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1 Schumpeter and the `Value-Neutrality´ of Modern IP Regimes

1 Schumpeter and the `Value-Neutrality´ of Modern IP Regimes

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6 Addressing Market Failures for Sustainable Innovations in Plant Varieties

of innovation can be traced to the history of economic thought in Europe. Indeed,

even as early as in 1912, from the oft-quoted and rather comprehensive definition of

innovation given by Joseph Schumpeter in his book ‘The Theory of Economic

Development,’1 one can identify only three central characteristics in every instance

of ‘innovation:’ innovations are ‘new’ (either in temporal, contextual or spatial

terms) and they ‘add’ something of ‘value’ to what pre-existed their arrival.2

Furthermore, almost two centuries before Schumpeter formulated his comprehensive definition of ‘innovation’, Adam Smith advocated that the desirability of an

economic activity (and therefore, of innovations) ought to be determined strictly by

the ‘invisible hand’3 with little or no government intervention. According to both

Smith and Schumpeter therefore, industrial or even individual actions or activities

that bring forth new and useful products and processes for human (or even animal)

comfort or convenience are all examples of desirable innovation. This is so not

withstanding whether or not such innovations abide by any ‘higher’ law or religious

tenet of what is ‘good’ or ‘bad’.4

Nonetheless, within the study of the history of innovation and economic thought,

we notice that there was, and continues to be, a parallel recognition by scholars that

the effects or impact (both short and long term) of ‘value-neutral’ innovation cannot

be dismissed away as easily as being ‘value neutral.’ For example, while one may

claim that a chemical fertilizer is a value neutral innovation, one cannot claim with

equal ease that the soil pollution resulting from its continuous (or excessive) use is

also value-neutral. Therefore, departing from the views of classical economists lead

by Adam Smith, neo-classical economists advocated the need to involve government regulations not only to manage the negative side effects of desirable economic

activities including innovations, but also to prevent undesirable economic activities

per se. They contended that in advocating the rule of the ‘invisible hand,’ the


Joseph A. Schumpeter, The Theory of Economic Development (Cambridge, Harvard University

Press, 1934). The book’s English version first appeared only in 1934. However, it was written

originally in German under the title Theorie der Wirtschaftlichen Entwicklung (Leipzig, Duncker

& