Advanced Biofuels and Developing Countries: Intellectual Property Scenarios and Policy Implications

"Chapter III analysed the commercial viability of second generation biofuels. This chapter focuses on related intellectual property rights (IPRs) aspects. Three hypothetical scenarios in the context of the intellectual property protection of second generation biofuels are developed, with each scenario representing a different level of strictness of protection. Therefore, each scenario translates into a different level of potential access to advanced biofuel technologies by developing countries.

Second generation biofuels can be classified in terms of the process used to convert biomass into fuel: biochemical or thermochemical. Second generation ethanol or butanol would be made via biochemical processing. Second generation thermochemical biofuels may be less familiar to readers, but many represent fuels that are already being made commercially from fossil fuels using processing steps that in some cases are identical to those that would be used for biofuel production. These fuels include methanol, Fischer-Tropsch liquids (FTL) and dimethyl ether (DME) (Larson, 2007).

Second generation biofuels are currently not being produced commercially anywhere. Many efforts are going on worldwide to commercialize second generation biofuels made by both processes. In the case of biochemical fuels, breakthroughs are needed in the research and engineering of micro-organisms designed to process specific feedstocks, followed by demonstrations preceding commercial implementation. It is expected that 10 to 20 years may be needed before commercial production could begin on a substantial basis. In the case of thermochemical fuels, relatively modest additional development and demonstration efforts would enable commercial production, expected to begin in 5 to 10 years (Larson, 2007). Many of the equipment components needed for biofuels production through the thermochemical process are already commercially established for applications in fossil fuel conversion and processing is relatively indifferent to the specific input feedstock.

A possible trajectory that the biofuels industry may follow is that of the agricultural biotechnology industry. Through divestitures, mergers and acquisitions, there has been a process of consolidation in the global agribusiness in recent years. The outcome is a few major integrated companies, each controlling proprietary lines of agricultural chemicals, seeds and biotech traits. Beginning in the late 1990s, intellectual property ownership has increasingly consolidated in this dwindling number of large multinational corporations.

The application of second generation technologies will entail greater systems complexity, integrated engineering design and other technical parameters (especially in the case of biochemical technology) that may limit the diffusion of such technologies to most developing countries, and this for two reasons: advanced technologies will be proprietary and consequently costly to obtain; they may also be too complex for developing countries to easily absorb and adapt to local needs. Therefore — as happened in the agricultural biotechnology sector — the risk exists that there would be limited technology transfer to developing host countries. In that sense, it remains important for developing countries to invest in their own innovation systems.

In this chapter we argue that a restrictive IPR regime for advanced biofuel technology will likely prevail. The chapter first analyses recent patenting and investment trends in advanced, second generation biofuels. Subsequently, it presents three hypothetical scenarios based on extensive access, restricted access and limited access to proprietary biofuel technologies. Specific mechanisms that developing countries could use to access technology within the framework of each scenario are presented. Finally, the chapter addresses issues related to innovation systems and presents policy options for developing countries to fast-track innovation into their national policies.

It is worth noticing that the analysis here presented is limited both by the lack of empirical literature on the specific topic and by the difficulties inherent in considering a diversity of hypothetical scenarios. In particular, evidence regarding biotechnology-related intellectual property issues in the developing country context is almost entirely lacking, with almost no empirical work on patenting in the industrial biotechnology sector (Herder and Gold, 2007)...."