This article has been composed by Mr. Saurabh Mani Tripathi a 1st year student of Lloyd Law College Greater Noida Uttar Pradesh.
Abstract –
Intellectual property rights (IPR) form an important component for unlocking sustainable innovation. Research highlights both the positive role of IPR in incentivizing sustainable innovation and the negatives, such as delaying diffusion. We review the state-of-art debates on incentivizing sustainable innovations and the role of IPR for sustainable manufacturing industries, summarizing three main debates: the role of incumbents versus new entrants, cross-industry collaboration, and IPR obstacles to the circular economy. The arguments bring forth the need for IPR systems to structurally support organizations in their move towards sustainability, removing institutional difficulties for cross industry diffusion, and in-depth research of IPR challenges for the circular economy. We conclude with directions for research that can enable better informed decisions on IPR for sustainability transitions.
Introduction
Transforming industrial sectors towards sustainability for tackling climate change requires phasing out and substituting unsustainable technologies and manufacturing practices. As a deliberate socio-technical transition, this entails amongst social transformation also technical innovation as well as broad diffusion of sustainable solutions. Intellectual property rights (IPR) systems, such as patents, trademarks, and copyrights, form essential policy tools to incentive innovation and support diffusion. IPR systems have been implemented and harmonized to some extent amongst member states of the World Trade Organization. The agreement on trade related aspects of intellectual property rights (TRIPS) has established guiding rules for providing similar institutions to register IPR, granting minimum protection levels, and assuring that foreign IP owners are treated equally to nationals. Accordingly, the TRIPS Agreement aims at supporting IPR as a tool for international knowledge and technology transfer, which is crucial for developing as well as diffusing sustainable solutions. As manufacturing systems are built on multinational value chains, the use of IPR for transforming these requires joint efforts of major players namely, businesses, research and development (R&D) organizations, and states across borders.
Emphasis on sustainable manufacturing includes social responsibility, going beyond eco-efficiency and green manufacturing concepts, such as circular economy (CE) with the 6R approach: reduce, re-design, re-use, re-cover, re-manufacture, and re-cycle. Initially focusing on hardware and production processes covered by patents and trade secrets, with the raise of digitalization software, data bases with copyright protection, data management and algorithms have gained importance for sustainable manufacturing. Digitalization not only supports measurement of eco efficiency gains, but also reduces negative impact directly, such as through optimizing supply chains. Proponents of sustainable manufacturing consider IPR as essential ingredients to enable innovation and diffusion of sustainable technologies, products and services, improving collaboration, and fostering prosperity in developing countries, paving the road to foreign direct investments. Opponents argue, given the cumulative nature of innovation, that IPR — in particular patents and trade secrets, and to some extent copyright — slow down the rate of sustainable innovation and create barriers for fast diffusion and adoption. Trade secrets more than, but also patents if not being licensed, for example, on design, prototypes, and product material restrict third parties to perform disassembly, recycling, and consequently to remanufacturing. Trade secrets on manufacturing technologies usually contain sensitive data, which is also required for appropriate life cycle assessments for comparing different manufacturing technologies.
In this paper, we take stock of the debate over the last five years, focusing on the role of IPR in achieving sustainable manufacturing through innovation and diffusion. Specifically, we summarize the debates in three key areas: 1) incumbents versus newcomers, who form two main innovation system groups that play a key role for innovating and diffusing sustainable innovations in the manufacturing industry. This also incorporates the discussion whether startups or large corporations provide higher sustainability impact. 2) Increasing sustainable innovation and diffusion across different industries, which includes larger scale collaboration. 3) The issues associated with IPR in the circular economy (CE), with CE being a major approach to achieving sustainable manufacturing.
The review raises questions for the IPR regime, for example, given that speed is increasingly important in sustainability transition to tackle climate change, and newcomers being important innovators but larger firms may be better suited to broadly diffuse sustainability solutions across the manufacturing sector, whether IPR systems structurally work in favour of corporations in their move towards sustainability and easier diffusion of sustainable technology. Furthermore, we raise the question if the IPR systems are geared for promoting the benefits of cross-industrial innovation for sustainable manufacturing. The need for further research in the adequacy of IPR as policy tools (e.g. to incentivize licensing) also is highlighted through our review of the CE literature particularly. The final section of the paper concludes with suggestions for future research that can enable better informed IPR related decisions on policy and firm level. In-line with linguistic usage in technology and innovation research, we use the term intellectual property (IP) to emphasize the knowledge and knowhow parts that may not all be protected under IPR, and IPR to emphasize formally protect IP, such as patents and copyright. Accordingly, IP transfer includes process knowhow but also formal IPR such as patents.
Innovators and implementers of sustainable manufacturing: incumbents versus new entrants
Several actors play a role in sustainable technology focused innovation systems, such as businesses, R&D organizations, funders and investors. Two key actors are established firms (incumbents) and new entrants (start-ups, or firms that enter a new field). Incumbents often operate less sustainable legacy technologies and require a substantial change to become more sustainable or to substitute these with more sustainable alternatives. If incumbents do not develop sustainable technologies themselves, these can be developed by new entrants.
Incumbents often manifest technology trajectories given their huge, long-term investments. This creates lock-in effects, thus switching costs that prevent them to adopt sustainable technologies. At the same time, this creates incentives for new entrants to disrupt established, dominant manufacturing regimes. Several industries and sectors face these challenges despite wide-spread agreement that current trajectories are not sustainable. New entrants are seen to be more flexible, hence can be a source for more radical sustainable solutions, but face difficulties such as resource constraints for commercialization. The IPR systems are sometimes considered as a means that incumbent exploit for their own benefits, rather than for societal benefits to manifest their positions: For instance, some build patent fences, sign cross-license agreements to increase entry barriers for new entrant. Some research results indicate that the patent system particularly supports resource-strong companies more than SME. If so, one can argue that developing sustainable technologies may be impeded when new entrants are structurally discriminated against. How patent owners can be better incentivized to share their technology through licensing still needs further research.
While the market disruption argument proposes new entrants are best at bringing sustainable innovations in the market, current evidence suggests that incumbents are actually quite actively develop sustainable technologies, eco-friendly products and processes. While in the sustainability transition often associated with incremental eco-improvements, they are undertaking eco-innovation efforts, such as recycling, and resource efficiency, in some instances to a larger extent than smaller new entrants, or by purchasing and in-licensing IPR and acquiring startups. At least, if one large incumbents, adopts a sustainable technology across multiple of its businesses or implements higher occupational health and safety standards and raises minimum wages to living wages, the resulting impact is likely to be substantial. Adopting new, sustainable manufacturing technologies is expensive. Investments in production facilities and R&D infrastructure require significant capital. Larger manufacturing firms, attributing to the pool of resources, specialized workforce, market power, and economies of scope and scale are argued to have a higher ability to bring sustainability to the market. García-Granero et al. found larger firms in Spain demonstrated higher propensity to adopt eco-innovations in green practices such as recycling, green packaging, or pollutant control input usage as compared to small-sized and medium-sized enterprises (SME). Current research on patent trading supports this observation, suggesting that larger firms purchase more valuable patents, given their stronger financial resources and negotiation power, although the majority of patent trading happens amongst SME. However, we argue that new entrants are a necessary component for triggering large incumbents towards improving their sustainable impact. If speed is important for sustainability transition [1,2], startups develop more radical solutions with higher potential to disrupt unsustainable paths, and larger firms have more resources to bring sustainability solutions to the manufacturing sector, these findings raise the question, whether the IPR systems structurally supports collaboration amongst these firms to transition faster and support for easier diffusion of sustainable technology.
Regardless of whether sustainable manufacturing technologies stem from new entrants or incumbents, IP transfer within and across countries and industries appears to be crucial for diffusing sustainable technology. Technology transfer requires the exchange of formally protected IP, such as patents (IPR), but also informal IP, such as non-protectable process knowhow. IPR is an important technology transfer tool in general that can indirectly turn intangibles into tradable goods. However, licensing patents is not sufficient but it needs to be accompanied by knowledge exchange of how to use the technology. Some examples, which highlight the indirect consequences of IPR in taking sustainability forward include the case of Tesla. Through a patent pledge the company released all of their electric car patents, at least partially to incentive others to increase R&D in electric mobility. Although the effects and motives are debated, as a symbolic act, it certainly gained large public attention and pushed the automotive industry to increase their sustainability efforts and rethink access to IPR. Another example includes the release of patents to the food industry by TATA Chemicals. It resulted in the proliferation of iodized salt for cooking in India that has saved millions of children from iodine deficiency-based physical deformities. Another example with mixed effects is the plant-bottle technology developed in 2009 by Coca-Cola, a large incumbent consumer good firm. The associated patent was licensed to selected non-competitors, such as to automobile industries, leading to substantial move towards sustainability before providing access to competitors in the same sector after ten years. Examples like this suggest that current IPR systems should be adjusted, for example, to better incentivize licensing of sustainable technologies with competitors earlier.
Our argument calls for business standards like in safety technologies to be implemented that require firms to license technology with societal benefits to everyone interested including competitors, to advance the sustainability transition of a whole sector as quickly as possible. For instance, safety improvements in automobiles like airbags need to be shared within and across the industry so that no one is excluded from the benefits and more lives can be saved. Hence, an obligation to license sustainability-related inventions, similar as for standard-related patents in telecommunication on a reasonable basis, may increase the speed of sustainability transitions in manufacturing. Such implementation needs careful consideration as it could slow down the pace of innovation, when firms do not have enough lead time advantages to recoup their R&D investments before having to share the technologies. A way forward could be a non-voluntary sustainability license, which however still leaves several questions open. For instance, who should and how to determine if a technology has a substantial (threshold-passing) societal impact and how a reasonable fee can be determined will need further research. An alternative would be financial incentives to increase the voluntary willingness to license sustainable technologies, such as tax reductions, similar to the patent box regimes, for example, implemented in the UK.
Cross-industry IP transfer for sustainable technology development and diffusion
Practitioners and scholarly literature widely recommend cross-industrial collaboration for sustainable technologies attributing to the complex, novel nature and pervasive application of such technologies. In this section we summarize the debate about the role of IP in cross-industry innovation for sustainable manufacturing during its two stages: 1) development, when IP is sourced or jointly developed during the development stage, and 2) diffusion when IP is transferred during the diffusion stage. Cross industry IP transfer refers to firms in one industry adopting or transferring IP from or to multiple, diverse, unrelated industries. For example, firms in the food processing industry adopt and implement IP from the chemical industry, such as plastic raising extrusion process to manufacturing protein-based pet foods is a cross-industry IP transfer.
Proponents of cross-industrial or inter-industry IP sources for innovation argue that firms that move beyond their industrial boundaries to access knowledge and IPR of unrelated variety are better-off and more likely to generate radical sustainable innovations with wider impact as compared to firms that rely only on intra-industry knowledge sources. For example, it was found that traditional European textile and clothing manufacturers had high technological development and diffusion performance, because they relied on cross-industry technology transfer of technological IP as sources for their innovation. Similarly, successful firms in high technology sectors in multiple countries, such as Japan, US, Germany, South Korea, France and China accessed cross-industry IP through patent licensing and contracts [40]. Current research demonstrates sustainable manufacturing technologies to be more radical and complex than ‘non-green’ technologies. These technologies have stronger and critical reliance on broad, diverse, alternative and unrelated technological IP components from different industries. Evidence from the global south, such as Brazil, India and South Africa suggests as well that developing sustainable technologies like photovoltaic, and carbon capture and storage technologies is positively related to the innovators’ involvement in international technological development networks that gives them access to a broad range of unrelated and diverse set of technological IP components from different industry sectors.
Proponents further argue for cross-industry IP transfer to being crucial for not just technology development, but technological diffusion as well. During the early lifecycle stage, sustainable technologies tend to exhibit the qualities of general, purpose technologies (like steam engine, and ICT) with wide-ranging possible use cases, promoting complementary innovations and applications in multiple sectors. Development and diffusion of such technologies requires multi-disciplinary expertise and complementary assets from diverse industries worldwide to ensure co-learning, co-invention, cost-sharing, and so on. An analysis of 11 Swedish firms across multiple industries that develop sustainable technologies revealed an openness amongst firms from different industries to share their best practices related to production and R&D for sustainability. Evidence further suggests that the development of patented inventions for climate change mitigation and adaptation technologies in the electricity and mobility sectors resulted into more diverse, wide-ranging and larger subsequent innovations across industries as compared to their unsustainable counterparts, such as the combustion engine and coal-based power technologies.
The evidence highlights IP on sustainable technologies, owing to their wide and general purpose , applicability, move beyond the conventional boundaries of related specialized industries, to be applied or implemented in diverse industries leading to cross-industry IP transfer. As patent applications are openly published, accessible to everyone to read without any fees, they are an open access repository of technology-related knowledge. While businesses rarely participate in publishing their R&D findings in research articles, patent-active firms publish their inventions in their patents. This mechanism thus enables the identification of the innovator, to ask for further information or joint collaboration on further improvements. Accordingly, patent documents as open knowledge repositories may increase transfer of sustainable innovations in manufacturing. Hence, the patent system functions much more as an enabler for sustainable innovation, than trade secrets.
Despite the benefits of cross-industrial innovation for sustainable manufacturing, high communication and administration cost, and barriers created due to linguistic, cultural and institutional differences also cause firms to struggle during cross-industrial partnerships. This is particularly relevant to SME and firms with little experience of negotiating partnerships for technology development and IP transfer. However, to increase transitions to sustainability in manufacturing, given that the majority of manufacturing sectors spam across multinational value chains, it is important to facilitate technology transfer across industries and countries, including those with a shorter history of IPR systems. We call for more research to focus on specific support mechanisms that can effectively facilitate cross industry IP transfer particularly for sustainable technologies within and on top of the existing rules and processes. Standard contract practices rather than information biases on licensing fees and rules may help. Also, broader knowledge and IPR commons are promising approaches, when administered appropriately, to make relevant IPR accessible.
