The Butcher The Baker The Pharmaceutical Maker: Why The Agricultural Biotech Industry May Differ From The General Biotech Industry

This paper explores the apparent anomaly in the patenting strategies found in the agricultural biotechnology industry, when it is compared to the literature's view of the patenting strategies in the general biotechnology industry and in the pharmaceutical industry in particular. By extending an extensive game model of the agriculture biotechnology industry, we show that, like the rest of the biotechnology industry, the integration of the agriculture biotechnology industry into several large private research firms with accompanying government laboratories can be transactions-costs limiting and thus efficient, given the existing institutional structure. A review of the literature respecting the general biotechnology industry reveals an apparent anomaly between the general industry and our findings with respect to the Canadian agricultural biotechnology industry. The literature seems to suggest, as one might expect, that the choice of patenting strategy in the general industry is dependent upon a positive probability of litigation over opportunistic patenting strategies, with the probability of facing litigation being dependent on the type of patenting strategy adopted. In contrast, we found general opportunistic patenting strategies in the Canadian agricultural biotechnology industry, independent of potential litigation. A comparison of the income elasticities of demand for food compared to other biotechnological products, particularly pharmaceuticals, can account for the apparent differences. We briefly assess the policy implications of these observations, particularly examining why the manner in which publicly funded research programs compensate the inventors of the intellectual property that they control may limit the incentives for these programs to control the apparent opportunistic behavior we perceive in the agricultural biotechnology research sector.