[Official GPO Transcript]
[The Chairman] Today, the Select Committee will hold a
hearing to focus on an issue that underlies all of our
discussions on technology but which is often overlooked:
intellectual property rights and the role they play in
developing clean technology solutions.
The gentlemen from Wisconsin, Mr. Sensenbrenner, is a
leading congressional authority on intellectual property
rights; and during our recent trip to China, he constantly
reminded our Chinese host that technology must solve the
problems of energy security and climate change, but, to do so
effectively, we need a rigorous system to protect intellectual
property. I share that view, and we are having this hearing to
explore those issues.
There is a huge and growing demand for climate-related technologies. It can and should be met by
inventions of American companies. America is well-equipped
to lead and provide the cutting-edge technologies we so
urgently need for solving the climate and energy challenges,
but we need to develop the solutions for tomorrow and then
deploy them worldwide.
Passage of the American Clean Energy and Security Act will
push entrepreneurs and college kids, Silicon Valley stars and
Stanford roommates to work hard and to try their luck at
inventing new ways to produce renewable energy and reduce
greenhouse gas emissions. When those entrepreneurs succeed,
what will happen to their product and know-how? That is the
question we will explore today.
In the upcoming Copenhagen negotiations, technology cooperation will be an important topic as
countries look for ways to enhance deployment of climate technology
around the world. At the international level, there is
a consensus that clean technologies have to be developed and
deployed and that the current efforts in this respect have to
be enhanced. There is also general agreement that the private
and public sector will have to find new and better ways to bring
those solutions to the villages of India and the towns in
South Africa. But although countries might agree on the general
direction, there are very different ways to achieve the goals.
With only 130 days left until the Copenhagen negotiations,
the world faces great challenges to find agreement on how
to address the technology challenge.
Today is a good time to take a close look at business
opportunities, at technology cooperation, at barriers to
spreading solutions, and at the closely related question of the
protection of intellectual property rights. Intellectual
property rights enable innovators to be rewarded for their
creativity and investment of time and money, but these rights
must be balanced with the need for incentives and the common
good in the interest of sharing ideas and technology.
This is why in the U.S. we have time limits on patents and
copyrights. This is why the United States and all members of
the World Trade Organization agree on the treaty which outlines
how intellectual property rights should be protected on a
We have the international framework in place, although I
appreciate there are disagreements as to how well that
framework operates in daily practice. Nonetheless, I think it
is important to see if we can develop policies within this
framework that can trigger the innovation and deployment that
we want. With American ingenuity, we have become the world
leaders in communications and information technology. Let us
again embrace our opportunities for our country and businesses
so that they can lead the world to a low carbon future.
Because this is our last hearing before the recess, I would
also like to take a minute to recognize the retirement of--
where is Tom? Tom is not here? Oh, God--Tom Weimer, who is
already in retirement.
I have worked with Tom starting back in the early 1980s
when I chaired my first subcommittee, the Oversight and
Investigations Subcommittee, in the old Interior Committee; and
Tom worked on the staff of Manny Lujan. Tom gave many
distinguished years of service to that committee and then at
the Interior Department, and I was pleased to work and travel
with him over the past 3 years as part of the Select Committee
staff. He was a consummate professional who was always fair and
committed to the work of this institution. I know that he
cannot be here today, but I did want to take this opportunity
to congratulate him for his long and successful career in
That completes my opening statement.
I turn and recognize the ranking member, the gentleman from
Wisconsin, Mr. Sensenbrenner.
[Mr. Sensenbrenner] Mr. Chairman, let me say that I deeply
appreciate the comments that you have made on the retirement of
the Republican Staff Director of the Select Committee, Tom
When I recruited Tom for this job, his extensive background
both on the Hill and in the Interior Department on energy
issues was invaluable in helping get the committee off the
ground. Despite the fact that the chairman and I have some
rather deep disagreements over how to go about solving the
problems of climate change and energy security, Tom has worked
very professionally with the Democratic staff in order to make
the work of the Select Committee a success.
After hearing your good words about Tom, I am going to make
an offer to you. Over here on the Republican side, anybody that
uses the word ``cap-and-trade'' instead of ``cap-and-tax'' ends
up having to buy a round of refreshments for everybody else;
and Mr. Weimer does owe a couple of rounds for letting the
wrong language slip out. And when we have payback time, Mr.
Chairman, I will be sure to invite you so that you can enjoy
the results of Mr. Weimer's slipping up on what the Waxman-
Markey bill really is. So stay tuned.
Now as far as my opening statement----
[The Chairman] Can I say we have the same thing on our side?
Anyone who uses the phrase ``cap-and-trade'' is similarly
punished. Instead, they must use the words ``energy
independence'' and ``clean energy jobs revolution.'' So we have
a similar fund on our side that we might be able to work with
you and have a really good party.
[Mr. Sensenbrenner] I thank the Chair for those very good
words. And, remember, some words count; and some words don't. I
am glad you agree that ``cap-and-trade'' is a bad word.
Having said all of that, my opening statement.
Global warming has become less about science and
opportunism. Soon after scientists rang alarm bells on carbon
emissions, everyone from financial institutions to developing
nations realized that they could get rich off of it. So while
scientists continue to debate the best course of action, those
with vested interest declare that the science is settled and
offer solutions that conveniently would also make them rich.
But we can't allow the need for action to make us victims of
self-serving proposals against American interests.
Efforts to weaken intellectual property rights at the
ongoing U.N. climate change negotiations are a perfect example.
Developing countries like China and India see climate change as
an opportunity to gain free access to American IPR. But far
from mitigating climate change, relaxation of IPR would ruin
our and the world's only hope of responding in a long-term way.
China, along with other developing nations in the so-called
Group of 77, wants the U.N. to establish an ``executive body of
technology'' that would be governed by many of these same
countries. The Chinese and others propose that this body would
determine ``technology related financial requirements'' and
seek to ensure that privately owned technologies are available,
despite the intellectual property protections. Put simply,
China and the developing nations seek to transfer the developed
world's clean energy technologies to an unelected U.N. body
which they would control.
The current draft U.N. negotiating text that will be
considered in Bonn early next month includes proposals that
would ``exclude from happening in developing countries
environmentally sound technologies to adapt to or mitigate
climate change,'' require ``compulsory licensing for
environmentally safe and sound technologies,'' and to ensure
``access to intellectual property protected technologies and
associated know-how to developing countries on nonexclusive
royalty free terms.''
These governments argue that the risk of climate change
justify free access to technologies to help mitigate them. The
result would be a transfer of billions of dollars worth of the
latest technologies. But the argument mistakes or willfully
ignores the truth that technology is not a natural resource
that can be pulled from the ground. New technologies will exist
only if there are incentives to create them; and innovators
should know that if they invest their time and money, their
innovations will be protected, not given away.
Chairman Markey and I respectfully disagree on how best to
respond to climate change, but I think we agree that advanced
technologies will ultimately be the long-term solution. Whether
we adopt new taxes or a more economic approach, which I
advocate, companies won't invest in new technologies unless we
have strong IPR to protect them and that IPR is enforced. As
Steve Flutter, head of the Electro-Imagination Division of
General Electric, has told the New York Times, ``Why would
anybody invest in anything that they would just have to give
China and India in particular have a checkered history of
protecting IPR. The U.S. Trade Representative reported to
Congress in April that neither China nor India provide an
adequate level of IPR protection or enforcement or market
action access for people relying on intellectual property
protections and placed both on its priority watch list of the
The Trade Representative's report said overall piracy and
counterfeiting levels in China remained unacceptably high in
2008 and that its IPR enforcement regime remains largely
ineffective and non-deterred, while privacy and counterfeiting,
including pharmaceuticals, remain a serious problem in India
and its IPR enforcement regime remains weak.
Rather than demanding free access to new technologies, if
developing countries want to mitigate climate change, they
should pledge to protect them so that the investments will be
made to develop those new technologies.
As the world works toward a new international agreement on
climate change, I urge the Obama administration to end hopes
that IPR will be freely granted by proposing new language for a
climate change treaty that strengthens intellectual property
and promises to protect and encourage technological innovation.
I thank the Chair.
[The Chairman] The gentleman's time has expired.
The Chair recognizes the gentleman from Washington State,
[Mr. Inslee] Thank you.
I want to welcome my constituent neighbor. Robert Nelsen is
here today with ARCH Venture Partners. He embodies the spirit
of innovation, and I look forward to his testimony.
I also have a little token of our appreciation, Mr.
Chairman, for your leadership. This is a little bit of Sapphire
Energy's algae-based biofuels, and this will get you the last
half mile to drive to the White House for the signing ceremony
for the ACES bill. We just want to make sure that you get to
the South Lawn. We have a little work between now and then, but
that will get you there.
[The Chairman] Thank you so much.
[Mr. Inslee] I want to make one serious comment.
[The Chairman] This is serious. There is nothing more
serious than algae.
[Mr. Inslee] The issue of intellectual property, to me, if
we were going to be assisting the developing world--and it is a
serious issue, but it ought not to be at the expense of
innovators, and it ought not to be in a way that depresses and
suppresses innovation. If we are going to be providing
assistance to make new technologies available to the developing
world, it ought to be based in a way that the community as a
whole finances it, rather than just the innovation community.
