Are ‘Patent Trolls’ Slowing the Development of Sustainable Products?

How is conflict over intellectual property affecting our progress towards a sustainable future?

Patent Infographic

By Adam Tassle
This article was published by The Guardian Sustainable Business on November 14th, 2013.

Disputes over intellectual property have seen a dramatic rise over the last few years and, despite the shared global advantage green technologies offer, they have not been immune from these battles over ownership. According to the latest figures published by the World Intellectual Property Organisation, applications to patent ‘greentech’ have risen by over 6% since 2011, making it one of the leading growth areas for IP[i].

Over the same period we have witnessed increased urgency to global efforts to preserve the natural environment and avert lasting impact on society. With this in mind, how is the volatile IP climate affecting the development of green technologies, and what is its impact on the pace of our progress towards a sustainable future?

Patents are the main system of IP regulation currently affecting sustainable technology. Originally conceived as temporary defensive measures to protect and promote innovation, patents grant the holder exclusive rights to make, use or sell an invention for up to 20 years, ensuring that businesses that invest time and effort into developing technology have the opportunity to commercialise it without competition from firms that have not made such costly commitments[ii]. However, the ability to sell or licence patents for a fee has led to a slow proliferation of patent ‘trolling’ which is now threatening the creation of new sustainable systems and products.

Patent trolls are non-manufacturing companies which acquire and exploit libraries of ambiguous patents to extract licensing fees from creative firms. Small entities, such as entrepreneurs or those independently developing new technology are particularly at risk from trolling, as their limited budgets typically preclude them from contesting spurious claims through the courts. Although multi-million pound battles between wealthy technology firms may dominate media coverage, recent figures suggest that 60% of patent litigation is now brought by patent trolls and the majority of their targets are firms with low annual incomes.[iii]

The danger of trolling to sustainable development is that it replaces the financial protection that patents offer this vulnerable field with financial encumbrance. This then reduces the incentive to turn green ideas into green technology and impairs the creativity that is at the core of sustainable progress.

The present patent system poses a greater risk to sustainable technology than simply discouraging creativity however. Using patents on essential components and concepts, established manufacturers have the ability to keep a tight grip on emerging new technology as well as on burgeoning creative talent in the field.

“Potential innovators and entrepreneurs – the driving force behind economic progress-are faced with the choice of either starting a business at the risk of being crushed by patent litigation, or going to work for one of the same companies that would have sued them. And to add insult to injury, the price of choosing the latter often includes complete surrender of those ideas. (Matt Stanford, 2012)[iv]

The problem with such a monopoly on knowledge is that often it is not in the interests of incumbent firms to develop new technology. This is especially true of sustainable development, where progress can involve the retirement of perfectly serviceable and profitable technology, in favour of alternatives that may threaten existing revenue streams or that cannot yet offer the same economies of scale. This conflict of interest between progress and profit can entice firms to shelve socially and environmentally beneficial technology in order to safeguard their financial interests. More worryingly, it can also provide a temptation to strategically purchase sustainable innovation purely to obstruct its development.

This fear is not unfounded. In 1989, innovator Stanford Ovshinsky invented a new nickel-based battery that was cheaper, safer and considerably more powerful than contemporary battery technology[v]: hence ideal for automotive applications. In 1994 he agreed to sell the patent for his creation to General Motors, to facilitate the development of the world’s first mass-produced electric car, the EV1. After testing the technology GM opted to stick with their conventionally powered vehicles and sold the battery patent to Texaco[vi], an oil retailer.

From 2001 to the present day, Ovshinsky’s battery technology has been licensed by a succession of petrochemical companies[vii] whose revenues rely in part on automotive fuels. Accordingly, the licence conditions for his NiMH batteries limit their application in hybrid vehicles and effectively prohibit use in fully electric vehicles.[viii]

The effect of this restriction can be observed in the pace of EV development today. Lithium-based batteries, as used in contemporary vehicles such as the Nissan Leaf and Mitsubishi i-MiEV, are only just approaching the range and performance of the original EV1 technology[ix] and they cost considerably more to produce. According to transport journalist Alan Ohnsman, Toyota, the manufacturer of the popular Prius Hybrid, “…doesn’t expect battery-powered cars to succeed in the mass market until 2020 because batteries are too costly and capacity limits their range”. (Ohnsman, 2009)[x]

The increased patenting of green technology and the nature of global business make future conflicts of interest and strategic purchase of green innovation an uncomfortable reality. The patent on Ovshinsky’s technology is about to run out, but its present owner, a company that derives the majority of its income from oil, has already stated an intention to acquire a broad portfolio of battery technologies, including the next generation of EV batteries[xi].

