Introduction

Biotech seeds have become an enormously-­?valuable part of the food supply in the US and abroad. A substantial portion of soybeans, corn, cotton and other agricultural products grown in the US are derived from genetically-­?modified seeds. The genetic traits that give these seeds their value—traits that confer resistance to herbicide and high yields, for example—are often developed by large agribusiness companies, with enormous research and development investments. The process is technologically advanced, time- and money-intensive, a risky investment, and subject to various layers of regulation. The process of developing a new seed variety can take 15 years and require hundreds of millions of dollars of investment. Regulations from the USDA, the FDA and the EPA can slow or halt the process, and international trade regulations (particularly from countries that ban or severely restrict importation of GMOs) complicate the control and the commercialization of the final products.

In part for these reasons, the biotech seed industry—like all segments of the US agricultural industry—has seen a substantial increase in concentration. Large scale is of obvious benefit to companies engaged in massively expensive R&D programs that can achieve economies of scale and thus lower costs. Meanwhile, there are also likely other vertical efficiencies associated with contractual arrangements between various players in the transgenic supply chain:

Vertical efficiencies such as reduced transactions costs and coordination achieved by exploiting the complementarities between traits and traited seed assets can also reduce costs. Closer, more precise coordination between levels in the transgenic supply chain may result in more efficient creation of new transgenic varieties in increasingly differentiated product markets.[1]

Thus it is not surprising that the period of increasing innovation has been accompanied with an increase in concentration as innovating firms assembled the necessary, complementary assets to develop and commercialize their innovations, often through vertical and horizontal mergers and acquisitions.[2] The remarkable gains in biotech seed development since the industry’s infancy less than 20 years ago, along with the complexities of the industry and our limited understanding of the economic significance of organizational choices in the industry, should counsel strongly against hasty antitrust intervention in the industry. Consumers enjoy significant benefits from innovation that must be considered before responding too quickly or improperly to complaints about increased concentration, especially if the complaints come merely from competitors.

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[1] Diana L. Moss, “Transgenic Seed Platforms: Competition Between a Rock and a Hard Place?,” American Antitrust Institute White Paper (October 23, 2009), available at http://www.antitrustinstitute.org/Archives/seed.ashx.

[2] Id. at Figure 2. While Moss happens to conclude that this inverse correlation is a surprise and struggles to find explanations for the seeming contradiction, the proffered explanations are unpersuasive (or irrelevant). See Nicholas Kalaitzandonakes & Bruce Bjornson, Vertical and horizontal coordination in the Agro-­ biotechnology industry: Evidence and implications, 29 J. AG. AND APPL. ECON. 129 (1997) for a more relevant analysis of industry forces.

Biotech seeds have become an enormously-valuable part of the food supply in the US and abroad.  A substantial portion of soybeans, corn, cotton and other agricultural products grown in the US are derived from genetically-modified seeds.  The genetic traits that give these seeds their value—traits that confer resistance to herbicide and high yields, for example—are often developed by large agribusiness companies, with enormous research and development investments.  The process is technologically-advanced, time- and money-intensive, a risky investment, and subject to various layers of regulation.  The process of developing a new seed variety can take 15 years and require hundreds of millions of dollars of investment.  Regulations from the USDA, the FDA and the EPA can slow or halt the process, and international trade regulations (particularly from countries that ban or severely restrict importation of GMOs) complicate the control and the commercialization of the final products.

Read the full comments here.