To do otherwise really suppresses and prevents the innovation
from coming into existence that we might be able to share and/
or sell to the developing world.
So I just want to make the point, and I know that we will
talk about this today, that the worst way to share is to do
something that would prevent that which you seek to share from
ever coming into being; and when in fact you deprive folks of
intellectual property, in fact that is what has happened. So
there are better ways to do that, and I look forward to this
discussion. Thank you.
[The Chairman] The Chair recognizes the gentlelady from
Tennessee, Mrs. Blackburn.
[Mrs. Blackburn] Mr. Chairman, I am delighted we are having
this hearing today. I do think it is an imperative that the
Federal Government protect the intellectual property rights of
One of the things that I realized as we were working on
preparation for this hearing is that, over the past 7 years,
all of the clean energy technology patents that have been put
in place, 50 percent of those are U.S. innovators. So we are
deeply invested in making certain that we protect that 50
percent of all of the patents that are held by U.S. citizens.
It is of concern to me that there are new developments in
international law and international agreements that may
threaten these rights and lead to some outright piracy and
theft of some of these patent-protected technologies. I am
concerned, too, about the climate fund accounts as a price for
participation in any treaty or agreement with carbon emissions.
I am concerned about compulsory licensing and preferential
pricing of low-carbon technologies that are coming into the
So those are all things that I am going to want to take a
look at as we have this hearing, because I think we have to be
careful that we don't barter or give away any of the work that
has been done by our innovative community, our creative
I thank you for the hearing and look forward to what the
witnesses have to say.
[The Chairman] I thank the gentlelady.
The Chair recognizes the gentleman from Missouri, Mr.
[Mr. Cleaver] Thank you, Mr. Chairman.
My son is an actor in California. Of course, at this point
I am paying for his acting, and I think I am the only one who
has rented the movie that is at Blockbuster, but I never
thought about intellectual property rights until he brought it
to my attention. Nobody is going to steal a line from the movie
he is in, but I am aware of it, and I have been thrown into a
controversy here--and I know Mr. Sensenbrenner is on the
Judiciary Committee--with the royalties related to many of the
iconic performers of the '60s and '70s who are not getting
money when their music is being played on the radio.
So all of a sudden I have given a lot of thought to this
whole issue of intellectual property; and the value of the new
and, in some cases, yet-to-be-invented energy technologies to
both developed and developing nations is immense. Most of the
technologies that we are going to depend on have yet to be
invented. So I look forward to this hearing.
There are some issues raised by Midwest Research Institute
in the Fifth Congressional District which you may or may not be
familiar with which I would like to lift up as we continue this
Thank you, Mr. Chairman and the ranking member, for this
[The Chairman] I thank the gentleman.
[The Chairman] We will now turn to our panel.
[The Chairman] Our first witness today is Mr. Govi Rao, who
is the chairman of Lighting Science Group Corporation, a
leading digital lighting solutions company. He is also partner
of Pegasus Capital Advisors, a private equity fund manager that
is also pursuing opportunities for sustainable business
He came back from his business trip to Bahrain yesterday
night in order to testify in front of us today.
We thank you so much, sir, for being here. Please begin
when you are ready.
[Mr. Rao] Good morning, Mr. Chairman, Ranking Member
Sensenbrenner, and members of the committee. Thank you for the
opportunity to testify before you today. This is my first such
Mr. Chairman, as you mentioned, I am chairman of Lighting
Science Group Corporation. We design and develop cutting-edge
lighting products. And when I see lighting products like here
in this room, what tickles me is that we still use mercury to
do that, and there is a way to do that without mercury.
Actually, that is what we do, is manufacture LED light bulbs
which are innovative. We have manufacturing operations in New
Jersey, Florida, and California. We would love to have
operations in the rest of the country as well.
This hearing to me actually has a couple of connotations.
At the end of the day, if it is IP or innovation, without the
opportunity to commercialize any of this, it really doesn't
matter. So I am going to be talking about the commercialization
aspect of it.
Yes, I did come back from Bahrain last night, so I am not
sure what my body clock says, but I will try to survive the
next couple of hours here.
I am also a partner at Pegasus Sustainable Century Merchant
Bank that we launched this year. The interesting story of
Lighting Sciences, we brought together--``we'' as in Pegasus
Capital--brought together four small, innovative companies in
the U.S.--actually three small, innovative companies in the
U.S. and one in Europe. Small, not large enough to have global
access, but very innovative and very entrepreneurial: one in
California, one in Florida, and one in New Jersey. We have
given them the ability to actually be able to provide their
technology to the rest of the world by building scale in both
manufacturing and R&D.
The three questions that were posed to me for today's
testimony had to do with the climate-related technologies in
developing countries and what opportunities do I see. I have
some exciting opportunities that were just uncovered for us in
the last few days in Bahrain. And then IPR, is it a barrier or
a boost? And I have my personal opinion about that. And also to
see, in the context of the upcoming negotiations, what my hopes
and worries are. So I am going to address the three of them
My experience in the last few years in Lighting Science--
and 2 years especially in building this company--has been
extremely powerful in two ways. One is seeking opportunities.
We look at this from a protectionist approach when it comes to
intellectual property. However, we also forget that countries
mentioned--Ranking Member Sensenbrenner mentioned China and
India specifically, but if you take a look at Brazil, Russia,
China, India, the Middle East, they are recognizing that their
gap between their energy requirements today and energy
production today is significant and is growing. So they are
actually being very aggressive in coming up with new ways of
meeting that demand, both on the energy generation side, but,
more importantly, they have also started very aggressively
putting a cap on how to use the energy on the demand side. That
is a powerful thing. I will spend some time on that today.
While we have new technologies that are coming on stream
for generation, I believe there is a tremendous amount of
technologies here in this country already existing to mitigate
the demand. We are not doing much about them, and I would like
to spend some time on that.
This is a big paradigm for us, bigger than anything we have
seen before. So whether it is our road to electricity or
landing on the moon or we are talking about the Internet, any
of these things, all of these things, pale in comparison to
what we have in terms of climate change. We look at this from a
geographical perspective in intellectual property, but I
believe we have to change our paradigm and look at this as a
Let me give you an example of my 3 days in Bahrain in the
Middle East over the last few days.
The opportunities there on the demand side of energy are
absolutely fantastic. They are requesting us to help them
curtail how they use energy, whether it is through controls or
whether it is through LED lighting or whether it is digital
motor control. There is demand. They know they will have to get
there one way or the other.
I made a proposal here in the executive summary which is
very, very simple. There is an urgent need to first act as a
global community; and we have to start breaking down the
barriers, the geographic barriers that we have built. The
opportunities in the Middle East and Asia and China and
especially in India are humongous and phenomenal. The
technologies we have already. If we do not get there and
actually make these technologies have the day-to-day
commercialization, then we will fall behind in leadership in
the commercial world, let alone the technologies base.
The markets are created locally. We just heard China is
urging buy China, buy local. So make local, buy local. We have
to be there with our technology. So I am not saying give away
the technology. I think there is a way of establishing
leadership, and I have made a proposal and would love to answer
questions about that in terms of creating an exchange for IP
where innovators get rewarded and not just taken for granted.
Thank you, Mr. Chairman.
[The Chairman] We appreciate that, Mr. Rao. We will have
plenty of time to ask you questions.
Our next witness today is Mr. Robert Nelsen, co-founder and
managing director for ARCH Venture Partners. His company has
significant experience in the early sourcing, financing, and
development of emerging technology companies.
As a part of ARCH Venture Partners, Mr. Nelsen has
contributed to the development of over 130 companies, including
leaders in the fields of solar and biofuels. These companies
hold over 1,200 U.S. patents and patent applications.
We thank you for joining us today, Mr. Nelsen.
[Mr. Nelsen] Good morning. Thank you, Chairman Markey and
Ranking Member Sensenbrenner.
My name is Robert Nelsen, and I am the co-founder and
managing director of ARCH Venture Partners. ARCH has spun more
companies out of U.S. universities and national laboratories
than any other venture capital firm. I have been involved in
founding 30 companies over 23 years, including companies that
are the standard of care in breast imaging, the leader in K-6
mathematics, the leading genomics company, and Sapphire Energy,
the leader in algae biofuels.
Please for a moment imagine a world with oil made here in
the U.S.A. with just CO2 and sunlight on desert land
powering conventional cars and jets. Imagine a world where
solar energy costs 6 to 8 cents a kilowatt hour with no
subsidy. That time is now. Those technologies exist today, and
that innovation is happening in our research universities and
labs and in start-ups, not in big companies. Big companies
don't do that anymore, and they don't take the risks.
This bottle of algae oil from Sapphire Energy has 200
patents behind it and $100 million of private capital just to
start. It will compete with Exxon and the Middle East and
China. Sapphire has a huge lead now because of U.S. innovation
and patents, and we are hiring hundreds of people in New Mexico
Without those patents, no money would come, no plants, no
jobs. With a strong world patent system and the right voluntary
incentives for global cooperation, we can use this green crude
to make poor countries oil exporters; and we want to do that.
