    [House Hearing, 111 Congress]
    [From the U.S. Government Publishing Office]

    CLIMATE FOR INNOVATION: TECHNOLOGY AND INTELLECTUAL PROPERTY IN GLOBAL
                               CLIMATE SOLUTIONS

    =======================================================================

                                    HEARING

                                   before the
                              SELECT COMMITTEE ON
                              ENERGY INDEPENDENCE
                               AND GLOBAL WARMING
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 29, 2009

                                   __________

                                Serial No. 111-8

                 Printed for the use of the Select Committee on
                     Energy Independence and Global Warming

                            globalwarming.house.gov

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                    SELECT COMMITTEE ON ENERGY INDEPENDENCE
                               AND GLOBAL WARMING

                   EDWARD J. MARKEY, Massachusetts, Chairman
    EARL BLUMENAUER, Oregon              F. JAMES SENSENBRENNER, Jr.,
    JAY INSLEE, Washington                   Wisconsin, Ranking Member
    JOHN B. LARSON, Connecticut          JOHN B. SHADEGG, Arizona
    HILDA L. SOLIS, California           GREG WALDEN, Oregon
    STEPHANIE HERSETH SANDLIN,           CANDICE S. MILLER, Michigan
      South Dakota                       JOHN SULLIVAN, Oklahoma
    EMANUEL CLEAVER, Missouri            MARSHA BLACKBURN, Tennessee
    JOHN J. HALL, New York
    JERRY McNERNEY, California
                                     ------

                               Professional Staff

                       Gerard J. Waldron, Staff Director
                           Aliya Brodsky, Chief Clerk
                     Bart Forsyth, Minority Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Edward J. Markey, a Representative in Congress from the
      Commonwealth of Massachusetts, opening statement...............     1
        Prepared statement...........................................     3
    Hon. F. James Sensenbrenner, Jr., a Representative in Congress
      from the State of Wisconsin, opening statement.................     5
    Hon. Jay Inslee, a Representative in Congress from the State of
      Washington, opening statement..................................     6
    Hon. Marsha Blackburn, a Representative in Congress from the
      State of Tennessee, opening statement..........................     7
        Prepared Statement...........................................     9
    Hon. Emanuel Cleaver II, a Representative in Congress from the
      State of Missouri, opening statement...........................    11
    Hon. John Salazar, a Representative in Congress from the State of
      Colorado, prepared statement...................................    12

                                   Witnesses

    Statements of Govi Rao, Chairman, Lighting Science Group
      Corporation....................................................    14
        Prepared Statement...........................................    17
        Answers to submitted questions...............................    90
    Robert T. Nelsen, Co-Founder and Managing Director, Arch Venture
      Partners.......................................................    26
        Prepared Statement...........................................    28
    Jennifer Haverkamp, Managing Director for International Policy
      and Negotiations, Environmental Defense Fund...................    35
        Prepared Statement...........................................    38
    Mark Esper, Executive Vice President, Global Intellectual
      Property Center, U.S. Chamber Of Commerce......................    57
        Prepared Statement...........................................    60
        Answers to submitted questions...............................   100

    CLIMATE FOR INNOVATION: TECHNOLOGY AND INTELLECTUAL PROPERTY IN GLOBAL
                               CLIMATE SOLUTIONS

                                  ----------

                            WEDNESDAY, JULY 29, 2009

                      House of Representatives,
                Select Committee on Energy Independence
                                            and Global Warming,
                                                        Washington, DC.
        The committee met, pursuant to call, at 9:38 a.m. in Room
    210, Cannon House Office Building, Hon. Edward J. Markey
    [chairman of the committee] presiding.
        Present: Representatives Markey, Inslee, Cleaver,
    Sensenbrenner, and Blackburn.
        Staff present: Camilla Bausch.
        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.
        [The prepared statement of Mr. Markey follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        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 prepared statement of Ms. Blackburn follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        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 prepared statement of Mr. Salazar follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. We will now turn to our panel.

       STATEMENTS OF GOVI RAO, CHAIRMAN, LIGHTING SCIENCE GROUP
        CORPORATION; ROBERT T. NELSEN, CO-FOUNDER AND MANAGING
     DIRECTOR, ARCH VENTURE PARTNERS; JENNIFER HAVERKAMP, MANAGING
          DIRECTOR FOR INTERNATIONAL POLICY AND NEGOTIATIONS,
      ENVIRONMENTAL DEFENSE FUND; AND MARK ESPER, EXECUTIVE VICE
    PRESIDENT, GLOBAL INTELLECTUAL PROPERTY CENTER, U.S. CHAMBER OF
                                COMMERCE

        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.

                         STATEMENT OF GOVI RAO

        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 statement of Mr. Rao follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        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.

                     STATEMENT OF ROBERT T. 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 statement of Mr. Nelsen follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        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.

                    STATEMENT OF JENNIFER 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 statement of Ms. Haverkamp follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        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.

                        STATEMENT OF MARK ESPER

        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 statement of Mr. Esper follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        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.
        Ms. Haverkamp, I think, keeps pointing out that we need to
    create a domestic marketplace for the products that we are
    inventing here in the United States. What is the point of
    becoming the world leader in solar and wind if we don't
    actually not only invent them, but then deploy them here and
    create the markets here, create the manufacturing jobs here,
    which is what the Waxman-Markey bill is all about, to create
    those incentives for the development of a domestic marketplace
    even as we then create the rules for the transfer of the
    technologies into the international marketplace to make sure
    that the inventors here benefit, but also that the world is
    presented with a solution to the climate change problem that
    will affect, unfortunately, poorer countries more gravely than
    the wealthier countries. And that is the balance we have to
    strike here.
        I think we have to respond to this, and embrace the
    opportunity of the challenge, and to do so in a telescoped time
    frame. We have to engage China to make sure that China as a
    special case understands that we need to have some regime of
    protection of intellectual property put into effect so that we
    create the conditions for innovation here while we have a
    mechanism, perhaps an international Green Bank, that we can
    work through as a concept to be able to ensure that this
    technology is transferred, but with proper compensation for
    those who have taken the risk and have the ability to create.
        So that is really the framework for our challenge going
    forward for the rest of this year. With the world gathering of
    190 nations coming to Copenhagen, I think they will be looking
    to the United States to frame this correctly. But they will
    also be looking to China to see if we get the proper response
    from them so that we can be the world leaders in that
    negotiation.
        Your hearing has been very helpful to us in the framing of
    the issue. We would like to stay close to you over the next 130
    days so that you can help to illuminate the choices that our
    policymakers will have to make as we enter those negotiations.
        Thank you all very much. This hearing is adjourned.
        [Whereupon, at 11:28 a.m., the committee was adjourned.]

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