Abstract

Complaints about frivolous patents abound in academic, business, and policy circles, and the focus of blame is usually on the large number of junk patents that have issued from the Patent Office that are actually invalid. The underlying cause is said to be the relatively modest examination performed by the Patent Office. Most popular proposals for change suggest methods for segregating patents into two or so bundles based on whether the patents should be subject to closer examination. A so-called “second window of review” has been proposed to allow competitors to make the choice of which patents get closer examination; and a so-called “gold-plated approach” has been proposed to allow patentees to make the election. Applying a back-to-basics approach, this Article points out two core problems with these popular proposals: (1) they do not adequately account for the information costs, error costs, and risks of capture that accompany any system premised on flexible and discretionary administrative review, and (2) they overlook the central lessons learned through debates over civil litigation generally about how to balance the conflicting goals of speed, cost, accuracy, and finality. The Article then elucidates how some small changes to our patent system could be used to better solve the problem of bad patents than would other popular proposals. This small number of changes, which are implementable through either case law or statute, would interact to make available a symmetrical risk of fee and cost shifting for bad-faith litigation over patents to encourage parties to exchange information and resolve disputes before getting deeply into expensive litigation. Such an approach would directly address the complaints of patent critics without injecting the degree of unpredictability and political manipulability into the system that would be caused by their proposed changes. It takes seriously the importance to the economy of strong intellectual property rights as well as reforms designed to lessen the negative impact of junk patents and frivolous lawsuits.

I, too, join the rest of the participants in congratulating Michael Carrier on this great book about this great topic.  I have enjoyed reading Michael’s work in the past and I enjoyed meeting him at a conference last year.  He is a wonderfully warm, bright, and engaging person.  Although I wish that I had more of an opportunity to fully read his impressive text before the date of this on-line symposium, I am grateful for the opportunity to read a great deal of the book and to at least skim the remainder.  The wonderful conference that Damien Geradin and his colleagues hosted on these same issues in Amsterdam these past few days was a pleasant distraction.  (For Damien’s conference click here).

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Abstract

The Supreme Court’s unanimous decision in Quanta v. LG Electronics may make it significantly more difficult to structure transactions involving patents. While this decision does make a group of players into winners in the immediate term for existing patent deals (this group includes any customer who, like Quanta, buys patented parts without buying a patent license), almost everyone is likely to come out a loser going forward.

The Court in Quanta decided that a patent license that LG Electronics sold only to Intel – and explicitly limited to exclude Intel’s customers, like Quanta, and priced to reflect these modest ambitions – would be treated by the Court as extending permission under the patent to those Intel customers. The legal “hook” on which the Court hung its decision is the patent law doctrine called “first sale” or “exhaustion.”

The Quanta decision is likely to have a serious negative effect on the nuts and bolts of patent licensing agreements. On one reading, it stands for little more than the unremarkable proposition that the actual patent license contract at issue was just badly written. But that would be a simple matter of applying state contract law to the underlying facts of the contract – not the type of issue that typically gains the Supreme Court’s attention. So the real motivating force behind the Court’s decision to take the case is probably something else. The extensive briefing and commentary, as well as the opinion’s colorful dicta, all suggest that the true import of the case is the way it speaks about what patent contracting can be done – as a matter of Court-created policy for federal patent law.

If this view of Quanta is correct, then the decision may be remarkably important in several respects. It may greatly frustrate the ability of commercial parties to strike deals over patents. It may also stand as an example of a seemingly conservative Court acting in direct contravention of clear congressional action.

Abstract

Several recent commentators have criticized trends in the patent system by suggesting that the goals of the system can be better achieved through a variety of approaches that avoid or mitigate the monopoly-type impact of property rights. Suggested alternatives include the use of cash rewards, buy-outs, and liability rules, as distinct from property rules. This paper uses the important contributions made by these commentators to reveal shortcomings in any view of the patent system that focuses only on incentives to engage in inventive activity. The paper offers a new view of the patent system that embraces property rights and property rules as core elements of the patent system. According to this view, property treatment is essential for the subsequent commercialization activity that is necessary to get embodiments of nascent inventions into the hands of consumers and for efficiently identifying which inventions are worth the costs of government intervention in the first instance. The recently suggested alternatives fail to address these important goals of the patent system and would actually frustrate them. In addition, the current system already addresses many of the concerns raised by such commentary. The paper reveals how property rights and commercialization motivated the creation of our current patent system and explains many controversial trends in the system, including those that sparked the recent critical commentary, as well as those in other intellectual property regimes such as trademarks.