Innovation, the Environment and the Future

By Jo Bowman

Innovative companies and individual bright sparks are creating new technologies that will help reduce global carbon emissions. Jo Bowman reports on how IP links the world in its search for a response to the global challenge of climate change.

The greenhouse effect and the issue of carbon-neutrality are now part of a global dialogue – never has awareness of the urgency of taking action been greater. The task is nothing less than radically changing the way we live and work. The Royal Institute of International Affairs in London says that to keep the rise in average global temperatures below a critical 2 degrees Celsius, global greenhouse gas emissions must peak before 2020, and be reduced to between 50 and 85 percent below 2000 levels by the year 2050.

The low-lying islands of the Maldives – extremely vulnerable to rises in sea level – are among the first countries to commit to becoming entirely carbon neutral. The government there is switching to renewable energy sources such as wind and solar power with the aim of hitting its zero-carbon target within a decade. The South Pacific Island state of Tuvalu has said it wants all its energy to come from renewable sources by 2020. Norway’s government has pledged to be carbon neutral by 2030; Costa Rica is hoping to get there by 2021. And, in New Zealand, the prime minister has said that, by 2025, 90 percent of the country’s energy must come from renewable sources, and transport emissions must be cut in half by 2040. Elsewhere, individual cities and states have declared their carbon-neutral intentions.

But if any of these ambitious targets are to be met, it will take much more than good intentions and community spirit. “Ensuring access to climate-friendly technologies at affordable prices is a critical issue for international public policy – and one that cuts across economic, legal, security and geopolitical concerns,” says Ilian Iliev, co-founder and Chief Executive Officer (CEO) of intellectual property (IP) consultancy CambridgeIP. “It requires a critical mass of low-carbon investment, innovation and deployment that meets mid and long-term goals. The implications for corporate strategies and business models are profound.”

Who owns the low-carbon future?

The role that IP rights play in the quest for a lower-carbon future is a contentious one. British think-tank Chatham House, in its report “Who owns our low-carbon future?” notes that, on the one hand are proponents of stronger IP rights regimes that encourage innovation in climate technologies; on the other is the argument that the IP system should be made more flexible, broadening access to technologies, particularly in developing countries.

The Chatham House authors, among them Mr. Iliev, are essentially in favor of strengthening IP protection. They argue that a patent portfolio can be used to attract venture capital, bring about strategic alliances, provide protection against litigation and create opportunities for mergers and acquisitions.

Appetite for low-carbon technologies has resulted in a flurry of applications worldwide to register patents on everything from stand-by lights for appliances that turn themselves off, through to new-fuel cars and carbon capture. Analysis of the Derwent patent database shows that, from 2003 to 2008, inventions for reducing power consumption numbered 1,200, compared to just 481 in the previous five years – the number granted in 2008 alone was 340. “It does suggest a major trend,” says Steve Van Dulken, information expert with the British Library Research Service. A search for patents related to reducing the power consumption of appliances in stand-by mode reveals even more marked growth – from a total of only four between 1984 and 1988, to 62 between 2002 and 2008.

“What we see happening is typical of any kind of technology – the deployment of different types of technology very much grows in line with patent filing,” says Alan MacDougall, a partner with IP attorneys Mathys & Squire. Patents relating to photovoltaic cells and wind power have risen, for example, he says, from between 300 and 400 a year, to closer to 1,600 filings per year. “There’s a very, very clear correlation between the number of patent filings and products on the market.”

The increase in patenting clearly shows that the IP system provides incentive for investing in research into environmentally-friendly technologies, thereby resulting in even more such products coming to market.

Limiting emissions leads to more patents

Businesses in some of the highest energy-consuming and biggest carbon-emitting industries are behind many of these innovations. In the auto industry, Rolls-Royce, for instance, filed 425 patent applications in 2008, a record number for the company, which invested £885 million in research and development that year, “a significant proportion” of which was aimed at reducing the environmental impact of its products. The global aviation industry, meanwhile, has agreed to cut its net carbon emissions to half of 2005 levels by 2050. The airline industry, if left unchecked, is forecast to account for up to 20 percent of all CO₂ emissions by 2050.

One of the major aircraft producers, Airbus, is developing new technologies to help bring this about, and protects its IP through patents. More than 380 patents have been filed in relation to technology developed for its double-decker A380 jet. “Significant breakthrough innovations have been achieved in aerodynamics, cabin design, engine integration, flight controls, aircraft systems, manufacturing techniques and the extensive use of advanced lightweight composite materials,” the company says. “These intellectual property rights secure Airbus’ innovations and form a solid basis for maintaining Airbus’ lead in new technological developments.” One of the patents relates to a new joining process for making a carbon fiber composite wing-box for commercial aircraft. About a quarter of the A380 is made from composites, leading to a weight saving over traditional construction of 15 metric tons that significantly reduces fuel consumption.

It is a little ironic that high-carbon companies control some of the IP that appears essential for the low-carbon economy. “Technological development does not evolve within the boundaries of economic sectors. This means that innovation can come from a range of sectors – high or low carbon ones,” says Bernice Lee, Research Director, Energy, Environment and Resource Governance, The Royal Institute of International Affairs. “The good news is that this gives high-carbon industries potentially serious stakes in the future of a global low-carbon economy. The problem is that companies in these industries need to balance their short-term gains from high-carbon activities with investment in their long-term future."

Smaller companies are also using patents to secure their future in a lower-carbon business environment. Solarcentury, founded 11 years ago to design and supply solar energy solutions for residential and commercial buildings, uses patents to make sure it is not squeezed out of an increasingly popular industry. The company’s chief innovation officer, Alan South, says solar power has averaged 40 percent compound growth over a decade. “The way we use patents’ capability is a means of ensuring we have freedom to trade,” he says. “This guarantees that the company – which employs about 120 people – can operate without infringing anyone else’s patents.”

