Alternative Business Strategies in Weak Intellectual Property Environments: A Law and Economics Analysis of the Argo-Biotechnology Firm's Strategic Dilemma

Journal of Intellectual Property Law Volume 14 | Issue 2 Article 2 April 2007 Alternative Business Strategies in Weak Intellectual Property Environments: A Law and Economics Analysis of the Argo-Biotechnology Firm's Strategic Dilemma A. Bryan Endres University of Illinois Peter D. Goldsmith University of Illinois Follow this and additional works at: https://digitalcommons.law.uga.edu/jipl Part of the Agriculture Law Commons, and the Intellectual Property Law Commons Recommended Citation A. Bryan Endres & Peter D. Goldsmith, Alternative Business Strategies in Weak Intellectual Property Environments: A Law and Economics Analysis of the Argo-Biotechnology Firm's Strategic Dilemma, 14 J. Intell. Prop. L. 237 (2007). Available at: https://digitalcommons.law.uga.edu/jipl/vol14/iss2/2 This Article is brought to you for free and open access by Digital Commons @ Georgia Law. It has been accepted for inclusion in Journal of Intellectual Property Law by an authorized editor of Digital Commons @ Georgia Law. Please share how you have benefited from this access For more information, please contact . Endres and Goldsmith: Alternative Business Strategies in Weak Intellectual Property Env ALTERNATIVE BUSINESS STRATEGIES IN WEAK INTELLECTUAL PROPERTY ENVIRONMENTS: A LAW AND ECONOMICS ANALYSIS OF THE AGRO-BIOTECHNOLOGY FIRM'S STRATEGIC DILEMMA A. Bryan Endres* & PeterD. Goldsmith* * TABLE OF CONTENTS ........................................... I. INTRODUCTION II. GENETIC ENGINEERING AND AGRICULTURE: THE SECOND "GREEN" REVOLUTION? ..................................... 239 243 III. A NORTH-SOUTH COMPARATIVE EVALUATION OF THE LEGAL ENVIRONMENT FOR INTELLECTUAL PROPERTY PROTECTION FOR PLAN TS .................................................. 250 A. PLANT INTELLECTUAL PROPERTY PROTECTION IN THE UNITED STATES: A HISTORICAL SUMMARY ................... B. THE INSTITUTIONAL ENVIRONMENT IN THE UNITED STATES .... 251 253 C. PLANT INTELLECTUAL PROPERTY PROTECTION IN ARGENTINA ............................................ IV. THE THEORY OF THE DYNAMIC GAMING MODEL ............... A. MONITORING STRATEGY TO REDUCE INFORMATION ASYMMETRY ............................................ B. RISK AVERSION IN THE AGRICULTURAL CONTEXT ............. C. PRICING STRATEGY FOR SEEDS SUSCEPTIBLE TO SAVING ....... 255 257 258 259 261 * Assistant Professor of Agricultural Law, University of Illinois. This research is supported by the Cooperative State Research Education & Extension Service, USDA, Project No. ILLU-470-309 and Project No. 483-611. Any opinions, findings, and conclusions or recommendations expressed in this publication are those of the authors and do not necessarily reflect the view of the funding agencies. The authors extend their appreciation to Saeho Yi,J.D., 2006, Wan Peng, M.S., 2006, and Joann Schmidt, J.D. expected 2008, for their excellent research assistance. ** Associate Professor, Executive Director National Soybean Research Laboratory (NSRL) and NSRL Research Fellow in Agricultural Strategy, University of Illinois. Published by Digital Commons @ Georgia Law, 2007 1 Journal of Intellectual Property Law, Vol. 14, Iss. 2 [2007], Art. 2 238 J. INTELL PROP.L [Vol. 14:237 1. ProductBundling ....................................... 265 265 2. Genetic Use Restriction Technologies ......................... 3. Reduce Investment in Pefilous Products ....................... 266 266 D. NON-PRICE RELATED STRATEGIC OPTIONS FOR THE FIRM ...... V. CONCLUSION ............................................. https://digitalcommons.law.uga.edu/jipl/vol14/iss2/2 267 2 Endres and Goldsmith: Alternative Business Strategies in Weak Intellectual Property Env 2007] AGRO-BIOTECHNOLOGY BUSINESS STRATEGIES 239 I. INTRODUCTION Maximi:ng return on researchand development investmentfor the lfe sciencefirm relies on the continued effectiveness of the socialcontractbetween buyerand sellerandinstitutionalbacking of the underlying agreement. Intellectualproperty protection and institutionalenforcement structures commonly fail for firms conducting business in developing countries. Most commentators claim that a strongintellectualproperyenvironment is essentialforprofitabiliy, and we agree. But what do firms do in the short term when an effective social contract is not possible? The authors argue that afirm can achieve success byfirst recognizng its status in the social construct and then adopting tactics that do not depend on an effective social construct between buyer and seller. Specificaly, the authors utilize an economic model of the agrobiotechnology industry to demonstratefour responsesfor firms when operating within weak intellectualproperty rights environments: dynamic pricing mechanisms,product bundlin& use restrictiontechnologies, and reduced investment. "[1In the state of nature, Profit is the measure of Right."' Although profit assuredly is the overarching objective of most firms, the state of nature in the Hobbesian view-in which there is no common power, no law, and where "Force[] and Fraud" 2 are regarded as "Cardinall vertues" 3 -is anathema to the efficient operation of the firm and its subsequent drive for profit maximization. Accordingly, the firm, like society in general, seeks to avoid an otherwise "poore, nasty, brutish and short"4 existence by entering into a social contract for protection from this state of nature. In return for these restrictions on its liberty,' the firm receives varied protections' and, ideally, an institutionalized legal system to enforce these mutual obligations. This social contract extends as well to the buyer-seller relationship. Consumers receive various protections from predation by the firm and, in the case of intellectual property rights, the firm can rely on the higher authority to I THOMAs HOBBES, DE CIVE 48 (Howard Warrender ed., Clarendon Press 1983) (1651). THOMAS HOBBES, LEVIATHAN 90 (Richard Tuck ed., Cambridge Univ. Press 1991) (1651). 3 Id. 4 Id.at 89. For example, Comment c to the Restatement 2d of Torts § 901 notes that 2 [o]riginally the primary purpose of the law of torts was to induce the injured party and members of his family or clan to resort to the courts for relief, rather than taking the law into their own hands by attempting to wreak vengeance on the wrongdoer or by resorting to violent means of self-help. RESTATEMENT (SECOND) OF TORTS § 901 cmt. c (1979). 5 An example of restrictions of a firm's liberty would be profit maximization without regard to the rights of others. 6 Rules restricting unfair competition would serve as an example of a protection received by the firm. Published by Digital Commons @ Georgia Law, 2007 3 Journal of Intellectual Property Law, Vol. 14, Iss. 2 [2007], Art. 2 J. INTELL PROP.L[l [Vol. 14:237 punish consumers attempting to breach the social contract by duplication or unauthorized use of protected property. Once removed from this "state of nature," the firm can develop a st (...truncated)