Intellectual Property Rights and its relevance in Energy and Innovation.

Introduction.

This paper will demonstrate why Intellectual Property Law (IPL) depicts a critical influence in the energy and innovation sector by three main arguments. The first one states that IPL influences the development of a country. The second argument states that litigation and the enforcement of IPL affect the direction and objectives of the science and innovation projects by researchers, investors and authorities. The third argument states that IPL has a defined impact on the energy sector, encouraging innovation through radical and collaborative efforts as an alternative to the traditional incremental and large scales projects.

IPL and the effect on the development of a country.

Innovation, like any other productive and intellectual activity, requires investment to be developed. Therefore, the investors require security over the money they provide and the technology that results from it. The legal framework provides this security trough different primary sources, the best example of this is the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) which is the Annex 1C of the Marrakech Agreement that created the World Trade Organization. According to this agreement the member countries must provide the legal framework regarding the Intellectual Property Rights (IPR).

IPR has a double effect on the economic and social development of the host country.[1] In this regard developed countries look after stronger IPR’s that harvest more financial and technological benefits from the better diversity and ubiquity of the market share they control.[2]

On the contrary, developing countries address significant barriers to technology adaptation, such as higher transaction costs and difficulties to generate or adopt new technologies to their production chain.[3] These challenges depict the posture of developing country to look for more open and nuanced IPR’s. This posture looks after a space of manoeuvre within the legal framework that can help to fill the technological gap and compete in a better ubiquity and at the same time increase the prospectivity as an innovation hub.[4]

IPL, such as TRIPS offers the minimal legal frame of protection, in which developed countries demand stricter IPR’s to attract more investor to specific innovation projects.[5] On the contrary, developing countries require more flexible and nuanced IPR’s to reduce transaction cost and barriers to technological adaptation.

Daniel Gervais confirms this idea as follows:

“Addition narrative advocates claim a casual link between global innovation and high levels of intellectual property protection in developed countries, despite the fact that technological development in many of those countries having started before high intellectual property protection was introduced”. Many global firms need strong assurance of patent protection to transfer technology or to direct highly sought-after foreign investment. Addition narrative rhetoric has thus changed from viewing TRIPS as quid pro quo for developing countries’ ability to obtain other concessions to arguing that high level of protection are intrinsically positive policies that will benefit all WTO members”.[6]

Not all countries follow this pattern. China, for example, which is still consider as a developing country faced a transition in the political and economic layout of the country transforming the country from a State Control country to a Market based one. This transformation aims to develop stronger formal institutions with the objective to foster and protect IPR’s and attract more international investments and technological transfer to China’s territory.[7]

Litigation and Science.

Under TRIPS the member states must create administrative and jurisdictional authorities to oversee the legal protection of IPR’s, these authorities shall conduct the contentious cases in two main branches. Firstly, they must decide over the eligibility and granting of the IPR titles, for example if a specific invention will be protected as a patent or not. Secondly, they will decide over infractions, damages and other enforcement procedures.

Patents are one of the stricter ways in which a researcher can protect its works. Thus patents (and also copyrights) grant to the inventor (or author) the possibility to control the use of the technology under the IPR, therefore one of the most critical elements that any legal framework has to address is the definition of the eligibility terms for granting IPR titles and the legal pathways to ensure their protection and enforcement.[8]

To the matter of defining the terms of eligibility to grant IPR titles, one case is relevant to study, and that is the case of AMP v Myriad[9]. In this case, the United States Supreme Court defined what specific inventions and projects are eligible for a patent title, in the specific case of genetical material.

The Myriad case stablished a landmark on patent law, defining in a precise way that genetical material is eligible for a patent title only if the genetical material is a synthetical created genetic material. This material is different from the natural gene in the way this gene has been isolated, modified or altered in a way that cannot be attributable to nature.

This case in combination with the ruling in Mayo v. Prometheus[10] defined the limits on the exception of the US Patent law that exclude laws of nature, natural phenomena, and abstract ideas from being eligible for a patent title.[11]

Additionally, to these landmarks, litigation cases may broaden the eligibility of new technologies, such as the case of software patents. Usually software and other abstract ideas are not eligible to a patent title and protection under TRIPS and the domestic framework of the member nations, but some cases in the US and the EU have defined a new set of eligibility test to address this new set of technologies.

