Intellectual Property Rights in Agriculture

1
Intellectual Property Rights in Agriculture

• Brian D. Wright
• Department of Agricultural and Resource
  Economics, UC Berkeley
• Workshop on Innovation in Pharmaceuticals and
  Agriculture, Center on Globalization and
  Sustainable Development,
• Earth InstituteColumbia University, May 20-21,
  2004

2
The Mission Is Vital

• Over the next 20 years, the rice genome will
  make more of a difference to human health than
  the human genome
• Donald Kennedy, Editor-In -Chief, Science

3
Protection of Agricultural Innovations
Pre-biotech

• Hybrid technology
• Biological protection of plant innovations
  against replanting and breeding
• Problem Exploitation of parental lines by
  competitors
• Plant Patent Act (1930)
• Just for clones (e.g., grafted trees, root crops)

4
Protection of Agricultural Innovations
Pre-biotech (continued)

• Plant Variety Protection Act (1970, revised 1994)
• Weak limits on replanting (farmers exemption)
• No limit on use for breeding (breeders
  exemption)
• Narrow scope distinctiveness vs. nonobviousness
• An example of freedom from prior claims
• Trade Secrets
• Trademarks

5
The Role of Non-Farm Private Sector in the Ag
Genetics Revolution of the 20th Century

• Important in Some Horticultural Crops
• Largely Irrelevant in Field Crops
• yet great yield increases
• Hybrid Corn as the Exceptional Private-Sector
  Triumph
• Capitalist plot?

6
Agriculture Pre-1990 The Original Open Source
Innovation Sector

• Public/nonprofit science dominated crop breeding
• (except corn in USA)
• Fundamental mechanical inventions by farmers,
  blacksmiths with little effective IPR
• refined by private sector corporations
• Fundamental farming practice innovations by
  farmers with no IPR
• (e. g. no till cultivation)

7
Implications of Ag Intellectual Property
Protection Pre-1980s

• Little relevance for farmer-innovators
• Nonfarm private sector had minor role
• Little direct relevance for individual
  public/nonprofit scientists, motivated by
• Salaries, career concerns (like private employee
  peers)
• Grants (like ex post prizes?)
• Prestige (like prizes)
• Intrinsic motivation (paid to play)

8
Remember the 1960s?

• Famine 1975
• The Population Bomb
• Lifeboat Economics and International Triage

9
Record since 1960s with Open Source
Agricultural Innovation

• World population up 80
• Cropped land area roughly constant
• Food prices have declined
• Income growth, not population is the big
  challenge (outside Africa)
• Average LDC citizen gets
• 28 more calories
• 59 more vegetable oil
• 50 more animal calories

10
Revolutions of the late 20th Century
Globalization
Information Technology
Expanded innovation potential
Biotechnology
Intellectual Property Rights
11
1980s Innovation in IP Patenting of Ag Biotech
in US

• Crucial rulings
• Diamond v. Chakrabarty (1980) living organism
• ex parte Hibberd (1985) plants
• Patent Protection Confirmed for
• Breeding technology genes, markers, methods,
  seeds
• Hybrid parent varieties
• Made enforceable by concurrent biotechnology.
• Initially high-powered incentive for innovative
  entrants.

12
Parallel Revolution in Public Researcher Mandate

• Stevenson-Wydler Act 1980
• Bayh-Dole Act 1980
• FTTA (1986) CRADAs
• Encouraged public/nonprofit IP protection
• High-powered incentives to public scientists

13
Logic of Patents for Public/Nonprofit Research

• Facilitates Public/Private Collaboration.
• E.g. terminator technology
• Prospect Theory (Kitch)
• Patent exclusive license can protect private
  innovators developing public/nonprofit
  innovations

14
Logic of Prospect Theory of Patents

• Theory Exclusive upstream patent claims can be
  crucial if further innovation is
• hard to patent
• easy to copy
• costly
• And user market is competitive

15
First Round Results Ag Biotech Innovations

• Inputs to other innovations research tools
• Several from Public Sector, exclusively licensed
  to private sector
• Examples Transformation technologies
• gene gun
• Agrobacterium
• Agronomic traits Bt, herbicide tolerance

16
Second-Round Problems A. High Cost of Freedom
to Operate In Private Sector

• Cumulative technology multiple prior claims
• High transaction costs of licensing transgenic
  inputs
• Uncertain, excessively broad, and conflicting IPR
  claims
• Difficulty of identifying valid licensors
• Much costly and slow litigation
• Liability, brand image, and externality control

