Critical Analysis : Property Rules, Liability Rules, and Molecular Futures - Bargaining in the Shadow of the Cathedral

This chapter from the forthcoming Cambridge University Press volume Gene Patents and Clearing Models: From Concepts to Cases comments on the international FAO treaty for sharing genetic resources and on proposals by Rai et al. to create a shared testing system for small molecule pharmaceutical development. Both of these intellectual property distribution models incorporate liability rule regimes that include aspects of options markets. In this chapter, I attempt to situate the FAO treaty and the Rai et al proposal within both the landscape of property theory and the existing literature on real options. To do so I draw upon recent literature analyzing property and liability rules from the standpoint of options and information theory. Although the literature on intellectual property and real options is currently sparse, I suggest that this approach has much to tell us about the development of systems for intellectual property liability regimes, particularly the incentive choices that might guide us to choose them or to reject them. I conclude with some observations regarding the allocative choices that we might make in a proposal like that of Rai et al, including some possibilities not considered in their paper