I believe the only way to get to energy independence and
solve global warming is through technology. Four to five
inventions in the next one to ten years will change everything:
algae biofuels at scale, solar that competes on cost, new
batteries, new lighting with 10 less electricity
consumption. It will happen only in the U.S. Almost all of the
major breakthroughs in energy are happening here, not just 50
percent of the patents but almost all of the major
breakthroughs only because of strong IP protection, only
because of huge private venture capital investments that follow
Now imagine a world where we allow Big Oil to run over the
innovators because of weakened patent laws and weakened
enforcement, where we accidentally harm our own clean
industries by using compulsory licensing instead of incentives,
where we increase taxes on investors who create new companies,
jobs, and solve our policy goals, like reducing carbon. That
could be our trajectory.
The light at the end of the tunnel is this committee and
others who are saying, wait a minute, policy goals actually
matter. We need to support and reward the innovators. We need
funding support for scale-up, and we need support in other
committees of Congress so that we do not inadvertently and
accidentally hurt energy innovation. We need the right policies
and incentives for global cooperation so we can deploy our
solutions rapidly to the world, while still protecting jobs at
home. We may even need something like a World Green Bank to
help fund the deployment of green technologies in developing
Our greatest global competitive advantage in the next
decade is energy innovation. Regardless of your position on
global warming, we will lead the world in innovation, and we
will become more secure as a result. Venture capital investment
in energy is solely dependent on our patent system and
protection of intellectual property. Without that investment,
we all lose. Without a healthy venture capital environment, our
policies will fail. With policies that encourage that
investment, we are more secure, more prosperous, and we will
have a greener and cleaner environment for the benefit of the
[The Chairman] Thank you, sir.
Our next witness is Ms. Jennifer Haverkamp, who is managing
director for international policy and negotiations at the
Environmental Defense Fund.
Previously, Ms. Haverkamp served for 8 years as the
Assistant U.S. Trade Representative, where she was responsible
for reconciling U.S. trade policy and environmental policy. She
has taught international environmental law at Johns Hopkins
University; and we welcome you here, Ms. Haverkamp.
[Ms. Haverkamp] Thank you very much.
Good morning, Mr. Chairman and members of the committee. It
is an honor to be with you here today.
Here is my message: Concerns about intellectual property
rules are solvable problems. In fact, a strong climate policy
will lead to a blossoming of new intellectual property.
In my statement I will make three points.
Point one, the most important driver of U.S. technology
development and U.S. competitiveness is a strong domestic
climate policy. I know this is a hearing about intellectual
property rights, but really I think what we are talking about
is our economic competitiveness, our concern that sharing our
own clean tech overseas will let economic competitors get ahead
by stealing our secrets.
The truth is they don't need to steal our ideas to
outcompete us in the new energy economy. They can simply seize
the opportunity first; and Europe, Japan, and others are racing
ahead right now when it comes to new carbon technologies.
How do we get back in the game? By putting a cap on
greenhouse gas emissions, as this House has moved to do. That
will create an enormous domestic market for low-carbon
technology. And the alternative is to sit tight and watch our
foreign competitors take a commanding lead in the new energy
economy, and that would be a terrible mistake.
Think about this: China's seventh richest man, Shi
Zhengrong, is worth $1.43 billion and is a low-carbon solar
entrepreneur. And, during 2008, China became the largest solar
panel producer in the world, with 95 percent of its production
destined for export.
I brought one graphic which my colleague will post there.
The chart reflects the geographic distribution of patents
around the world. And, as Congresswoman Blackburn noted, the
circle on the left, the green half of the circle, is U.S.
patents from the years 2002 through 2008. We lead the world in
clean energy patents, but we have a much smaller share of
production, only 9 percent in 2005 for solar. The problem here
isn't theft of our IP; it is that we don't have the right
Of course, where valid concerns about IP exist, they must
be addressed. But we are not going to build a clean energy
economy just by having a lot of pieces of paper from the Patent
Office. We need factories and installers, and we get that by
putting a cap on carbon.
Point two, in the U.N. climate negotiations, intellectual
property discussions have so far displayed strong rhetoric that
limited analytical basis. IP rights are becoming a flash point
in the U.N. climate negotiations, where IP is one part of the
broader issue of tech transfer.
Over the years, developing countries have been promised and
have had high hopes for tech transfer, but they have mostly
been disappointed. As others have noted, the parties to the
international negotiations hold sharply divergent perspectives
on IPR. Many developing countries argue that IPR restricts
their access to climate-friendly technology and seeks special
treatment and relaxing of the rules. They see the situation as
analogous to life-saving medications like those for HIV and
But there are big differences between pharmaceuticals and
low-carbon technologies. Unlike pharmaceuticals, many of the
tools necessary to reduce carbon emissions and adapt to a
warming planet are not leading-edge, unique solutions. They are
existing technologies, unprotected by patents even in the
Consider three main ways of emissions reductions: The
first, energy efficiency, typically involves things that don't
require IP licenses: putting up insulation, caulking air holes,
installing more efficient windows, appliances, that sort of
The second, clean energy production, likewise does not
appear to be significantly hemmed in by patent protection. Many
companies in different countries compete to offer renewable
energy equipment. In wind, for instance, there are at least 20
different firms scattered in many countries competing to sell
wind turbines. When a technology depends crucially on a single
patent, such as a drug to treat HIV and AIDS, this doesn't
Finally, consider a third way, sequestering carbon in farms
and forests. To our knowledge, there are no exclusive rights,
for example, in planting more trees, flooding rice patties less
often, or using less fertilizer.
It is also important to remember that getting a patent,
unlike copyrights, requires a time-consuming and often costly
application process in each individual country. Thus, unless an
inventor has obtained a patent in a particular country, he or
she won't have any patent rights to enforce there.
For these reasons, it is not clear whether there are enough
IPR problems for climate-friendly technologies to support
significant modifications or exceptions to the rules.
It is also important to keep in mind when evaluating the
developing countries' proposals in the U.N. negotiations that
countries are in the midst of what has finally ripened into an
actual negotiation, with parties ramping up their rhetoric and
staking out strong positions in anticipation of future
Point three, we need to be vigilant for emerging problems
from either side of the issue, potential infringement of IPR
rights or potential IPR barriers to technology access. As I
have noted, the case remains to be made in favor of climate-
specific modifications to the rules. The urgency of the climate
problem demands, however, that climate-friendly technologies be
widely available and that breakthrough innovations be quickly
and widely disseminated. Accordingly, we must continue to
monitor the situation and respond swiftly if IPR rules are
found to be blocking effective tech transfer. But, should that
happen, the fora that specialize in IPR rules, the World
Intellectual Property Organization and the TRIPS agreement,
appear better positioned than the U.N. climate talks to address
In closing, cooperative research and development can play a
crucial supporting role in tech transfer; and the recently
announced U.S.-China jointly funded center for CCS research is
a good example of that. It helps set the stage for constructive
U.N. negotiations toward the end that we must achieve, a global
deal to reduce greenhouse gases from all major sources.
[The Chairman] Thank you, Ms. Haverkamp, very much.
Our final witness is Dr. Mark Esper, executive vice
president of the Global Intellectual Property Center and vice
president of the Europe and Eurasia Department of the U.S. of
Chamber of Commerce. Previously, Dr. Esper worked as a senior
scholar at the National Institute for Public Policy. He also
served as executive vice president of the Aerospace Industry
Association of America.
Thank you, Dr. Esper, for joining us this morning. We look
forward to your testimony.
[Mr. Esper] Chairman Markey, Ranking Member Sensenbrenner,
members of the committee, I appreciate the opportunity to
testify today on behalf of the Chamber of Commerce Global
Intellectual Property Center and its members.
The Global IP Center and its members believe that strong
intellectual property rights are integral to driving the
innovation and creativity necessary to create jobs, save lives,
advance economic growth and development around the world, and
generate breakthrough solutions to global challenges such as
Our Nation's Founders recognized the link between strong IP
rights and innovation more than 200 years ago and explicitly
gave Congress the power to protect IP rights in the
constitution. As a result, America has led the world in
innovation for generations.
Today, the United States IP is worth between $5 and $5.5
trillion. IP accounts for more than half of all U.S. exports,
helping drive 40 percent of the United States economic growth;
and, as of 2008, IP-intensive industries employed more than 18
million Americans. But beyond driving job creating and economic
growth, strong IP rights have created a secure framework for
investment in research that led to solving some of the world's
most difficult problems, from disease and famine to water
scarcity and energy security, just to name a few.
In addition to protecting and incentivizing inventors,
strong IP rights are also integral to promoting technology
deployment and diffusion by providing a clear legal framework
by which companies can transact business.
Despite these facts, threats to innovation and IP rights
exist around the globe. In an effort to promote domestic
industries or appeal to narrow political interests, some
governments are actively engaged in attempts to weaken the
current IP system.
The United Nations Framework Convention on Climate Change
is the latest front where some are attempting to portray IP
rights as a barrier to solving climate change. The GIPC
believes these critics have once again turned reality on its
head. Robust IP rights are not an obstacle, as some allege, but
instead play a fundamental role in encouraging innovative
solutions to climate change mitigation and adaptation.