According to Mr. MacDougall, the biggest problem with green technology is deployment – getting technology to the marketplace. Many companies are developing new technologies, and they will develop their own proprietary systems, but it is likely to take years before significant progress is made in confronting the challenge of climate change. And time is of the essence if warnings about the rapidity of global warming are to be believed.

Borrowed time

Research at Chatham House shows inventions in the energy sector generally take two to three decades to reach the mass market. This time lag reflects the time it takes for any patented technology to become widely used in subsequent inventions. Data on 180 patents from six technology sectors relevant to carbon reduction show an average lag time of about 24 years. “The diffusion time for clean technologies globally will need to be halved by 2025 to have a realistic chance of meeting climate goals,” says Mr. Iliev.

Moving quickly is especially important in emerging markets, where large infrastructure programs are being rolled out. Where low-carbon technology is available, it can be implemented on a grand scale; otherwise, investment will be made in higher-carbon technology, and the switch over will not occur for some years.

Fast-tracking green technology

Several countries have implemented fast-track systems to enable patents relating to green technologies to “jump the queue,” among them, Australia, the Republic of Korea, the U.K. and U.S. Brazil, China and Japan have expressed an interest in following suit.

Tony Howard, divisional director responsible for patent examination and legal policy at the U.K. Intellectual Property Office, says the fast-track scheme announced in May 2009 means applicants can ask for part or all of the patent application process to be accelerated. This can reduce the time from application to granting of a patent from the usual three to five years, to as little as eight or nine months. “It’s part of a wider range of policies directed at supporting the battle against climate change,” Mr. Howard says. “It highlights the importance of patents and IP in general in combating climate change, as well as the critical role played by innovation.”

By October 2009, there had been 65 applications for fast-tracking under the U.K. program. “That doesn’t sound like very many … but that’s quite an encouraging figure,” says Mr. Howard. Those applications related to a diverse range of technologies, from new methods of energy generation, to products to make processes more efficient or to conserve energy. Some applicants were large companies, some small, and others individual inventors. The ability to move faster is of particular benefit to smaller businesses, Mr. Howard notes, as it allows them to get their technology to market more quickly and helps with licensing.

Initiatives to pool and share

Universal concern for the environment is leading to new approaches in IP ownership. The Eco-Patent Commons – founded by IBM, Nokia, Sony and Pitney Bowes – allows patents with environmental benefits to be shared and used by other contributors free of charge, encouraging new technology to be adopted more broadly, more quickly.

In the Netherlands, the CATO-2 program – a joint government and private-sector carbon capture and storage initiative – encourages participants to use different levels of IP ownership. Patent applications are soon expected to emerge from within the project. Ownership of the patents will reside with the inventing party (or parties), with ownership sometimes being shared between a knowledge institute and a private company.

This multi-tiered arrangement sounds complicated, but Jan Hopman, deputy CEO of CATO-2, says the complexity is a necessary evil. “The alternative is that everything’s public, shared with everybody. If everything’s shared, then the big breakthroughs will come from outside the program. We want to give an incentive to keep them inside.”

International cooperation – cutting across boundaries

The enthusiasm with which governments are embracing carbon-reduction targets is a huge vote of confidence in technologies that promise to reduce emissions, and gives the companies and individuals behind them confidence that their investment in green technologies could have a significant pay-off.

It is now time for governments to be more specific about the ways in which they work to reduce emissions, notes Mr. Iliev, to help focus research and guide investment into the areas most likely to be favored. “Government signaling intent is very important, but if they don’t follow through it can lead to disillusion,” he says. “We are now at a critical moment.”

The authors of the Chatham House report caution that apparently well-intentioned government efforts to support national champions may actually hinder global innovation in energy systems. They say that existing industrial structures, regulatory regimes, research capabilities of private and public institutions, as well as other supporting infrastructures, are already determining the types of investments or technologies most likely to take off in decades to come.

What is needed, they say, is cooperation across international boundaries – particularly between developed and developing economies – and across diverse business sectors. “Many breakthrough innovations occur when different fields interact,” they say. Innovation in solar photovoltaic technology has benefited from developments in consumer and industrial electronics, and advances in concentrated solar power come from aerospace and satellite technology. “Given the importance of innovation from outside the energy sector to the development of energy technologies, proactive innovation and climate change policy-makers face a complex challenge in monitoring technological and commercial developments,” their report says.

Setting standards for the future

As companies, entrepreneurs and governments seek new approaches to business as usual, so too might the world of IP, and there might well be a lesson to be learned from mobile telephony, an industry whose rate of growth in the past decade and a half could serve the green technology industry handsomely.

“There needs to be a major refocus in how IP is used, and we’re not saying the patent system needs to be changed … just that there’s such a rich experience in other sectors where IP has been critical,” says Mr. Iliev. Mobile telephony’s worldwide success – there are now more mobile phones than toasters, he says – happened as quickly as it did because of standardized technology based on patents.

Mr. MacDougall also points to mobile telephones as inspiration for green-technology diffusion. “All the mobile phone companies could have continued making phones with their own different systems, but there would have been a limited market for them.” By standardizing the technology on which they were based, they widened the market for everyone. “Everyone benefited, and it led to a profusion of mobile technology.”

If it became clear that standards were the way forward, the incentive for holding a patent on which the standard was based would be even greater. In all likelihood, the pace of innovation would accelerate, and diffusion of technology would also happen much faster once a standard was agreed on.