In the US, the Alice test which is based primarily on the decisions of the Bilski[12] and Enfish[13] cases opened the possibility to specific innovations in the software business to achieve the patent title. In the ruling of the Bilski case, the court defined that “machine-or-transformation test is not the sole test for determining the patent eligibility of a process” this implies that the eligibility test must address a holistic view of the claims and the examiners must compare them to the ineligible concepts in order to determine if the invention claimed is not only a mere set of instructions, extra-steps in a solution or the invention face severe restrictions in its implementation field. What a software-based invention must address is a define improvement in the technology.

The enforcement and protection of patents is critical for specific industries, such as the energy and the wind generation technologies. In this sector, patents are critical to the transfer of technology and the costs related to this, because acquiring advance technology can be difficult if the technology suppliers are few in quantity and concentrated in quality.[14]

In this context, the ubiquity of the technological suppliers poses a great deal of concern to competitors and users, thus the patent holders can deter the admission of new competitors though infringement litigation as J. Reichman states:

“The wind turbine industry is also quite concentrated, with the top 4 firms accounting for almost 75 per cent of the market. In the U.S. market, General Electric is the major player, and it has a reputation for enforcing its patents aggressively. For example, in February 2008 GE asked the U.S. International Trade Commission to bar imports of wind turbines made by Japan’s Mitsubishi Heavy Industries Ltd., arguing that Mitsubishi’s turbines infringe on its patents.”[15]

IPL, also has the role of equilibrium leverage instead of a booster for innovation. Thus, legal intervention frequently is problematic. IPL and litigation play the role of a trigger that in some cases, leads to a wasteful race to gain IPL titles, despite the novelty or the real application of the inventions under examination.[16]

IPL on the energy industry.

The energy industry is usually dominated by existing technologies, especially in the countries that faced liberalisation of their markets, large scale and incremental technologies profoundly dominate the innovation projects in this area; thus, these methods are the ones that offer more security to the new investors.[17]

Despite this scenario, IPL established a positive effect on the oil and gas industry, one case that is relevant to address is the one related to the shale gas.[18] The production of unconventional reservoirs requires exclusive technology. In this case, the hydraulic fracture is a proven technology but is very expensive to operate, and the production and recovery rates are not enough to be economically viable. By itself, the hydraulic fracture cannot be implemented either by incremental or large scale, the revolution of shale gas was feasible when the technology of hydraulic fracture collaborated with a new technology addressed as horizontal drilling.[19]

Thought the combination of these two technologies and the IPR of them, that investors considered that the benefits of producing in these unconventional reservoirs were higher than the risks involved.

Considerations.

This paper analysed the effect that IPL has over the energy and innovation industry, first this paper shows that a country may have benefits and acquire a better prospectively to attract foreign direct investment, notably when the country establishes a useful design IPL framework.

Secondly, this paper studied the impact of litigation and enforcement of IPR on the innovation and the investments for research and development, taking in consideration the case law regarding patent eligibility to synthetically modified genes, and how these rulings and legal definitions reduced the number of further research and investigation projects and works significantly.

Finally, this paper addressed the positive impact on the energy sector or the IPL, and how it had a role as an incentive to develop new technology through disruptive and collaborative methods of innovation with the example of the shale gas revolution for production of unconventional reservoirs.

Conclusions.

Accordingly with the arguments exposed on this paper it can be concluded that IPL has a considerable relevance over the innovation and energy sector; thus a correct IPL framework can foster or discourage innovation and competition allowing countries to gain a better prospectivity to attract foreign direct investment, and also to develop business methods or industries relegated by the traditional methods of innovation.

Bibliography.

Brown A, ‘Lessons from Technology and Intellectual Property in the Oil and Gas Industry in Scotland: A Scholarly Journey and an Empirical Review’ (2014) 11 (1) SCRIPT-ed <https://doi.org/10.2966/scrip.110114.9> accessed 20 September 2019

Costa-Campi M, García-Quevedo J, Trujillo-Baute E, ‘Challenges for R&D and innovation in energy’ (2015) Energy Policy < https://doi.org/10.1016/j.enpol.2015.04.012> accessed 20 September 2019

Engel C, ‘When is intellectual property needed as a carrot for innovators?’ (2011) 7 (2) Journal of Competition Law & Economics < https://doi.org/10.1093/joclec/nhq025> accessed 20 September 2019

Gervais, D.J. “Climate Change, the international intellectual property regime, and disputes under the TRIPS Agreement” in Sarnoff, J. Research Handbook on Intellectual Property and Climate Change (Edward Elgar 2016)