IP protection also helps facilitate tech transfer by
providing companies a commercial incentive to engage in foreign
direct investment, joint ventures, co-production, cooperative
research endeavors, and licensing agreements with local
There now is a clear commitment by the developing world to
address global warming through some form of binding
international agreement. As either a negotiating tactic to
block any international agreement or condition that will be
used to advance their own economic development and
technological prowess, China, India, and other developing
nations are using the issue of tech transfer as a major lever
in current U.N. negotiations. As a result, among the options
included within the current U.N. negotiating draft is language
related to IPR as compulsory licensing, patent exclusions, and
other exceptions for green technologies.
Incorporating any of these proposals into the final U.N.
agreement would not only have a negative impact on the
development and diffusion of climate change mitigation and
adaptation technologies but would also put American workers and
the U.S. economy at a competitive disadvantage.
Some countries claim that IP rights are a major barrier to
the diffusion of technology. Such claims are quite misleading.
To begin, IP rights cannot be a barrier to tech transfer if the
patents are not protected in the first place, which is often
the case in many least-developed countries.
Ironically, one of the real barriers to tech diffusion is
not strong IP rights but the lack of them. Indeed, a report
commissioned recently by the European Commission states that
``U.S. multinational companies are more active in engaging and
transferring intangible assets to their own affiliates in the
country if the country has strengthened its IP legislation.''
Another major obstacle to tech transfer is a country's
absorptive capacity, meaning a country's ability to not only
receive the technology but then have the various means, from
physical to human capital, to deploy and employ it effectively.
Lack of access to capital in domestic and international
markets is another barrier to tech transfer. Other obstacles to
tech transfer are often self-imposed through tariff and non-
A 2008 report by the OECD stated that Brazil, Russia,
India, and China have ``significant barriers to trade in carbon
abatement technology,'' often imposing tariffs quoted above 10
percent on these technologies.
A recent report by the U.S. Chamber of Commerce stated that
``many companies impose tariffs of up to 70 percent on climate-
friendly goods and services, impeding access to cutting-edge
Given the real and very serious obstacle to tech transfer,
a number of remedies are readily apparent. The U.S. could take
a number of actions from, for example, urging developing
countries to strengthen their IP laws and enforcement, working
with countries in the developing world to improve their
absorptive capacity, and working with our trading partners and
others in the developing world to remove all tariff and
nontariff barriers to trade.
These are just a few ideas. I included more in my written
testimony, and we can discuss additional ones later.
But the fact is that technology development and deployment
and diffusion cannot be mandated. It is a long-term process
that occurs largely and most effectively within the private
sector along voluntary, commercially viable, not de-compliant
The Global IP Center applauds the House of Representatives
and its Members who have taken a number of steps to ensure IP
protection is a priority within the UNFCCC negotiations,
particularly Ranking Member Sensenbrenner and Representatives
Blackburn, Larson, and Kirk. As a result of these efforts,
there are currently three House-passed bills containing
provisions aimed at protecting IP for green technologies.
While the Chamber views these provisions as positive,
enacting them does not guarantee that IP rights will be
protected in Copenhagen, nor does it foreclose the likelihood
that other nations may, down the road, seek to use a narrowly
tailored exception in the current WTO agreement on trade-
related aspects of intellectual property rights to expropriate
IP-protected American innovations. As such, we believe it is
critical that Congress continue to send the administration and
our negotiating partners clear and forceful signals that IP
rights is not an area where the United States is willing to
make concessions in Copenhagen.
Let me wrap up by saying that reduced global carbon
emissions is a major challenge that will require many new
technologies and unprecedented cooperation among the world's
nations to achieve. At a time when job creation, economic
growth, and problem solving are paramount, it is important more
than ever to protect an IP-based incentive system that has
worked extremely well for centuries and driving innovation,
developing solutions, and deploying those technologies as
broadly as possible.
The Congress has taken a number of positive, constructive
steps in this direction, but more can and should be done if we
are to be successful at the end of the day.
[The Chairman] Thank you, Dr. Esper, very much.
I now recognize the gentleman from Wisconsin, Mr.
[Mr. Sensenbrenner] Thank you very much, Mr. Chairman.
In my opening statement I refer to the current U.N.
negotiating text at the Bonn meeting next month, including
proposals to ``exclude from passing developing countries
environmentally sound technologies to adapt to or mitigate
A second to require ``compulsory licensing for
environmentally safe and sound technologies.''
A third, to ensure ``access to intellectual property
protected technologies and associated know-how in developing
countries on nonexclusive royalty free terms.''
Now, obviously, this goes directly opposite to what
everybody has said here.
What would be your recommendation to Mr. Stern and the U.S.
negotiating team when they go to Bonn next month on how to deal
with this issue, aside from saying what is in the text is a
I open it up to anybody who wishes to take a crack at it.
[Mr. Nelsen] I will take a shot.
I do think you have to have an alternative other than just
One of the things I was looking at as a model was something
like the Asian Development Bank, some possible private or
private-public sector incentive system, essentially. So for a
developing country, if there is a breakthrough technology, that
there is some way, maybe modeled after the Green Bank here,
that would incentivize U.S.--primarily U.S.-breakthrough technologies to go to developing countries
and possibly loan guarantees or some other way that sort of
entices me, instead of going to another developed country to deploy
my technologies, to deploy in developing countries
still with IPR protections. I think with the overarching
goal being that the technologies are still proprietary and protected,
but there are incentives to deploy versus disincentives.
Personally, I think it is going to be very hard because of
the amount of dollars that are going to be invested in these
technologies to deploy billions and billions. If there is not
some kind of intellectual property rights there, people won't
do the investment in the developing country, so we will have
exactly the opposite effect that the developing countries are
thinking it will have, some incentive structure.
[Mr. Sensenbrenner] Mr. Nelsen, I appreciate that. The
message that I got out of our recent trip to China is either,
quote, give us a compulsory license or, if you won't do that,
we will just steal the technology anyhow. Either alternative,
one which is legal and one which is not, would mean that the
actual manufacture of the technologies that were developed as a
result of American innovation would not be made by American
workers for use in Third World countries.
How do we solve that problem? Because we want to develop
jobs here in this industry; and with either the compulsory
license or what we heard in China, we will be developing the
technologies, but the Chinese will be using their workers and
paying them slave labor wages, so they will end up monopolizing
[Mr. Nelsen] I think we can do both. I think there are
plenty of incentives that are being created here at home to be
able to deploy green technologies. I think the Green Bank is
one way of kind of getting some incentives for things to stay
So, at least with this oil, we are going to start in Texas
and Oklahoma and New Mexico and other places. But it isn't
necessarily a loss for us if China makes this oil under the
right construct. If China is making domestic oil, that means
they are probably interfering in less things outside of China
and Africa and other places. It might not be a bad thing.
I personally think, with China, it is a different case than
some of the other developing countries. I think it needs to be
dealt with at a high level, probably in some sort of SED
construct or some specific government-to-government relationships where IPR is really addressed
at an extremely high level.
When we are making our business decisions about China, we
are waiting. And we are waiting for government help and we are
waiting probably to try to get China to invest some of their
own foreign reserve in things like this so that they feel
invested and that we feel protected.
[Mr. Sensenbrenner] That is a big problem. Because if they
can get it free, why would they invest their money in that
rather than something else?
I think I have made my point. My time is up. Thank you, Mr.
[The Chairman] Mr. Inslee.
[Mr. Inslee] This is a little bit off topic, but we had
discussion yesterday about some multiple technologies. There
was a question asked yesterday about the relative prospects of
two paths for transportation fuels, one of a solar-powered,
electrical-powered vehicle transportation system, and an
alternative or adjunct path of a solar-powered photosynthetic
biofuels path to a transportation system.
The gentleman who was talking was comparing the relative
efficiencies of photosynthesis to photovoltaic or concentrated
solar systems. I wonder if you want to comment on your view how
we should look at those two potential paths, Mr. Nelsen.
[Mr. Nelsen] Just real briefly. I think there are going to
be multiple solutions. So they are not substitutes for each
other. But I think people often confuse electricity with
transportation fuels. So if you are comparing a transportation
fuel to something, you need to compare it to a battery that
stores electricity. You can't compare solar photovoltaics to a
transportation fuel. Basically, you have to say it is a gallon
of gas compared to a battery. And, right now, a gallon of gas
is 200 times more dense than the best battery. So if you have a
battery that equals a gallon of gas and it was a Duracell
battery, it would be 9 feet high. So far, there isn't anything
that replaces most transportation fuels.
[Mr. Inslee] Thank you.
Mr. Rao, when we were in Hong Kong or north of Hong Kong,
we saw an American company, CERES, doing work on LED lighting
elements; and, as I understand it, they intend to do some
manufacturing in China. What is your current view of the
relationship of your intellectual property in a China context?
What do you view the current status is? How confident would you
be of manufacturing in China or allowing that intellectual
property to be available?
[Mr. Rao] With respect to the LED technology, sir, we have
been waiting for that particular reason, because our confidence
level wasn't too high. However, we have seen technologies grow
in China and take advantage of the massive local market. At the
end of the day, they are able to invest in manufacturing in
China if they are able to create the market in China. We are
finding low-cost options for LED technology coming from China,
and we are beginning to have conversations with people to
actually either cross-license or work together.
