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“Competition of the future is competition in intellectual property¡±, Premier Wen Jiabao is quoted as saying in a conference with Tony Blair in 2007.

Certainly, the future of clean energy technology transfer is inexorably linked to intellectual property rights. Whilst there is an urgent need to clarify and strengthen intellectual property (IP) rights on the one hand, the need to facilitate the development and transfer of technology from developed countries to developing countries on the other hand lies at the heart of the aims of the United Nations Framework Convention on Climate Change (UNFCCC). The idea of facilitating the development and transfer of technology has been echoed in the Kyoto Protocol (Article 3(14)), the Bali Action Plan (paragraph 1(d)) and the Copenhagen Accord (paragraph 8).

The tension between technology transfer to developing countries and the need to protect the IP of the transferor is acutely felt with respect to carbon capture and storage (CCS) in the People¡¯s Republic of China, which hosts the largest number of CCS projects of any nation in the world.

The need for clear international legal guidance with respect to IP rights pertaining to CCS has been emphasized by many parties for some time. It was acknowledged, although not ultimately addressed, in the international Charter for the Carbon Sequestration Leadership Forum, which was signed in June 2003. Clause 6 of the Charter identifies the protection and allocation of IP as a major issue for CCS and says that such allocation ¡°will be defined by implementing arrangements¡±. At the time of writing, no such international arrangements have been made.

Despite the fact that the call to clarify IP rights with respect to CCS has come from many different parties, it is argued that the issue should not ultimately be resolved through multilateral action. Instead, it should be addressed through the use of incremental bilateral agreements or memorandums of understanding. This incremental, bilateral approach is preferred because:

1. Most of the PRC¡¯s CCS projects take place with the assistance of investment from a number of developed countries, each of which may have different expectations about the extent of IP protection. It would be very difficult to reach consensus amongst such a large number of parties about the level of IP protection that can or should be expected;
2. In order to give the private sector a financial incentive to invest in CCS projects, the private sector needs the comfort of a clear, binding agreement about how IP rights are to be attributed. It is more likely that a bilateral agreement, which has involved extensive consultation and final agreement between the PRC and the developed country supporting the project, would give any private sector investor more comfort than an international agreement, particularly one that was not ratified by one or both parties; and
3. The attempt to create a multilateral international agreement, in the manner of the World Trade Organization¡¯s Trade Related Intellectual Property Rights (TRIPS) Agreement, has proven inadequate for regulating clean energy technology transfer. TRIPS, and any multilateral international instrument like it, necessarily involves a compromise between the demands of the developing and developed world. The final result can be insensitive to the demands and expectations of each individual country. Indeed, with respect to TRIPS in particular, the agreement has been criticized as being more in favour of the rights of the developed world than the developing world. To be fair, TRIPS was never designed specifically with the particular characteristics of clean energy technology transfer in mind. Nevertheless, the difficulties associated with compromising between many parties with diverse interests that are basic to the inadequacies of TRIPS provide a valuable lesson for how IP rights should be regulated with respect to CCS in the PRC.

   

To some extent, the framework for the protection of IP rights between developed countries and the PRC is already occurring. For example, the PRC has provided formal undertakings with the following nations:

• The PRC and the USA agreed to a Memorandum of Understanding on the Protection of Intellectual Property in 1992 and a framework for regular consultation on Intellectual Property in 2000. In 2004, the US and the PRC also created an Intellectual Property Protection Working Group on the Joint Commission of Commerce and Trade;
• The European Union and the PRC established an IP rights working group in 2005 and signed an updated action plan in 2009; and
• The PRC has established bilateral or triangular dialogues and cooperation mechanisms on intellectual property with Japan and South Korea, including annual meetings between the commissioners of the respective countries¡¯ patent offices since 2001.

Notably, however, several countries have thus far abstained from formalizing any understanding on IP rights with the PRC (beyond being signatories to TRIPS). Canada and Australia are amongst those countries which have not yet formalized IP arrangements with the PRC, even though both are significant investors in CCS there. Whilst such agreements would by no means prove a panacea for all of the concerns raised about IP rights in relation to CCS in the PRC, they would nevertheless prove an important first step as well as a symbol of the countries¡¯ ongoing cooperation and mutual support with respect to CCS. Finally, from China¡¯s perspective, it may prove beneficial as a strong signal to business in developed countries that any IP rights that may be produced as a result of a privately funded enterprise would be clearly defined and appropriately attributed.

Catherine Gascoigne is an associate in the environmental markets department at Baker & McKenzie in Sydney

Zhang Danian is the chief representative of the Shanghai office of Baker & McKenzie