[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:]

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    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:]

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    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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