As Mr. Nelsen mentioned, most of us here in the U.S. are in
a wait-and-see approach as to what happens in places like
China. In the meantime, however, their markets are growing at a
very rapid pace. They are not waiting for people like us to
come in. They are getting it. They are taking it one way or the
other and will continue doing that, whether it is through their
own schools and universities or it is through partnerships. So
that is why I brought up the sense of urgency for us to move
If we don't take the action and create some kind of a
mechanism on the commercial side to take advantage of our
technologies and IP, then I believe we will be left behind,
which is one of the reasons we are jumping ahead and having
Are we very confident of protecting our IP in China? No.
But is that the reason not to do something? I don't believe so
either. I am not sure of the exact answer, but we will have to
get out there and start putting our technology out there so it
leads the world.
Most of the core technologies in demand side, whether LED
lighting or not, is here today to lower energy consumption. As
American enterprise, if we are able to get out there and make
that lead and have other countries and companies follow, I
think we will continue to stay in the leadership.
[Mr. Inslee] So do you look at yourself as sort of between a
rock and a hard place? If you wait and allow other companies to
develop these markets in China, you are left at the starting
gate. If you move to China now, you could lose your
intellectual property. Is that the conundrum you are in?
[Mr. Rao] That is it exactly. So people look for
alternatives, whether it is Thailand or Indonesia, where there
is more of a perceived protection of IP. I am not sure if it is
true or not. There is less of a flow. Or what we do is we keep
gen one products here in the U.S. and maybe older technology we
take it to other parts of the world so you don't lose your
The other thing about being between a rock and a hard
place, sir, is the fact that if we are able to create markets
here locally, we can stimulate innovation at a much more rapid
rate. That is one thing that is keeping us behind. A couple of
us mentioned here we are slow to create markets in energy and
climate-related technologies here in the U.S. That will be our
number one challenge. If we don't do that, we will be left
behind. China and India and the Middle East are doing that
[Mr. Inslee] We have a little bill that we hope will become
law in the fall that will help in that regard.
Thank you very much.
[The Chairman] The Chair recognizes the gentleman from
Missouri, Mr. Cleaver.
[Mr. Cleaver] Mr. Nelsen, are you familiar with Midwest
[Mr. Nelsen] Just generally.
[Mr. Cleaver] The Midwest Research Institute, MRI, has a
division called Solar Tech; and it serves as a neutral place
where companies, research organizations, or utilities can
collaborate on or come and challenge and conduct proprietary
research necessary to be successful. I am wondering whether or
not you think it would be feasible for us in some future
legislation to award incentives to companies that create
neutral places as a part of their U.S. marketing strategy? I
mean, where the innovators can come to make sure that there is
a neutral party to kind of manage, oversee, negotiate, to
[Mr. Nelsen] I think that is a good idea in the U.S.
When you talk about exporting ideas like that globally, I
think it is a great idea to have applications development or,
as Ms. Haverkamp mentioned, a place, a joint effort we are
doing in China, and there are some things in Europe. There is a
lot of interesting ways we can think about ideas like that on a
global basis focused on applications.
My point earlier was that most of the big breakthroughs are
still going to happen in the U.S. So we have to do two things.
We have to protect the big breakthroughs, and we have to
develop the applications.
I think when you talk about these joint research institutes
and potential neutral ground, those are better for the
applications than they are for the breakthroughs. Because no
matter what you do in foreign countries, you won't be able to
replicate the $1 trillion or $2 trillion investment the U.S.
has in our research infrastructure that is pretty much not
duplicatable anywhere else in the world.
[Mr. Cleaver] Thank you.
Ms. Haverkamp, you mentioned the benefits of including
international allowances and offsets in the Waxman-Markey
climate bill, which we proudly passed over here in the House.
And if we could figure out a way to eliminate the Senate
constitutionally, I think we could make a lot of progress, but
that is just a personal opinion. But you also mention that the
Kyoto Protocol international offset program, the clean
development mechanism, has not lived up to expectations.
What can you share with this committee that might improve
our international offset program before the final passage of
our Waxman-Markey bill?
[Ms. Haverkamp] Thank you for the question. I think what is
especially important is that the international offsets that are
allowed to be used by U.S. companies satisfy scientific
requirements for their environmental integrity, and I think the
bill proposes a process for that happening. There are some
kinds of offsets, like the reductions in deforestation from
tropical forest countries, that you can be sure are keeping
carbon out of the atmosphere, and the bill in a very good way
creates a lot of space for deforestation credits to come into
With respect to emissions reductions from projects in
developing countries along the lines of the clean development
mechanism, I think there are a couple of things that should
happen. One is to make these reductions happen at a greater
scale is to move to more broader what are called sectoral
crediting, where you are trying to achieve reductions across an
entire industrial sector rather than a particular facility.
The other thing that I think the bill does which I applaud
is that while preserving the clean development mechanism
projects for the smaller, poorer countries, it has a mechanism
for the largest emitters graduating out of the ability to sell
their credits into our market. And I think that is especially
important for the atmosphere, because the major emitting
developing countries need to move as soon as they can toward
real emissions reductions. And CDM projects are, frankly,
shifting emissions from one part of the world to another rather
than an overall reduction globally in emissions.
[Mr. Cleaver] Thank you.
Mr. Esper, do you think that further nation-to-nation collaboration, such as the U.S. and China
are doing on carbon capture and sequestration, or promises for
future collaboration will significantly help negotiations with
developing nations at Copenhagen?
[Mr. Esper] Well, I think it is important that we continue
to engage China on this issue. But for the purposes of
intellectual property, I think we do need to be very clear up
front with the Chinese--and in some ways they have claimed
leadership of the G-77 bloc--to make clear that IPRs are off
the table with regard to a climate change agreement, because at
the end of the day, as several of us noted, and the chairman
and the ranking member have noted, if we don't protect the
intellectual property rights, then we won't draw the innovation
that is going to get us to the solutions.
And so I think it is critical that we continue to engage
the Chinese, but be very clear and forceful up front that IP
isn't on the table when it comes to addressing climate change.
[Mr. Cleaver] All right. Thank you, Mr. Chair.
[The Chairman] Great. We thank the gentleman.
Mr. Rao, in your testimony you point to the tremendous
business opportunities across the world for clean technology.
Could you tell us in more detail about the experiences you
personally had meeting this demand with your products?
[Mr. Rao] Sure. Chairman, thank you for the question.
Specifically I will talk about the Middle East, but I will also
expand that to Southeast Asia and China where we have been
having discussions. This is fresh in my mind, so I can talk
[The Chairman] Tell us about the barriers that you have
[Mr. Rao] Absolutely.
This pertains specifically to energy in the aspect of
demand containment, so demand-side management in terms of
lighting, digital lighting, so LED lighting and controls. There
are opportunities in these countries where they have recognized
that controlling their use of energy is going to be a lot
faster than just adopting energy-generation technologies. As an
example, in the Middle East using solar photovoltaic technology
is not going to be practical because of dust settling into
solar panels. So they have tried it. You know, we blindly
believe that there is a lot of sun in the Middle East, so solar
would be great, while actually practically on the ground it
does not seem to be all that fine.
[The Chairman] Would that be the same problem in the Mojave
Desert in the United States; dust would settle in, and, as a
result, that that is a false promise as well?
[Mr. Rao] I am not sure if I am qualified to technically
answer the question without a little bit more research,
Chairman, but I will tell you this: If it is dust with
moisture, if the humidity content is high in the Mojave Desert,
which I believe it is not, at least for most of the year, that
becomes an issue, because the dust with humidity settles in and
cakes on these panels. That is actually putting a barrier
between you and the sun rays and the actual photovoltaic cells.
[The Chairman] So we are lucky there is no humidity in the
Mojave Desert, so as a result we can become the solar giant
because of that. And all across the Middle East, no matter
whether it is 100 degrees a day and the sun is out every single
day, that solar is not in their future, is that what you are
saying, because of the humidity that accompanies the dust and
the sun in the Middle East?
[Mr. Rao] For the moment, Mr. Chairman, that is the reality
as they have tried and tested. However, I am hoping----
[The Chairman] Wow.
[Mr. Rao] Go ahead.
[The Chairman] No, I am just saying, wow, I did not know how
really up the creek the Middle Eastern countries are because of
their humidity accompanying there. I never knew that before.
[Mr. Rao] And they are looking for solutions. So talk about
technology and opportunity for innovation, if we can solve the
problem of dust and humidity settling in. The same thing
happens with outdoor LED lighting where the brightness of the
fixtures are reduced by 40 to 50 percent because of the film of
dust that gets in, caked in. So we are taking that on as a
challenge to resolve those issues. That is on the energy side.
On the control side in LED lighting, interior, I believe,
there are tremendous opportunities. As an example, in built
environments today, with technologies that exist here in the
U.S. and elsewhere, we can reduce the energy usage by at least
40 percent without major infrastructure change. They recognize
that, and they have asked us to help them with implementation
of this technology.
So there are specific examples. So if you talk about
controls, what am I talking about specifically? Making built
environments more intelligent that actually regulate the
lighting, the HVAC, et cetera, based on ambient conditions of
outside lighting as well as outside temperature. And very often
we find in commercial buildings or in other places as well, the
outside temperature is 110 degrees, but the inside temperature
and air conditioning is ramped down to 65 degrees. And we have
actually been in environments where you feel cold inside when
it is 110 degrees outside.