17
Private Sector Solution Integration of seed,
plant protection industries
Startup Biotech
Big Pharma
Life Science Co. . Pharmaceutical . Ind.
Chemical . Agriculture (ChemSeed)
Pharmaceutical Ind. Chemical Ag. Chemical
Big Chemical
Seed company
Big Agriculture (ChemBiotech Seed)
?
Grain processor
Consolidation 1995-99
Re-consolidation 1999-?
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Second-Round Problems B. Lack of Freedom to
Operate In Public/Nonprofit Sector
Commercialization

• Cumulative technology multiple prior claims
• High costs of dependence on patented inputs
• All the private sectors problems, plus enhanced
  vulnerability to holdup
• Refusal of IPR-holders to negotiate license
• Little financial capacity for litigation

19
Second-Round Problems C. Effects on
Public/Nonprofit Sector Culture?

• Disruption of Nonprofit/Public Collaboration?
• Reduced intra-unit scientific collaboration?
• Induced avoidance of some research fields?
• Diversion from publication to patenting?

20
Usual Strategies for Enhancing Public/Nonprofit
FTO Focus on Patent System

• Tailor Patent Life for Different Cases?
• Lose administrative economy of patents
• Compulsory license?
• Blunt instrument
• Research License?
• Cuckoos egg
• Lanjouw Initiative

21
Less Recognized Economic Theory Offers Only
Restricted Support to Patents

• Patents best only if public does not know value
  of successful research ex ante
• Contracts best if value and probability, but not
  necessarily cost, known publicly

22
Why Prizes?

• Prizes best if public knows what it wants but
  not probability (or cost) of getting it
• Canning of food (Napoleons need to feed army)
• Chronometer (UKs need to keep its Navy afloat)
• Will Masters initiative for Africa (worlds need
  to develop Africa) in ex ante mode

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Choice between Patents and Prizes
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Conclusion

• Congratulations to Will Masters and the Earth
  Institute for an innovative proposal, not
  motivated by any expectations of a patent!

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End
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Alternate Innovation Protections in Private
Industry

• lead time first to market
• market power
• reputation
• superior capacity/asset mix
• All of these protections grow as startups
  disappear, mergers continue

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Alternative Innovation Incentives

• Creative urge
• Farmer innovation with no IPR
• Open source software
• Scientists pay to play
• Prizes
• Grants and contracts

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Choice between Patents and Prizes No Common
Pool Problem
Prob. Of Success
1.0
Prize Best
Prize Best
Patent Best
Prize Best
Patent Best
Patent Best
Elast. Of Supply of Research of Research
1.0
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Strategies for Enhancing FTO

• 2. Beyond Modifications of Patent Laws
• Pool public/nonprofit IPR, segment market
• PIPRA initiative
• Create open source suites of key alternate
  enabling technologies

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Golden Rice
Over 120 million children worldwide are deficient
in vitamin A. Rice has been engineered to
accumulate b-carotene, Incorporation of this
trait into rice cultivars and widespread
distribution could prevent 1 to 2 million deaths
each year.
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Choice between Patents and Prizes No Common
Pool Problem
Prob. Of Success
1.0
Prize Best
Prize Best
Patent Best
Prize Best
Patent Best
Patent Best
Elast. Of Supply of Research
1.0
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Modern Sages

• Paul Ehrlich The Population Bomb (1968)
• In the 1970s Hundreds of millions of people
  are going to starve to death in spite of any
  crash programs embarked upon now.
• William and Paul Paddock (1967)
• Famine 1975 Who Will survive?
• advocated triage abandon many LDCs as
  hopeless cases

35
The International Patent Policy BattleNational
Discretion vs. International Harmonization

• TRIPS Minimum patenting requirements
• In exchange for agricultural concessions
  promises
• TRIPS Plus Bilateral
• Pressure to give up discretion regarding
  agriculture, life forms
• Doha concessions on price discrimination and
  generics
• WIPO Substantive Patent Law Treaty in the wings
• Full harmonization, no national discretion,
  efficiency of centralization

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Sources of AgriculturalRD Expenditures
Uniquely Diverse
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Role of public inputs

• If public inputs used, why is whole output value
  privatized?
• Look forward to the steady state
• In patenting of input and output, some finite
  life is Pareto optimal if licensing
• Koo and Wright 2003

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Case Study Retailing of USDA Information Thrives
on Free, Open Access
USDA
75
100
82
Consultant
Extension
Ag Media
15
15
13
9
Information Consumer
Use of USDA Direct (15)Indirect(44)59
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Long-run Questions re Ag Biotech/IPR

• Are arms length contracts feasible for
  obtaining FTO in ag biotech?
• when, for what?
• Can startup entrants reappear as economics
  improve?
• Will innovation be slowed by increased private
  sector concentration?

