IPR needs its own sustainability transition

When dealing with patents and other intellectual property rights, sustainability remains an empty word, receiving little weight in case law.

Sustainable innovation plays a crucial role in changing and adapting our economic system to meet the demands of sustainability. Intellectual property rights (IPR) – such as patents and trademarks – can have a surprising impact in making business more environmentally sustainable.

“Many consider intellectual property rights to be a hindrance to sustainability, as they drive consumerism and encourage overproduction. However, they are a key factor working in both directions, meaning that they can also promote sustainability,” says Professor Jukka Mähönen.

Jukka Mähönen, Professor of Cooperative Law, and Taina Pihlajarinne, Professor of Copyright Law, are exploring how IPR-related incentives can optimally benefit sustainability in the SHARE project, funded by the Academy of Finland.

“The sustainability challenge is a matter of life and death to humankind, which is why sustainability must be assessed in all business-related regulation,” Taina Pihlajarinne says.

Conservative case law

Intellectual property rights are exclusive rights designed to encourage innovative and creative work and prevent competitors from getting a free ride. Examples of intellectual property rights include patents, trademarks, copyright and design rights.

In practice, intellectual property rights grant their holder strong protection, providing financial security and predictability for business. But from an environmental perspective, strong rights can be problematic.

“Sometimes, repairing a consumer product instead of replacing it with a new one could promote sustainability, but such a repair is often found to infringe the patent associated with the product. Similarly, the reuse of various materials can easily be interpreted as an infringement of rights. Rights can be extremely efficient tools for standing in the way of the circular economy,” Mähönen explains.

In Norway, a one-man repair shop lost a legal battle against Apple in the country’s Supreme Court. The repair shop had used refurbished screens to repair Apple phones, a practice which the court found to infringe on Apple’s trademark. The court did not take into account that repairing phones would have been a more sustainable approach.

According to the researchers, IP law is quite conservative and inflexible. Its foundation was laid in the late 1800s and early 1900s to meet the needs of the industrial revolution, and it is anything but easy to amend the international conventions concluded at the time.

“Intellectual property rights are perceived to be similar to the right to property, and we may instinctively think of these rights as being broad and inviolable. Of course, this is not true, and intellectual property rights can’t be an isolated field in which societal interests are ignored,” Pihlajarinne says.

However, it is tricky to challenge the present situation, and hardly any relevant case law is available. To date, the European Court of Justice has not issued a single ruling in cases falling under its competence in which sustainability was used as a crucial argument.

A cautious approach to sustainability is typical of Finnish case law, as well. According to Mähönen and Pihlajarinne, we have become too reliant on guidance from the EU. In sustainability matters, it is important to make decisions and draft legislation from a national perspective, as it is impossible to harmonise everything at the EU level.

The Covid-19 pandemic paved the way

However, there is hope of a more flexible approach to intellectual property rights. The Covid-19 pandemic showed the need to waive exclusive rights under certain circumstances.

“The pandemic put society in a tough spot. It became increasingly obvious that pharmaceutical patents prevented global exports of vaccines. The rigidity of the IPR framework and the need for greater openness became very tangible in those circumstances,” Pihlajarinne explains.

Consequently, the EU Commission has proposed a new system enabling the compulsory licensing of patents in crises. The model is mainly intended for situations like the pandemic, but other matters of societal significance, such as sustainability, could also benefit from greater flexibility. Compulsory licensing means that parties other than the patent holder would also gain access to the patented innovation under certain conditions and against a fee, regardless of the patent holder’s willingness to grant such access.

In addition to compulsory licensing, there is a need for more flexible licensing and utilisation models to ensure that sustainable inventions become more widely used. The solution should be one that makes licensing an attractive option for patent holders.

In the project, a solution has also been sought for the current trend of very short product life cycles. As an alternative, Taina Pihlajarinne proposes the concept of sustainable life cycle, meaning that IPR-protected products could be modified commercially if this genuinely lengthened their life cycle.

“If the life cycle was designed to be short, it could be extended through various repair and modification measures. This would not infringe intellectual property rights, unless there was no genuine attempt to extend the life cycle. However, such a principle would have to be balanced on a case-by-case basis with the core interests of each form of protection. This would ensure a good balance between exclusive rights and the promotion of the circular economy.”

Such an approach would encourage companies to design products that last longer. While the idea is radical, it could be feasible under certain boundary conditions. According to Pihlajarinne, it is finally time to move from empty phrases to concrete actions that promote sustainability.

“I believe that concepts related to sustainability sciences, such as the circular economy and sustainable life cycle, should be embedded into the IPR framework. If not, sustainability will not enjoy the significance it merits in case law.”

Small companies at an impasse

Now in the home stretch, the SHARE project has sought ways to support the innovation activities of small and medium enterprises (SMEs). These enterprises have great potential for sustainable innovation, but the European patent system is often far too complex and expensive for start-ups.

However, patents can often be crucial to the future prospects of small businesses. To secure funding, companies need patents or other tangible assets that banks and other funders will accept as collateral.

“Innovations can’t be used as collateral, as they’re really just ideas. Patents, instead, can be assigned as collateral. They’re almost like cash. However, SMEs often can’t afford to apply for patents because it’s too expensive to monitor them. Companies are at an impasse: they can’t afford patents but without patents, they can’t get funding,” Jukka Mähönen says.

If society values sustainable innovation, public funding should be targeted more effectively at sustainable innovation, and new means must be found for combining public and private funding. According to Mähönen, banking regulation also needs to be examined in this context. Banks might be interested in granting risk financing to green innovation, but prudential regulation may stand in the way.

Accelerated patent examination is a tangible way of supporting SMEs to create innovations classified as sustainable. However, as an individual measure, this extra carrot offered by the Finnish patent system has been rather inefficient and has not essentially helped SMEs.

The SHARE project funded by the Academy of Finland explores how IPR-related incentives can best serve sustainability. The project’s principal investigators are Taina Pihlajarinne, Professor of Copyright Law, and Professor Rosa Ballardini from the University of Lapland. Jukka Mähönen, Professor of Cooperative Law at the University of Helsinki, is a sub-project principal investigator. The project’s researchers are Dhanay Cadillo Chandler, Tuomas Mattila, Jouko Nuottila, Krista Rantasaari, Olena Sushch, Antti Talonen, Pratyush Upreti and Jialei Yang, with Aaro Eränen as the research assistant.