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[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

global basis.

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

public service.

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

Weimer.

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

away?''

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

worst offenders.

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.

[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

our innovators.

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

marketplace.

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

community.

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.

Cleaver.

[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

hearing today.

Thank you, Mr. Chairman and the ranking member, for this

hearing.

[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

solutions.

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

event.

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

today.

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

global activity.

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

and California.

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

Federal research.

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

countries.

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

global community.

Thank you.

[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

national policies.

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

AIDS.

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

developed world.

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

thing.

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

happen.

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

compromise.

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

that issue.

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

climate change.

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

partners.

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-

tariff barriers.

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

technologies.''

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

terms.

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.

Thank you.

[The Chairman] Thank you, Dr. Esper, very much.

I now recognize the gentleman from Wisconsin, Mr.

Sensenbrenner.

[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

climate change.''

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

nonstarter?

I open it up to anybody who wishes to take a crack at it.

Mr. Nelsen.

[Mr. Nelsen] I will take a shot.

I do think you have to have an alternative other than just

saying no.

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

the market.

[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

here.

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.

Chairman.

[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

forward.

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

those conversations.

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

current technology.

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

today.

[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

Research Institute?

[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

prevent thievery?

[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

the system.

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.

Thank you.

[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

about that.

[The Chairman] Tell us about the barriers that you have

encountered, please.

[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

those technologies.

[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

change.

[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

tackle those.

[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

protection.

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

plutonium.

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

out?

[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

panels.

[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

solutions.

[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

indirectly.

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

these issues.

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-

transfer issues.

[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

medicine area.

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

regime.

[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

negotiations.

[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. 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

with that.

[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

play.

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.

[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

be----

[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

places.

[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

today.

[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

bait.

[The Chairman] Thank you all very much.

Mr. Nelsen.

[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

compulsory.

[The Chairman] Thank you, Mr. Nelsen.

Mr. Rao.

[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.

Thank you.

[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.