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Strategic Questions for Public/Nonprofit Sector

• Is exclusive licensing encouraging startups and
  dissemination, increasing monopolization, or
  both?
• Is exclusive licensing interfering with FTO of
  public/nonprofits?
• Is private sector covering all essential fields
  of application?

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• Can we more effectively mobilize public sector
• IP in agricultural biotechnology for
• Commercialization in major crops through
• public/private sector partnerships
• Commercial licensing or public/public
  partnerships
• to enable applications to specialty crops
• Humanitarian licensing to enable developing
• countries to assist subsistence farmers

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Largest public sector agbiotech IP holders
formPUBLIC SECTOR INTELLECTUAL PROPERTY
RESOURCE FOR AGRICULTURE (PIPRA)
Foreign
United States

• Ministry of Agriculture, Forestry, Fisheries
  (Japan)
• Max Plank Gesellschaft (Germany)
• CSIRO (Australia)
• Plant Bioscience Ltd (UK)
• Institut National de la Recherche Agronomique
  (France)
• Institut fur Genbiologische Forschung Berlin
  (Germany)
• Ministry of Agriculture and Agri-food
  (Canada)

• University of California
• Cornell University
• USDA-ARS
• Massachusetts General Hospital
• Rutgers University
• University of Florida
• North Carolina State University
• Salk Institute
• Washington State University
• University of Wisconsin
• Purdue University
• Michigan State University
• Iowa State University

44
PIPRA (Public Intellectual Property Resource for
Agriculture)
Plan Develop shared technology packages
US public sector research institutions others?
Information and databases
Ag-bio clearinghouse Broker for minor/subsistence
crop applications Assemble virtual patent pools
US public sector research institutions others?
License components of patent pools
Commercial license Specialty crops
Humanitarian use license Subsistence farmers
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Impressive World Trends
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Figure 1 Long-Run Trends in Wheat Yields
Source Alston and Pardey (2001) and FAO (2000).
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Table 5 Rates of Return by Commodity Orientation
Source Alston et al. (2000). Note a Includes
fishery and forestry.
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Table 4 Estimated Global Public and Private
Agricultural RD Investments, 1995
Source Pardey and Beintema (2001).
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Figure 4 Global Public Agricultural Research
Expenditures, 197695 Source Adapted from Pardey
and Beintema (2001).
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Malthus Essay on Population

• Population growth is geometric (proportional to
  current population) if there is enough food
• Agricultural productivity growth is arithmetical
  (growth rate declines as level of productivity
  increases)
• Population will therefore outpace productivity
  until hunger limits population growth

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Public Sector Share of All US Patents is Small
Public Sector 2.7
Private Sector 97.3
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Agricultural research historically a public good
Annual PCT filings of plant biotechnologies
1984-2000
700
(total 3393 filings)
600
500
Private Sector
400
Uncertain
PCT filings
Public Sector
300
200
100
0
Year
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
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Ag Biotech Is A Special Case Public Sector Patent
Share is Large
Monsanto
14
Public sector 24
Du Pont
13

Unknown
2
7
Syngenta
Aventis
4
Dow
Rest of private
3
sector
33
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Logic of IPRs for Public/Nonprofit Research

• Exclusive IPRs can be crucial if
• further innovation
• hard to patent,
• costly
• easy to copy
• user market competitive
• Exclusivity not always necessary
• Royalties not generally efficient

58
Choice between Patents and Prizes No Common
Pool Problem
Prob. Of Success
1.0
Prize Best
Prize Best
Patent Best
Prize Best
Patent Best
Patent Best
Elast. Of Supply of Research of Research
1.0
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Trait genes
IMPLEMENTATION TECHNOLOGIES
ENABLING TECHNOLOGIES
GERMPLASM
Transformation methods
Cultivars
Selectable markers
Promoters
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Dynamics of protection of inputs

• Anticommons problem in ag. biotech
• - Golden Rice as dubious example
• Induced IO concerns
• Fencing the commons more fun than being held
  up by squatters
• IPRs incentives look best right after their
  introduction

61
Less Recognized Economic Theory Offers Only
Restricted Support to Patents

• Prizes best if public knows what it wants but
  not probability (or cost) of getting it
• Canning of food
• Chronometer
• Will Masters initiative for Africa
• Contracts best if need and probability, but not
  cost, known
• Patents best only if need unknown ex ante