BACKGROUND – AN INTERDISCIPLINARY SPECIAL INTEREST GROUP

The enormous technology investment and diffusion requirements for addressing climate change threats are well known by now. The International Energy Agency (in its report Energy Technology Perspectives 2008) estimates that a minimum additional $14 trillion in investment will be needed between now and 2050 to keep climate change within the 2°C target range. That translates into an annual average of $400 billion. Given that many of the required technologies are at an early stage of development, a significant part of the additional investment will go into R&D and deployment. This puts technology transfer and Intellectual Property Rights (IPRs) at the centre of policy-maker and industry interest.

In response to these significant challenges, Martin Sandford, then president of the Licensing Executives' Society of Great Britain and Ireland (LES B&I), launched the Renewable Technology Licensing initiative in 2007, led by Meredith Lloyd-Evans, LES B&I member and a Knowledge Transfer Manager for Bioscience for Business (BfB) Knowledge Transfer Network (KTN). The stimulus was a ‘call to arms’ given by Jonathon Porritt at the LES's Annual lunch, when he emphasised that rapid and forceful development and application of technologies was needed to deal with global warming and resource depletion. The initiative has since been joined by the Resource Efficiency Knowledge Transfer Network (RE-KTN), and its steering group includes representatives of Intellectual Property (IP) lawyers, the UK Intellectual Property Office and renewables companies.Footnote 1

This paper is expanded from the group's third workshop, held at LES B&I's Annual Meeting 2008 at the Wellcome Collection, London.

ISSUES AND CHALLENGES IN PRACTICE IN THE LICENSING OF RENEWABLES TECHNOLOGIES

The background already provides a summary of the genesis and aims of the Renewables group. However, in the energy sector, which is the first focus, tremendous hopes and large budgets are being pinned on the development and use of renewable resources. These include natural climatic features such as wind, tides and the already-accepted hydro-power and hydrothermal energy; managed reactions such as nuclear power and hydrogen evolution; and, most recently, the use of biorenewable resources as biomass or a source of biofuels.

Biotechnology certainly has a large part to play in the success of biorenewables. Selection of biomass characteristics, specific micro-organisms and processing enzymes is a major component in extracting as much energy from feedstocks as possible, and establishing proprietary position and IP in these areas is critical to many of the ventures being funded in the United States, the United Kingdom and the rest of Europe. One area in which large public funding programmes have developed is that of algal technologies for energy, specifically the use of microalgae (plankton) to trap carbon and convert this to biooils suitable for use as transport and aviation fuels. The US Department of Energy and Department of Defense (DoD) between them have committed about $1 billion to the search for new products and processes that can replace petroleum as a source of JP-8 fuel, on which the DoD spent over $12.5 billion in 2007. Over 10 per cent of this R&D support funding is dedicated to plant and algal biomass alternatives.

Succeeding in renewables can therefore involve complex and giant-scale engineering, micro-management of chemical and biological processes or use of biomass to capture carbon and generate novel product streams including energy, posing challenges to successful IP management and integration of technologies.

An additional challenge lies in the following: renewables-related biotechnology fields will be simultaneously part of legacy biotech industry norms and regulatory practices and subject to common R&D investment support frameworks with other non-biotech related renewables fields. There remains a risk that tried-and-tested IPR management and technology transfer practices in the biotech industry may be seen as illegitimate in the context of other renewable-energy industries that are characterised by a greater degree of sharing and cross-licensing of technology. Venture-funding business models specific to the biotech industry may be seen as inadequate to the new cross-disciplinary field of renewables, whether related to technology deployment (for example solar farms) or R&D (photo voltaic technology development). And in particular, where biomass and biofuels are concerned, there may be the conflicting requirements of power generation- and transportation-related value chains. There are also socio-economic and political challenges, such as land-use changes, the current ‘food versus fuel’ debate and considerations of North-South technology transfer. The technical complexities, especially in the cross-discipline efforts needed to be successful in biorenewables, imply that special thought will need to be given to technology licensing and IP management issues.