The difference doesn't have to be that much to provide
comfort for us as human beings to being inside. So making it
intelligent actually adds a tremendous amount of savings. That
is something that we ought to be doing here in the U.S. And
people outside the U.S. and the Middle East and Southeast Asia
have recognized that as well. They are beginning to implement
[The Chairman] Let me ask Mr. Nelsen a question. You talk
about the U.S. Green Bank as a good idea to help to finance new
green technologies, but you also pointed to the idea of a World
Green Bank. Could you talk a little bit about how you would see
that structured and how you would see the technology transfer
occur in that kind of a context?
[Mr. Nelsen] I think the structure would be similar in the
sense that it is really an incentive process. So if you have a
developing area, they can essentially partner with private
companies and then apply for funding from this entity, whether
it was a private entity or public entity. Something like the
Asian Development Bank would be a good example of something
that exists outside of the U.S.-proposed Green Bank. So if I
wanted to make a million-acre algae biofuels facility in a poor
country in Africa, I would approach the country, and we would
jointly apply to an entity that would help partially fund it;
intellectual property rights being preserved, not actually
transferring the technology to anybody, but kind of a joint
effort that would have some public funding.
And then with China I think it is a little bit different,
so it needs to go in at probably a different level. And I
actually think maybe the solution would be to have the Chinese
put up some of their excess money into that kind of a structure
so they feel invested.
[The Chairman] So when the Chinese say they don't have any
excess money, and, as a result, we should be giving them these
technologies, what is our best answer to them about this debate
over whether or not they have excess money?
[Mr. Nelsen] I sat on a panel recently with the person that
is directing the social security fund in China and the other
person that happens to be in charge of the China Investment
Corporation, and they have a large amount of money. And I think
that one of our challenges to China and one of the ways to
solve this problem is to get them invested. I mean, if they are
investing billions and billions of dollars in U.S. technology
that is deployed in China, and intellectual property rights are
preserved in a government-to-government relation, that actually
might work, because it is less likely that they are going to
want to steal the technology if they have invested huge amounts
of money in it.
[The Chairman] Got it. Thank you.
[Mr. Esper] Mr. Chairman, I was going so say, if I can add,
I think China is a special case. And going back to the idea of
the Green Bank, and the demand is that the developed countries
would make contributions to the bank from which, as the example
was pointed out, the developing countries could draw from. But
I think putting the onus on the developed countries is only
half of the equation. The other half is addressing the tariff
and nontariff barriers. It doesn't make much sense to
contribute to the bank and allow companies or countries to draw
from this, but then paying exorbitantly high tariff rates and
confronting the other problems.
China is even more different, because in that case not only
do you have the tariff issues and nontariff issues that you
face, but in China we also note that the government has
identified renewable energy as a strategic industry. So they
have, in addition to tariff and nontariff barriers, other types
of protectionist measures, whether it is local content
requirements, IP issues, that are really aimed at improving
their own economic competitiveness and their technological
skills. So it is a special case that we really have to work on
in particular if we are going to break down these barriers and
get them to be a responsible player in addressing climate
[The Chairman] Thank you, Dr. Esper, very much.
The gentleman from Washington State, Mr. Inslee.
[Mr. Inslee] Thank you.
Dr. Esper, could you talk about those tariff barriers right
now, where they exist; the amounts; what, if anything, we do
then about them; are there pockets of the worst offenders?
[Mr. Esper] Well, we have some specific examples. I think I
cite in my written testimony countries such as the Philippines,
China, others, where you have tariff rates at least as high as
10 percent, in some cases higher. You have other types of
nontariff barriers that could equal 300 percent in terms of a
tariff equivalent. So it is a big challenge when countries put
those types of obstacles in front of tech transfer. That is
what we say when we, rather than talking about IP and how we do
compulsory licensing or tech transfer in the UNFCCC context, we
really need to not focus on the red herring and look at what
the real obstacles are at the country-by-country level and
[Mr. Inslee] Let us just take the Philippines, just because
you have mentioned them. Have we made any significant efforts
on those tariff barriers for IP use, so there is, like, a 10
percent. I mean, we are investing gazillions of dollars in
security, training people in the Philippines. It is kind of
hard to accept that tariff barrier against our sales to them of
high-tech material and systems. Have we made any serious
attempt there, for instance?
[Mr. Esper] Well, that is a good question, and I don't have
the answer for it right now. I think it is part and parcel of
the strategy we need to put forward in terms of addressing the
tech-transfer issue of looking at these countries, looking at
where they rank on the special 301 watch lists, and asking
ourselves how do we talk to them and how do we engage them in a
way that will get them to reduce these tariff barriers. What
levers can we use either diplomatically, through financial
assistance, foreign assistance, whatever the case may be, to
get them to address these issues to comport with international
IP laws and to strengthen our IP enforcement?
[Mr. Inslee] Mr. Nelsen, you had an idea about the Green
Banks, like the idea of maybe using a Green Bank in an
international context. But you also suggested one solution is
to have other companies be invested so they have got an
investment in it where they benefit, if you will, from IP
Were those mutually inconsistent at all, that you know we
are helping finance through Green Bank, but we are also
expecting people to be personally invested?
[Mr. Nelsen] I think you define it based on poor countries
versus wealthier countries. So there are developing countries
that have large foreign currency reserves; you know, China
being the obvious. So I think China and India and maybe one or
two other Asian countries are separate cases. And then you have
issues like Africa and other places where basically there isn't
money, and so you need to probably have some kind of private-
sector, public-sector matching, or similar, some quasi-public
structure like the Asian Development Bank, where there is
maybe--or maybe multiple different organizations coming
together to do project finance that has some private matching.
[Mr. Inslee] Just to share my story from China to show I am
thinking on the lines you are is that when we were meeting with
the Chinese officials and, the same line, with remarkable
message discipline, everyone told us the same story in China,
which is that they are a developing nation, we are a developing
nation, we are a developing nation. And I was with one of the
officials. I noted that in driving to the meeting with him, we
had gone by two Gucci stores, a Prada store and a Ferrari
dealership. And I noted that just that morning, the Chinese
businessmen had bought a stake in the Cleveland Cavaliers. And
I said that I thought China was a developing nation just as
much as Yao Ming is a developing basketball player, so I kind
of share your view in that regard.
[Mr. Nelsen] One of the things I have noted in my dealings
with China has been that I think they are looking for the right
technologies, just as we are. Once the green technologies that
actually can compete on cost exist, I think they will
absolutely invest their money in it. And so as you see solar
come down, and as you see biofuels that are practical, it is
the same process that we have here. I mean, they are going to
be marginally impactful until they can compete on cost, and
then I believe we will invest more, and I believe China
actually will want to invest some of their foreign currency in
those solutions. And that is probably actually a good thing for
us in a lot of ways. But we are still going to need to go high
maybe in an SED level for IP protection.
[Mr. Inslee] Thank you.
[The Chairman] Mr. Rao, I really want to come back to this
inability of the Middle East to produce any solar, because, as
you know, it is necessitating us selling nuclear power plants
to countries in the Middle East with uranium, plutonium and
other nuclear bombmaking material, which is only going to
escalate the tensions in the Middle East. And I am very afraid
that as we send very expensive nuclear power plants to the
Middle East, that we are only shortening the day that we have
to send ever more troops over there as a government collapses
that has one of these nuclear power plants. In the same way
that in Iran and Iraq we are now facing that problem, it is
almost inevitable that the same thing will occur in one of
these other countries, a country that could otherwise generate
electricity from solar.
So here is what I am wondering, and everyone is gone here,
so I am all alone as the Chairman, and I am just wondering, you
know, we have this problem with rain that used to go on the
windshields of American cars, and somebody came up with the
idea of a windshield wiper that would just wipe off, basically.
And then somebody came up with a brilliant, brilliant idea.
It was called the intermittent windshield wiper. It would just
occur every 30 seconds or so, a big patent fight over that
about 50 years ago in the United States. A guy got very rich
winning this patent fight, a big, big fight.
And it just seems to me that maybe someone can invent a way
that intermittently the--since the very device that we are
trying to protect generates electricity, it would seem that
perhaps there would be a way to have an intermittent dust
wiper, you know, wipe off the dust so that the electricity
which is being generated by the thing that is being protected
by the intermittent dust wiper would allow this country to be
able to take advantage of their better natural resource rather
than asking the United States to send them uranium and
Should I get a patent on my idea, Mr. Rao? And would this
idea emanating from this Chair right now constitute constructive notice to all other entrepreneurs
in the world that I have the idea first? And how much more
complicated than that should it be to be able to figure this
[Mr. Rao] A couple of comments, Mr. Chairman. I think it is
an excellent idea, and the only consolation is that you
probably are repeating what happened at a workshop 3 days ago
in Bahrain about finding alternatives for self-cleaning solar
panels that actually can do the same thing. We did recognize
the fact that there was a patent fight, and the discussion was
we have to do more research on who holds the patent on
intermittent wipers and how it can be applicable to solar
[The Chairman] You actually had that conversation.
