you can really identify as mining countries in the sense that mining activities are very important. For example, Australia as well. I mean, I'm not citing them all.
But at the top end of innovating activity, we do also find countries which are not in the common, like in the general idea, mining country, for example, Belgium, France, Sweden, Korea, Switzerland... Why them? Because these countries are hosting what we call the METS like I was talking before about these service companies, which collaborate with the big mining companies. The METS companies are not extracting themselves. These are specializing suppliers to the sector and these countries host companies, which are not mining companies per se, but innovate within the mining sector because they produce innovation, which is targeted to the mining sector. And then they sell these first to mining companies. For example, a lot of the belts that have been developed for the mining industries, they found application also for transporting humans and escalators and things like that.
Lise McLeod: And now those countries who haven't perhaps been innovating as you would've expected?
Giulia Valacchi: On the other side, so you asked me which countries we didn't find as innovative we would expect. Of course, here in this type of analysis where we use IP indicators, particularly patents, we are missing all the informal economies. In the sense that I'm talking probably about like some African countries where for sure there is a lot of mining activities, but probably this mining activity for the moment takes place at a more informal level. Either the production there should be, and there is for sure some innovation, but given the informality of the full structure, they don't go and patent the innovation on the market. They just keep it as a secret within themselves, and for sure, we don't capture this type of activity in this study.
Lise McLeod: What would you say would be the main takeaways for our listeners with regards to the contents of this book?
Giulia Valacchi: Okay. Well, again, I think the takeaways probably are different from different audiences, so for sure as a researcher and an academic, I would say 'Oh, cool. There is this publicly available database' because it's publicly available. Maybe I find an interesting subject, let me go and dig more in this topic from my angle. So it could be an interesting research opportunity, for example, from the researcher’s point of view.
From the policymaker, I think the best angle is probably the one we gave about the cyclicality of innovation. So I am, let's say a policymaker of a country that relies a lot on mining. Let's say Chile, Brazil, and it's a bad period for prices, or methods, or minerals are low. My industry is definitely struggling because it's producing less, maybe is closing up some mines. What should I do? Definitely, I should do some counter-cyclical policies. Target, for sure, production, but also innovation because you know that giving the support, you can still stimulate the sector to innovate for, maybe, some cost reduction. So they are still able to reduce the cost without, let's say, cutting their contract, for example. So as a policymaker, maybe looking at the big picture, you want to, in bad periods, subsidise this innovation, which is able maybe to help the minors to go through the bad periods without just sending people home.
I think from the last point of view, which is the one of the industry itself, I think it's a very interesting study maybe to compare your position, your country of residence, with other countries within the study to see where the technological frontier is. Maybe you already know it, maybe you don't. This study is really showing off which countries are leading it. So let's say the state of art within the mining industry is on innovation. And in particular, I forgot about to say this, we have some partner countries. You will find specific chapters dedicated to the analysis of specific countries. And in particular, we collaborate with Chile, Brazil, Canada, Australia, and the US. For these countries, you will really find an inside, a very deep, inside breakdown of innovation just within these countries.
It could be definitely interesting to see, I don’t know, that your main competitor is in one of these countries and you just have a look and see what's going on there in terms of innovation and maybe to compare yourself or to target yourself to something else.
Lise McLeod: Thank you, Giulia. The way that you've highlighted the various aspects of the subject has been really insightful and I'm sure that our listeners will delve into the different parts of the book that are of interest to them.
Giulia Valacchi: Thank you.
Lise McLeod: I hope that you've enjoyed listening to my conversation with Giulia Valacchi, whose passion about innovation in the mining sector really comes across when she speaks. The book is available from Cambridge University Press, in digital format as open access and the print version is available for purchase. You can find the book in our knowledge repository, along with the rest of our collection about both historical and current IP issues.
Until next time and the next Page Points, bye for now.