Patents for self‐replicating technologies: Game theoretic analysis of genetically modified seed

• Author: Pamela J. Smith,Andrew R. Tilman
• Date: 01 July 2020
• Published date: 01 July 2020
• DOI: http://doi.org/10.1111/jwip.12145

J World Intellect Prop. 2020;23:166–184.wileyonlinelibrary.com/journal/jwip166

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© 2020 John Wiley & Sons Ltd

DOI: 10.1111/jwip.12145

ORIGINAL ARTICLE

Patents for self‐replicating technologies: Game

theoretic analysis of genetically modified seed

Pamela J. Smith

1

|Andrew R. Tilman

2

1

Department of Applied Economics,

University of Minnesota, St. Paul, Minnesota

2

Department of Biology, University of

Pennsylvania, Philadelphia, Pennsylvania

Correspondence

Pamela J. Smith, Department of Applied

Economics, University of Minnesota, 332H

Ruttan Hall, 1994 Buford Avenue, St. Paul,

MN 55108.

Email: psmith@umn.edu

Abstract

This paper examines the implications of patents for

farmers’decisions to use genetically modified (GM) seed

versus traditional non‐GM seed. We consider a game

theoretic approach employing the replicator equation to

assess the conditions for farmers’adoption decisions. The

results show that farmers may choose GM seeds even

when this decision leads to lower profits than using tra-

ditional seeds. This result emerges because of the self‐

replicating characteristic of the technology of seeds and

their dispersion via acts of nature and/or intentional in-

fringement. This result is robust across our baseline

model and extended model that includes the option for

farmers to intentionally infringe upon the GM seed

technology. This result is also robust with respect to a

wide range of initial conditions and parameter values

representing economic conditions including the dispersal

of the GM technology, monitoring effort, payoff of GM

seed relative to traditional seed, cost of patent infringe-

ment, cost of contamination, and added cost of legally

using GM seed.

KEYWORDS

evolutionary game theory, genetically modified organisms,

intellectual property rights

JEL CLASSIFICATION

C73; Q16; O34

1|INTRODUCTION

This paper examines the implications of patents for farmers’decisions to use genetically modified (GM) seed versus

traditional non‐GM seed. In our paper, we define “traditional crops”as non‐GM crops that could be conventional or

organic. Our context is that of a country which provides patent protections, but where the intentional and/or unintentional

diffusion of the GM technology puts farmers at risk of incurring infringement costs such as legal fees for law suits or fines.

The motivation for examining the farmer's adoption decision is that GM seeds have two unique characteristics

that make them distinct from technologies that are typically patentable. First, some seeds embody a self‐replicating

technology, such that crops produce subsequent generations of seeds that can grow and spread in future years.

Second, the technology embodied in GM seeds can spread to non‐GM crops or fields by acts of nature. These acts

of nature include wind‐driven cross‐pollination as well as seed dispersal to nearby fields during harvest and

transport. This natural diffusion of the technology cannot be completely controlled. The term “pollen drift”refers to

the accidental cross‐pollination of different varieties of crops through natural dispersion methods such as wind or

insects. The risk of pollen drift may be undesirable to farmers for multiple reasons. For example, farmers may grow

specialty crops and wish to preserve their genetic traits; or farmers may wish to avoid crossing a GM crop with non‐

GM conventional or organic crops for other reasons. Further, farmers whose non‐GM crops have been con-

taminated with GM genes may lose their contracts or rights to certain labeling, or may not be able to comply with

trade controls in countries with strict GM regulations such as EU countries. Pollen drift can be mitigated to some

extent by separating GM and non‐GM fields; however perfect control is not possible and may not be economically

feasible in some country environments. The GM seed technology can also diffuse through intentional seed saving

and reuse. Thus, both intentional diffusion of the technology (by infringement) and unintentional diffusion (by

nature) can result in the spread of the GM technology.

The characteristics of self‐replication and diffusion have significant implications for both seed companies and

farmers. For seed companies, the ability to control the use of the GM technology is complicated by these characteristics.

Patents are designed to protect inventions from unauthorized use. They do so by granting exclusive monopoly power

for a temporary period of time to the patent holder—the seed company in this case. One purpose of a patent is to create

an incentive for investment in research and development, by ensuring that the patent holder can reap a return on their

investment. Typically, patents protect technologies that do not have the ability to self‐replicate and diffuse. These

characteristics raise questions that are unique for GM crops relative to other patentable technologies.

One question is whether patent protections extend to the future generations of the seed. This issue was

addressed in the United States in the case Bowman v. Monsanto Co (2013) which focused on patent exhaustion. The

patent exhaustion doctrine states that the initial authorized sale of a patented article terminates all patent rights to

that item and confers on the purchaser, or any subsequent owner, the right to use or sell the article as he/she sees

fit. In Bowman v. Monsanto Co (2013), the question was whether patent exhaustion permits a farmer to reproduce

patented seeds through planting and harvesting without the patent holder's permission. The court's answer was no,

reasoning that the farmer (i.e., Bowman) had created a newly infringing copy. The court concluded that if such

exceptions were allowed, patents on seeds would retain little economic value after the first sale. The implication of

this ruling is that the practice of seed saving and reuse is not allowed under U.S. law. However, the ruling was

limited to the situation of the case, where the farmer intentionally planted the seeds to make and market replicas.

The court ruling states: “We recognize that such inventions are becoming ever more prevalent, complex, and

diverse. In another case, the article's self‐replication might occur outside the purchaser's control. Or it might be a

necessary but incidental step in using the item for another purpose (see Bowman v. Monsanto Co,2013).”Thus, there

remains some ambiguity with respect to patent exhaustion in such other contexts.

1

This ambiguity is less pro-

nounced in the United States and Canada (where a series of court decisions has made clear that planting GM seed

to grow another seed is remaking the invention, and the exhaustion of rights argument has been rejected) relative

to other country environments.

SMITH AND TILMAN

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