IPR challenges for implement the circular economy in manufacturing Circularity is a promising approach with many proponents, including the European Commission for achieving sustainable manufacturing to address growing resource scarcity and environmental pollution. Unlike the conventional linear economy, that is, take-make-use-dispose, as an emerging industrial paradigm the CE propagates sustainable resource consumption and production patterns such that ‘the value of materials and products is maintained and recovered through narrowing, closing, and slowing loops’ . To achieve full circularity, various actors need to collaborate and jointly innovate, which comes with generic, but also CE-specific IPR challenges that have hardly been researched.
For instance, BMW, a leading German car manufacturer has committed to the CE and developed proprietary tools for efficient disassembly processes, not the least based on their own internal know-how of how products are assembled and the materials that are being used. However, so far, the company dismantles only a fraction of the cars it sells globally due to challenges in recovering used cars that are geographically dispersed. While third party recyclers and refurbishers can bridge this recycling gap, incumbent manufacturers like BMW might not be particularly willing to share (i.e. license) valuable know-how to external third parties, thus denying access to proprietary IPR. BMW is just one example and there are other manufacturers in other industries, like Apple and Nikon who seem to operate with similar mind-sets.
CONCLUSION –
Analysing a database with 100 CE implementation cases Kalmykova et al. conclude that the manufacturing and distribution parts of the value chain are rarely addressed by CE research. In fact, we can conclude that hardly any CE research addresses IPR associated issues for sustainable manufacturing. Implementing the CE concepts for sustainable manufacturing requires new competencies, a holistic view of the entire supply chain, and may involve development of novel technologies and IPR assets. Examples of such CE related IPR include BMW’s patented tool to drain oil from the shock absorber, and recycling tools for printed circuit boards. Successfully implementing the CE also requires access to existing IPR assets through technology transfer. Hence, collaboration and cooperation amongst upstream and downstream actors of the same supply chain appear to be critical for a successful CE implementation wherefore, uncertainties in managing IPR may inhibit CE implementation. For instance, original equipment manufacturers (OEM) may themselves develop the IPR needed for closing the loop, which they can exploit for implementation of end-of-life CE related tasks for themselves. When other end-of-life solution providers enter the CE innovation system, they may need access to the OEM’s IPR, including trade secrets about recipes. OEMs fearing leak of their trade secrets may resist the competition from these third parties by denying access to the IPR needed for CE related tasks. Alternatively, OEMs that do not perform end-of-life activities in-house may choose to outsource this to third parties by licensing them relevant IPR which they require to perform the task (e.g. prototypes, design, disassembly tools). CE implementation thus involves supply chain redesigning creating frictions at the actor interfaces within the supply chain.
The IPR challenges at the interfaces of CE supply chain actors like the raw material suppliers, OEMs, third party small scale new entrants and other upstream and downstream players remain underexplored. An example is the IPR uncertainty for components that are recycled. For instance, when a phone gets recycled or refurbished and sold again, does the remanufacturing company have to pay licensing fees again to the IPR owners of technologies that are embedded in the phone? Another example relates to the sharing and ownership of data when multiple users use certain equipment. We contend, therefore, the need for further research to better understand the IPR challenges at the actor interfaces including the dynamics of generating, and sharing IPR in the CE supply chain and suggest IPR strategies for CE implementation.
While above discussions focused on CE implementation at firm or industry level, current sustainable manufacturing practices are majorly ‘top-down’, that is, driven by policy, regulations and public institutions (e.g. China, Europe, and Japan). The top-down initiatives are dominated by environment focused laws, regulations with little or no emphasis on knowledge and IPR related barriers and solutions. Eco-design regulation by the EU for instance outlines the requirements for energy efficiency, functional requirements, off mode, standby and networked standby modes, material efficiency and information availability, but no guidance on the IPR perspective. Few exceptions are the ‘right to repair’ directive planned by the European Union to enable customers to repair the products themselves which requires manufacturers to disclose their proprietary information which would otherwise have remained a trade secret and not accessible to the customers. Further research, therefore, is required to explore the adequacy of IPR, in particularly patents, design rights, utility models, and trade secrets, and how they should be addressed in policy tools for fostering CE manufacturing approaches.
Towards using IPR to support sustainability transition in manufacturing: further research and way forward. We conclude by reiterating that transforming industrial sectors towards sustainability requires novel ways of manufacturing, and IPR can play an important role. Our review demonstrates some benefits and issues associated with IPR systems, and the quest for mechanisms to facilitate IPR aspects in collaborating for sustainable innovation and diffusion, such as increasing the willingness to license, and improving the role of patents as knowledge repository. Transforming the manufacturing sector can go a long way with better alignment of the IPR with the current innovation needs of the manufacturing industry.
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