Jerome Reichman, Arti K. Rai, Richard G. Newell and Jonathan B. Wiener, ‘Intellectual Property and Alternatives: Strategies for Green Innovation’(2008) EEDP Paper 08/03 London: Chatham House/RIIA < https://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=2915&context=faculty_scholarship> accessed 20 September 2019

K.Ravi Srinivas, ‘Climate Change Technology Transfer and Intellectual Property Rights’ (2009) Ris Discussion Paper < https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1440742> accessed 20 September 2019

Kenneth Guang-Lih Huang, Xuesong Geng, Heli Wang, ‘Institutional Regime Shift in Intellectual Property Rights and Innovation Strategies of Firms in China’ (2017) 28(2) Organization Science <https://doi.org/10.1287/orsc.2017.1117> accessed 20 September 2019

Pathak S, Xavier-Oliviera E, Laplume A, ‘Influence of intellectual property, foreign investment, and technological adoption on technology entrepreneurship’ (2013) 63 (10) Journal of Business Research <https://doi.org/10.1016/j.jbusres.2013.02.035> accessed 20 September 2019

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Table of cases and legislation.

Ass’n for Molecular Pathology V. Myriad. 133 S.CT. 2107 (2013)

Bilski v. Kappos; 561 U.S. 593 (2010)

Enfish, LLC V. Microsoft Corp., 822 F. 3D 1327

Mayo Collaborative v. Prometheus Labs. 132 S.CT. 1289 (2012)

United States Code Title 35 – Patents section 101

References.

[1] Cassandra Sweet C and Dalibor Maggio, ‘Do Stronger Intellectual Property Rights Increase Innovation?’, (2015) (66) World Development <https://doi.org/10.1016/j.worlddev.2014.08.025> accessed 20 September 2019

[2] Ibid.

[3] Saurav Pathak, et al, ‘Influence of intellectual property, foreign investment, and technological adoption on technology entrepreneurship’ (2013) 63 (10) Journal of Business Research <https://doi.org/10.1016/j.jbusres.2013.02.035> accessed 20 September 2019

[4] Sweet (n1)

[5] Ibid.

[6] Daniel Gervais, “Climate Change, the international intellectual property regime, and disputes under the TRIPS Agreement” in Sarnoff, J. Research Handbook on Intellectual Property and Climate Change (Edward Elgar 2016)

[7] Kenneth Guang-Lih Huang, Xuesong Geng, Heli Wang, ‘Institutional Regime Shift in Intellectual Property Rights and Innovation Strategies of Firms in China’ (2017) 28(2) Organization Science <https://doi.org/10.1287/orsc.2017.1117> accessed 20 September 2019

[8]Heidi Williams, ‘Intellectual Property Rights and Innovation: Evidence from the Human Genome’ (2013) 121 (1) Journal of Political Economy <https://www.jstor.org/stable/10.1086/669706> accessed 20 September 2019

[9] Ass’n for Molecular Pathology V. Myriad 133 S.CT. 2107 (2013)

[10] Mayo Collaborative v. Prometheus Labs. 132 S.CT. 1289 (2012)

[11] United States Code Title 35 – Patents section 101

[12] Bilski v. Kappos; 561 U.S. 593 (2010)

[13] Enfish, LLC V. Microsoft Corp., 822 F. 3D 1327

[14] K.Ravi Srinivas, ‘Climate Change Technology Transfer and Intellectual Property Rights’ (2009) Ris Discussion Paper < https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1440742> accessed 20 September 2019

[15] Jerome Reichman, Arti K. Rai, Richard G. Newell and Jonathan B. Wiener, ‘Intellectual Property and Alternatives: Strategies for Green Innovation’(2008) EEDP Paper 08/03 London: Chatham House/RIIA < https://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=2915&context=faculty_scholarship> accessed 20 September 2019 pp19

[16] Christoph Engel, ‘When is intellectual property needed as a carrot for innovators?’ (2011) 7 (2) Journal of Competition Law & Economics < https://doi.org/10.1093/joclec/nhq025> accessed 20 September 2019

[17] M.T. Costa-Campi, et al, ‘Challenges for R&D and innovation in energy’ (2015) Energy Policy < https://doi.org/10.1016/j.enpol.2015.04.012> accessed 20 September 2019

[18] Abbie Brown, ‘Lessons from Technology and Intellectual Property in the Oil and Gas Industry in Scotland: A Scholarly Journey and an Empirical Review’ (2014) 11 (1) SCRIPT-ed <https://doi.org/10.2966/scrip.110114.9> accessed 20 September 2019

[19] Ibid.