The fundamentals of dealing with IP, and practical strategies for in- and out-licensing of technologies in the renewable energy area, are not dissimilar from other areas, though the need to consider interacting technology types brings its own complexity. There are shared issues in technology licensing from university and company perspectives, but also important differences in vision and context that need to be taken into account and that often all too easily become problems. The key elements in forging a successful licensing strategy in this area include the strength of issued and pending patents; clear demonstration of proof-of-principle; clarity and recognition of ownership; robust due diligence on third- party rights; the timing of a deal in relation to the development stage of the technology; and the choice of whether to sell, license or co-invest in a technology. In practice, it is early proof of principle and confirmation of freedom-to-operate that provide the best strategic outcomes, but the power of effective public relations and communication in this current overheated area must also be taken into account. Anticipation of potential conflicts and litigation, and flexibility to undertake cross- or in-licensing, are also important attributes of the successful deal in this complex area. The addition of biotechnology into this mix certainly forces the issue of freedom-to-operate, but also gives opportunities for new discoveries around integration into chemical engineering and physical processes.

Three examples were given at the workshop that illustrated the pitfalls on the path to success. Though coming from the non-biological area, they are still highly relevant and certainly illustrate the need for IP professionals to be involved in technology development and commercialisation rather earlier in the process than is often the case.

A London-based university had established patent applications in the area of wave power, but did not start discussing how to take the concepts further with potential commercial interests until late in the day, not only in the absence of proof-of-principle in the field, but also too close to the deadlines to extend the patent cover. In the end, however, the licensing deal was successful and the technology is now in use.

A consortium developing tidal power for Swansea Bay in Wales knew that there was tidal technology in place in France, but was not aware of interfering IP from the United States until well after the consortium was committed and work was underway. They needed, therefore to review this, come to a view on freedom-to-operate, and make a decision on whether or not they needed to take licences.

A company had developed wind turbine technology that was technically superior, and the argument for using it in the domestic situation was attractive, but the company had not considered the practical questions of wind flow and strength in urban settings. In spite of a strong IP position, the company was not able to obtain funding for this concept and needed to change its strategy.

These examples show that it is not enough to believe that one's own IP is superior: proper due diligence is needed before going to negotiate, which in any case should always be done from a position of strength.

TECHNOLOGY TRANSFER IN THE RENEWABLE ENERGY SPACE: KEY CHALLENGES AND OPPORTUNITIES

One key opportunity for developing the biorenewables sector is better mining of IP information for actionable strategic intelligence to assist business development. Doing this means that it is possible to identify and understand key technology trends, pinpoint competition before products are launched, identify investor networks or find the productive individuals in a field of interest. This information is useful to companies and organisations of all sizes, and the assessment and reporting of it adds value beyond the current online information sources for patent information. This approach has been applied by one of the authors (IPI) to a number of renewable technology and ‘clean-tech’ projects, including alternative refrigeration systems, photovoltaics, air supply to fuel cells, biomass electricity and clean cell technology. By profiling in this way, licensors can understand how prospective licensees have shifted in their valuation of technology, and can see whether unexpected potential licensees have started to embrace new technology.

A key challenge, which becomes an opportunity if grasped well, is to understand first world – third world (or North-South) technology transfer trends. There is a significant opportunity for the developed world to transfer renewable and clean technologies to the developing world. Particularly in the case of China and India, there is high investment, high willingness to adopt appropriate and effective technology including biotechnologies, high use and a high carbon impact of adopting clean-tech. Such economies are becoming more attuned to IP management and the importance of working with the European Union (EU), the United States and so on on IP protection. Paradoxically, we now have the possibility for IP transfer in the non-conventional East-to-West/South-to-North direction. A case in point is the adoption of Indian technology by British Sugar for their bioethanol plant in Eastern England.