[Mr. Rao] Absolutely.
[The Chairman] No way.
[Mr. Rao] But there may be an extension. If you look at IP,
so you will note that they actually had the conversation here
in terms of actually bringing it, because we were looking for
[The Chairman] You know, there is a part of me that really
from a nationalistic perspective that I thought maybe I
shouldn't share this idea with Bahrain and Saudi Arabia and
other countries, maybe I should just keep it here so that we
develop all these ideas, and that they not become the capital
of solar, okay, because we now have them, because they don't
know about this, buying our nuclear power plants. And that is a
good trade advantage for us.
But maybe just out of--you know, and Ms. Haverkamp already
pointed this out, and I think Mr. Nelsen as well--maybe there
are other reasons we should share the intermittent dust wiper
technology with these other countries so that they can capture
the opportunities there.
But I just think it sounds like an eminently solvable
problem, and it also solves the problem of us sending uranium
and petroleum to countries that could be subject to political
instability over the next 50 years, which instability would
then create real problems for us as well in the transfer of
nuclear bomb-making material to Third World groups that many of
these countries, as you know, are already subsidizing at least
So I just think the sooner we solve this problem--and I
would like to work on this as an issue, because I think almost
everyone at this table really does believe that solar is the
future, and it could become the single largest manufacturing
sector in the history of the world. And I would just hate to
see the countries with the most sun not being able to benefit
from it because they don't understand the intermittent
windshield wiper technology better.
[Mr. Rao] Excellent. Thank you, Mr. Chairman. That is an
excellent idea. In fact, I think what the folks in Bahrain and
the Middle East are looking at is not the solar, it is just one
option. It is one of several options. So, for example, they are
exploring wind simultaneously as well, and they are also
curtailing the use of energy itself. They are grossly negligent
about how they use energy because it is so cheap. Now they are
beginning to realize that.
We will work on that. I really applaud you for taking that
effort, and maybe there is an idea for another patent, maybe,
if you continue thinking on it.
[The Chairman] Is this a patent in the control of the United
States? Are you aware of that? Is the workshop, the 3-day
workshop, on the intermittent dust removal technology, is that
an American technology that they were discussing?
[Mr. Rao] The initial patents, I believe, we are doing some
research on it. The workshop wasn't on intermittent wipers, the
workshop was on energy solutions as a whole. This is one aspect
of it. So we have started doing research. It is about 48 hours
since my last discussion on that, and I have been in a plane
for 26 hours of those. So we will get that research as well.
[The Chairman] Thank you.
A lot of times people say, well, you know, this is the
equivalent of our putting a man on the moon. But in a lot of
ways, that kind of overstates the case because we are talking
about batteries, we are talking about, you know, incremental
additions on already existing technologies with additional
breakthroughs; kind of like in the chip industry how there is
Moore's law, and it just keeps improving every year or so.
The same thing is true here with incremental new technology
breakthroughs that keep improving by another 18 percent per
year the efficiency of solar or wind or other technologies,
which seems to be the curve that at least solar has been on
since 1978. So that is the context in which I am thinking about
Maybe you could, Ms. Haverkamp, talk a little bit about the
difference between the HIV/AIDS patent protections and the
clean energy patent protections as you see the differences in
other countries around the world in terms of those technology-
[Ms. Haverkamp] Sure, my pleasure. I went into this in some
more detail in my written testimony than I did orally, and I
would recommend that people also look to that. But I think some
of the most significant differences are that often in the
pharmaceutical area to deal with a particular disease there may
be just one fix that is developed, one drug that really works.
There is a lot of effort to find the one thing, the silver
bullet, if you will. And what people are fond of saying is that
with respect to climate change, it is not going to be a silver
bullet, it is going to be silver buckshot. And the examples
that you see, say, in the solar area or the wind area, where
there are lots of different companies with lots of different
ways of addressing the problem of reducing emissions or making
the products more efficient, that is quite different from the
But I do think it is important, in thinking back to
Representative Sensenbrenner's question about the negotiations,
there is a lot of baggage from the pharmaceuticals debate that
countries bring to the climate debate.
[The Chairman] So what is that baggage?
[Ms. Haverkamp] I think it was a sense that in the
pharmaceutical area, it was more a monopolistic situation with
the few large companies that were making--they had to make
incredible investments in the research to develop these
products, but then there were significant financial benefits
when you had that patent. And there was a fair amount of
obvious human misery that could be avoided if the medicines
could be made available more cheaply.
And it was--this is getting into anecdotal information, but
I think one of the stories that I remember being bandied about
a lot was that when the patent was about to expire, a minor
change to the product could extend the patent period again. So
it was looking like it was companies going out of their way to
preserve their market share and make it harder for generics to
come on line. And I think in the area of human health that was
seen by many developing countries as unacceptable.
The good news is that in the Doha WTO Ministerial, the
governments got together and came up with a decision about
access to medicines that recognized that there were
flexibilities in the TRIPS agreement, and in situations like
this, they really ought to be used.
[The Chairman] So in the negotiations on international climate agreement, intellectual property is
one of the four main pillars of the negotiation. Why is it
important for the United States to be a leader in resolving
these issues, in your opinion?
[Ms. Haverkamp] I would slightly amend your description of
intellectual property as one of the four main pillars. One of
the four main pillars is the transfer of technology, and
intellectual property is one piece of that. The transfer of
technology involves also the capacity building, the access to
information, a whole suite of issues. And transfer of
technology and addressing that is critical to getting an
agreement in Copenhagen because it is, if you will, the
developing country's side of the deal that we need to make. We
are wanting them to reduce their emissions; they are wanting
the technology and financial assistance to be able to do that.
And it is in our self-interest as the United States to come up
with solutions in the tech-transfer area because, as many
people have said, even if our emissions went to zero, if all
the developed country emissions went to zero by 2050, you
aren't going to avoid dangerous climate change unless the major
developing countries soon also get their emissions leveled off
and in a downward path. And so we need to find the ways to
share technology, share know-how with them so that they can do
that as well. And I think the private carbon market can be a
big player in making that happen.
[The Chairman] So we can have the audience watching on
television understand, what does TRIPS actually stand for, so
that we can bring them into this discussion? What does T-R-I-P-
S actually mean?
[Ms. Haverkamp] I am going to trip over this. Trade-related
aspects of intellectual property rights.
[The Chairman] And that is the most important agreement in
the international intellectual property area, would you say?
[Ms. Haverkamp] Well, the intellectual property provisions
have gone into a lot of bilateral agreements, and well before
TRIPS was put into----
[The Chairman] When was TRIPS put into?
[Ms. Haverkamp] It was as part of the Uruguay Round, which
was in 1994, 1995, when the WTO agreements entered into force.
But before that there was a range of agreements around
intellectual property that are administered by the World
Intellectual Property Organization, WIPO. But I think TRIPS has
been considered the most significant in creating the incentive
for countries to establish strong intellectual property regimes
in their domestic law.
[The Chairman] So how does TRIPS as administered by WIPO
impact on the clean technology transfer area? If you can put
that into English for our viewing audience.
[Ms. Haverkamp] I am sure my colleague would like to help as
well. But I think that one way to say it is that the TRIPS
agreement, when countries join the WTO, they take on an
obligation to write into their domestic law strong intellectual
property protections. And if countries do not pass those laws,
or if they don't enforce those laws, then countries who are
hurt by that can bring enforcement actions in the WTO to compel
them to establish a good intellectual property protection
[The Chairman] Which, in your opinion, is the best place to
address the intellectual property issues related to climate
change, Ms. Haverkamp?
Then I will ask you, Dr. Esper.
[Ms. Haverkamp] Well, I think my first caveat would be that
I think that the picture is still emerging of how significant
these issues are and whether and what kind of fixes might be
needed. But I think that climate change is a problem that
requires--that needs to be addressed across multiple fora, and
the U.N. climate negotiations does not have the sufficient
expertise or involvement of all the right ministries to address
all the issues.
So I think that the IP issues are coming up here, but it
may well be, depending on the kind of concerns that emerge,
that the other fora like the WTO TRIPS agreement would be an
appropriate place to address it. I think also that is just a
political reality that I don't think you are going to get
consensus to address these problems in the climate
[The Chairman] And Dr. Esper.
[Mr. Esper] It is a good question. I was in Geneva a few
weeks ago, and this issue has been debated back and forth for
some time now between the WTO and the WIPO and the UNFCCC. My
sense is they are coming to some conclusion, which we fully
support, that the WIPO is the best place to handle IP issues
for the reasons that my colleague cited; everything from the
expertise, the capacity, the ability to bring to bear all the
different parties to the agreement, and to be able to address
and consider any unintended consequences.
This is one area where the WHO has already acknowledged
that they believe in the health care venue that the WIPO, the
Intellectual Property Organization, would take the lead. So our
view has been that IP is best handled in the WIPO.
But going back to your original question, I think the issue
really is about tech transfer, not about IP. It just tends to
be the case that for one reason or another some governments,
some NGOs, jumped people on the IP issue and cited that as the
problem. And I think, as I pointed out in my testimony, others
have as well, IP isn't the obstacle here, it is what is going
to get us innovation. When you start looking through the case-
by-case, country-by-country examples, you find that certainly
in the least developed countries patents aren't the problem.