It is apparent that the current patent system is failing in its objective to promote and protect sustainable innovation, yet it is argued that sustainable development would be worse off without patents. The present system includes an obligation to publish details of protected technology. Without patents, manufacturers would be likely to resort to secrecy to protect valuable scientific and technological knowledge, starving the global community of the building blocks of future innovation.

How then, do we secure the future of sustainable technology development?

In short, by updating the existing patent system to reflect the changing face of innovation. In our modern economy, the process of finding solutions and meeting societal needs has become a community undertaking, increasingly motivated by concerns over human and environmental welfare, alongside potential profit.

The traditional influence of financiers on the innovation process is diminishing as crowdfunding platforms enable communities to cultivate the products and services they require without the assistance of banks and loans. Similarly in business, social enterprises have grown in strength and look set to play a significant role in our future economy. In the twelve months to July, SEs reached a new milestone, outperforming comparable traditional businesses in the UK with respect to business growth.[xii]

An effective system to promote and protect innovation must recognise the complete spectrum of stakeholders in technological development, and value innovation for environmental and social benefit as highly as for financial gain. How we achieve this change is the subject of ongoing debate but two distinct directions are emerging:

·         Better regulation of the present patent system

Restore the protection and incentives that patents were intended to offer all innovation. Reduce the influence of incumbent manufacturers and the stifling effect of trolls on emerging green technologies by limiting the breadth of patents and regulating licences on basic technologies.

·         A better protection system for socially and environmentally valuable technology

Nurture dialogue on a more fitting IP protection strategy for greentech, such as a royalty or prize fund system that would make sustainable knowledge available to all potential innovators. Such systems would also ensure that those who push technology forward for human and environmental good still receive appropriate financial reward.

Whatever strategy we adopt, it is clear that tackling the retarding effect of the present IP system on innovation must become a priority for the sustainable development community. The quality of green technology available to us dictates how effectively the advances we make in business, consumer activity and government policy can be converted into practical applications and measurable savings. Without action, as the market for greentech grows, we face the prospect that our journey towards a sustainable future will become ever slower and more difficult.

Adam Tassle
November 2013

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[i] WIPO, World Intellectual Property Indicators – 2012 Edition, WIPO, (2012)  ISBN 978-92-805-2305-8

[ii] Intellectual Property Office (UK), Patents: Basic Facts, IPO, (2013)

[iii] Lindsay Blakely, How Much Patent Trolls Cost Start-ups, Inc., (2012), available from: http://www.inc.com/lindsay-blakely/cost-patent-trolls-startups.html

[iv] Matt Stanford, Eco Thugs: How Patent Trolls Threaten To Undermine A Sustainable Energy Future, Green Living Press, (2012), Available from: http://blog.loomistank.com/2012/02/23/eco-thugs-how-patent-trolls-threaten-to-undermine-a-sustainable-energy-future/

[v] Battery University, Nickle-based Batteries, Battery University, (Accessed Oct 2013) Available from: http://batteryuniversity.com/learn/article/Nickel_based_batteries

[vi] Douglas  Korthof, True Story of the EV1, www.ev1.org, (Accessed Oct 2013)  Available from: http://www.ev1.org/chevron.htm

[vii] Douglas  Korthof, True Story of the EV1, www.ev1.org, (Accessed Oct 2013)  Available from: http://www.ev1.org/chevron.htm

[viii] Sherry Boschert, Plug-in Hybrids: The Cars that Will Recharge America, New Society Publishers, (2007), ISBN 9780865715714

[ix] Stephen Edelstein, How does GM’s fabled EV1 stack up against the current crop of electrics?, Digital Trends, (2013) Available from: http://www.digitaltrends.com/cars/how-does-gms-fabled-ev1-stack-up-against-the-current-crop-of-electrics/

[x] Alan Ohnsman, Toyota Remains With Nickel After Lithium Prius Test – Update3, Bloomberg, (2009) Available from: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aI7Ov7Jyo2nU

[xi] BASF, BASF acquires Ovonic Battery Company, BASF (2012) Available from: http://www.basf.com/group/pressrelease/P-12-140

[xii] Andrew Bounds, Social Enterprises Seen As Driver for Growth, Financial Times, (2013) Available from: http://on.ft.com/15slubX