Plant Breeders' Rights, Patents and Incentives to Innovate

Innovations on plant varieties can be protected by patents or Plant Breeders’ Rights (PBRs). Although these methods of protection have similarities, they also have major differences. With the PBR regime, farmers are allowed to save part of their harvest to replant during the next period (“farmers’ exemption”). To comply with international regulation, they must pay a tax to seed producers for the loss incurred due to this exemption. We analyze the impact of this exemption and its associated tax on seed prices and on the incentives to innovate in a monopoly setting. We find that with only a PBR regime, a relatively high tax level is necessary to eliminate self-production. If both patent and PBR regimes coexist, farmers might still self-produce if the seed innovation is protected with a PBR. Our findings suggest that the coexistence of the two regimes does not fully prevent self-production. Nevertheless, it boosts the research investment which is a non-monotonic function of the tax. The seed producer might over or under invest compared to what is socially optimal. Moreover, incentives to innovate are the strongest, either with a patent regime or with a PBR regime for which a high tax prevents seed saving. In terms of welfare, having both systems has ambiguous effects.(This abstract was borrowed from another version of this item.)