Many of the technology solutions aren't patented. Reforestation
is certainly something that is not patented. But when you start
moving up the ladder in terms of developing countries, that is
where it gets a little bit trickier as they may need different
types of technologies.
[The Chairman] Interesting, interesting.
[Mr. Rao] Mr. Chairman, I have a slightly different view on
that. I have actually given the details in the testimony of an
idea. The TRIPS is administered by WIPO. And TRIPS by default
actually talks about the trade-related aspects of IP. Perhaps
it probably won't be a bad idea to actually make this a trade
issue, because at the end of the day, IP without commercialization doesn't really mean much.
IP for the sake of IP is not going to get us anywhere.
[The Chairman] You don't know how as a history major, you
know, all history and history majors in college envied the kids
who were the science majors and the technology majors because
they know what they want to do. And we are just taking
satisfaction in these history and English books that we are
reading. And here for just one brief moment, it only lasted
until I recognized you again, I got great satisfaction. So
sometimes IP just for the sake of IP does really serve a
purpose, okay? It only lasted a very transitory moment. But I
don't want you to underestimate the satisfaction I felt as a
history major in also having that big breakthrough.
[Mr. Rao] Well, perhaps maybe in the vein of Hite's law and
other laws maybe we have a Markey's law, an intermittent
cleaning of solar panels at some point.
[The Chairman] And intermittent satisfaction from coming up
[Mr. Rao] From coming up with it, absolutely, I agree.
Actually I was talking about taking a different approach to
IP. Instead of actually having this for the sake of IP
internationally, maybe in conjunction with what Mr. Nelsen was
talking about here in terms of having an IP clearinghouse as an
exchange. It actually has been tried by the World Business
Council on Sustainable Development, they call an eco-patent
pooling. But they don't incentivize the innovators; it is more
just to share ideas.
But the clearinghouse that I was talking about actually
does incentivize, and this is exclusively for climate change-
ready technologies now across the board. You take this out of
this realm of debate, because while we are debating, we are
polluting. We are actually making this War of the Worlds of a
So my idea was actually if you add this Green Bank, I think
it was actually--I called it funding, but made this a part of
the WTO effort where the clearinghouse actually takes
responsibility; you pay for play, you get in. If you have an
idea, you get in, and you can actually take IP as well. It lets
innovators actually take advantage of ideas around the world.
The interesting thing it is not about the large companies
alone. I think the backbone of our economy and most other
economies is what I call the SMEs, the small medium
enterprises. Innovation comes out of there. And providing them
with access to ideas and incentives for getting new ideas
innovation is going to make a difference for us to create jobs
here as well.
[The Chairman] Okay. Great. Thank you.
[Mr. Nelsen] I think as long as it is not compulsory, those
kind of exchanges work. But for the real big breakthroughs,
which are the ones that are actually going to matter to us, all
the incremental stuff added up will not get you to solar that
competes with existing electricity. There needs to be major
innovative breakthroughs. And those are happening, but those
people probably won't want to put those in.
And one final point. The difference between the HIV issue
and what we are talking about is the R&D costs are great on
both, but the deployment cost on these energy solutions is very
large. So one biofuels plant that is just a demonstration plant
in the U.S. costs more than the total manufacturing cost of all
the HIV drugs that have been distributed in Africa. So it is a
very different, completely different equation.
[The Chairman] I was only making reference to a hearing that
we had yesterday with Dr. Emanuel Sachs, who is an MIT
professor who created the technology that led to the creation
of the company Evergreen Solar Company. And what he did was he
presented us a chart which showed how the cost of generating a
kilowatthour from solar had dropped from $5 down now to about
20 cents, and that it improves about 18 percent per year
technologically; and that with his new company, 1366, which is
a new company in Lexington, Massachusetts, with his new state-
of-the-art technology making an additional improvement, that he
sees actually by the year 2020 that the generation of
electricity from PV will be equivalent to that of coal, and
that by 2020 we can expect that 7 percent of the electricity in
the world will be generated from photovoltaic technology.
Now, you look at that, Mr. Nelsen, and your response would
[Mr. Nelsen] My response would be that--it is a good news
response--was that we have a company that is going on sun at
NREL in a week that will probably do 6 cents to 8 cents a
kilowatthour, so you don't have to wait 20 years.
[The Chairman] We don't have to wait 20 years. No, he is
saying that we will actually see by 2020 7 percent of all
electricity in the world. Do you think that is a realistic goal
once you get it down to 6 cents to 8 cents?
[Mr. Nelsen] I think it is all about cost. And whether it is
biofuels or it is solar, it is all about cost. And it looks
like, I would say, that the breakthroughs probably will be
there and are almost exclusively going to be done in the U.S.
[The Chairman] That is the technological breakthroughs will
be made in the United States?
[Mr. Nelsen] Yes.
[The Chairman] And then the question becomes what are the
rules for the technology transfer to get them out to other
countries? And so for Bahrain it would be that we need to have
windshield wipers on the technology, but assuming that we can
make that breakthrough as well and cut the deal with the family
that still holds the patent rights to that.
[Mr. Nelsen] And I would love to be able to put a giant
biofuels or solar manufacturing facility in Mali or some other
poor country. I just don't want to be compelled to do it. So
the question is what are the right incentives to do that?
[The Chairman] And how would you be compelled?
[Mr. Nelsen] If somebody told me that I had the license--you
know, that I had to give away my technology to some world body
versus some incentive structure, which I think could be created
to get me to do that.
[The Chairman] You would lose your incentive to further
invest here in the United States if you were compelled then to
transfer the technology overseas.
[Mr. Nelsen] Exactly. And I would have suspicions that our
friends in competing strategic countries would take advantage
of those situations to make fungible assets like fuels other
[The Chairman] Okay. That is great.
So here is what I would like to ask each of you to do. We
will start in reverse order of the opening statements; ask each
of you to give us the 1 minute you want us to remember as we
are moving forward on these issues in the 130 days up to
Copenhagen. The select committee will be in Copenhagen, and we
will be working on the effort to have a bill put on the
President's desk before he goes to Copenhagen. So please give
us your 1-minute closing bit of advice.
Dr. Esper, we will begin with you.
[Mr. Esper] Great. Thank you, Mr. Chairman.
My 1-minute synopsis is this: Technology is crucial to
addressing climate change, and if we want the advanced
technologies that are going to get us there, what we need to do
is preserve an IP system that has generated technologies over
the decades. And so as we look at what is happening now at the
UNFCCC more broadly, it is critical that the United States make
clear that IP rights are not on the table for negotiation or
for undermining. And I think the Congress can play an important
role in that through passing legislation, as you have already
done; through speaking to the administration, asking them to
come forward; offering statements of your own, but making clear
to our partners both in the developed world and in the
developing world who look to us for leadership that IP rights
are the solution, not the problem, and we should focus on the
real problems that myself and various others here have outlined
[The Chairman] Ms. Haverkamp.
[Ms. Haverkamp] Thank you.
I agree tech transfer is--technology is critical to solving
the climate change problem. Tech transfer is critical to that.
What will make that happen are policies, U.S. Government
policies, that cap on carbon that the Waxman-Markey bill
represents. Similarly, in developing countries, however much
technology we develop and are able to send, it won't go to
developing countries unless they have domestic policies and
incentives that require it to be used there.
As far as the U.N. climate negotiations, I think they have
been very much at a rhetorical stage. Everyone is waiting for
the United States to come to the table. Now that the U.S. is
here, we need to move the negotiations into a much more
thoughtful ``get down into the details'' stage of discussion.
And I think that for the IPR issues, it is time to get more
concrete; get beyond the rhetoric to what are the specific
concerns that are motivating, what are the examples that are
motivating countries' proposals so we can figure out what is a
serious concern that needs addressing and what is negotiating
[The Chairman] Thank you all very much.
[Mr. Nelsen] The innovations are happening, they are going
to happen in the U.S., there are going to be breakthroughs, and
they are going to be the solution to climate change. And they
are also going to be what is going to allow us to lead the next
10 or 20 years of the economy in the world. They are going to
create a lot of jobs at home, and we need to protect them in a
smart way, but also deploy them with incentives, not
[The Chairman] Thank you, Mr. Nelsen.
[Mr. Rao] Thank you, Mr. Chairman.
Two points I would like to make. One is what got us here
necessarily won't get us there. We have to look at IP very,
very differently. So we have successes over the past decade. I
think this is going to be very different.
I would like to propose that we do actually look at an IP
exchange combined with some kind of a funding agency that we
call a World Bank or Green Bank, or whatever it is. But
actually I think it should be a private not-for-profit sort of
organization where it is voluntary participation, where
somebody has to--to take, somebody has to contribute. I would
like to propose that we take that to the next level and propose
it. If not, things will continue to happen in China and Saudi
Arabia and India without the U.S. presence in there, and that
probably will be detrimental to us.
[The Chairman] Well, we thank each of you. We clearly have a
challenge before us. We want to protect intellectual property
rights. We want to make sure that inventors in the United
States have an incentive to continue to invent, and that
investors have an incentive to invest in those inventors. And
we have to make sure that we properly analyze the markets that
we are talking about.