The Bali Action Plan of 2007 has resulted in recognition that global problems and solutions are every country's responsibility. The challenge is how to use existing patent systems to incentivise and develop technologies and ensure dissemination and diffusion rather than the kind of strategic blockade so often seen before. The danger of trying to prop up an unsustainable IP model was highlighted by the controversy surrounding the South African AIDS medicines and patents issue in the early 2000s. In the IT area, there are good models such as Symbian and the recently announced WiMax standards collation. There is a need for more such industry-led consortia in the renewables area. Although innovation in biotechnology should be treated the same way as innovation in any other technological sector, the application of biotechnology is very different on a regional basis. The imposition in Europe of bans on genetically modified starting materials is a hidden pitfall in exploiting biorenewables IP. An additional element of complexity is that the biorenewables area may be characterised by a higher level of public sector involvement, in terms of both regulatory and higher legacy levels of public spending through science and research funding.

Hence, ‘business as usual’ may be a costly option for developed economy businesses: the policy imperative for rapid technology deployment and technology transfer from developed to developing economies has already given rise to radical alternatives to current IP-owner-led licensing processes. These include the following:

  • decreased use of IPRs in publicly funded research in renewables biotechnology where the publicly funded invention can be adopted by industry easily (with limited needs for tacit knowledge transfer);

  • greater use of non-exclusive licensing in publicly funded research-inventive outputs;

  • enforced price discrimination between commercial and academic use of IPR and based on geography;

  • buying out and pooling unused IP;

  • use of prizes (such as the X-Prize) for solving particular problems, and then open-sourcing the R&D outputs.

KEY QUESTIONS

In thinking about global licensing strategies and sourcing of appropriate biotechnologies, the key questions that bring innovation into this area are as follows:

  • What are the innovative IP licensing regimes seen in the past that could be applied? These regimes may have been developed in other technological sectors but the lessons learnt and even perhaps some template approaches may be highly relevant.

  • How can the interests of incumbents, new entrants and consumers be balanced? This is particularly important when new entrants may well have critical enabling technology but be micro-companies, small and medium enterprises or small academic units, as is still almost always the case for biotechnology innovations.

  • What differentiated pricing regimes between different countries can be implemented?

  • What mechanisms are there for licensing revenue administration in pooled IP portfolios? The experiences of the IT sector could be quite valuable here.

  • How can transparency be increased? (For example licensing reporting framework, benchmarking, valuation principles.)

In addition, as highlighted by one of the authors (Meredith Lloyd-Evans) in a different forum, there are some questions that are perhaps not restricted to renewables, but have a direct impact on them. They include the following:

  • How well do we see IP-generating institutions responding to the internal challenges of technology-packaging across disciplines? University licensing departments cannot be all things to all people, and blind spots may be a real challenge to technology-packaging.

  • Could governments do more to stimulate cross-disciplinary action, and if so what? In the United Kingdom, for example, there are a number of initiatives that offer incentives to companies to engage with innovation from universities, but not in as sustained and coherent a way as the United States's SBIR and STTR programmes. The EU's Framework programme for science and technology development is now in its seventh cycle, and continues to improve on its predecessors, but its predecessors, including FP6, are still slated for a low conversion of funded work into large-scale market success.

  • Are we putting too much burden on researchers by interpreting innovation as novel discoveries, instead of new ways of putting existing knowledge and things together to make new products and systems? Do we need to turn away from the received wisdom in biotechnology, especially the biopharma sector, of a new ‘magic biomolecule’ to something where the impetus comes much more from engineering integration?

  • Should we expect a single researcher or research team to understand the complete spectrum of tasks necessary to satisfy the product chain? Whose job is it to bring that knowledge?

  • UK Research Councils support what are called sandpits, similar to ‘blue-sky’ sessions but intended to uncover deeper innovative approaches to science and technology challenges: is this idea widely used internationally? And if not should it be? BfB is exploring this area specifically for the industrial biotechnology, biomass and bioconversion topics that will be key to success in biofuels.

These are questions that the authors believe need to be considered, not only for renewables technologies, including making a success of biofuels, but also for the commercialisation of increasingly complex biotechnology-based products such as bioartificial organ and tissue constructs.