Welfare Impacts of Property Rights in the Seed Industry

The paper examines the welfare impact of different intellectual property right (IPR) regimes in private sector seed research. The model takes into account the period after expiration of IPR protection, and requires a simultaneous equilibrium in the markets for R&D, seeds, and final product (grain). Simulation results show that with the exception of R&D productivity, the optimal level of IPR protection is remarkably insensitive to parameters of the model. There is a range of IPR appropriability levels where the interests of consumers and producers (taken together) are complementary to the interests of R&D firms, and another range of appropriability levels where the welfare of producers and consumers can be increased only at the expense of the welfare R&D firms. These results may explain some of the acrimony in the debate about plant gene patenting and genetic use-restriction technologies (GURTs). Results suggest that the optimum IPR appropriability level is greater than that which exists in the North American seed corn market, but lower than would exist if GURTs were to become widely used. The optimal appropriability level is much higher than that which is achieved in situations where crops are open pollinated or where IPR protection is limited, and this may help explain and justify the relevance of public research in these situations.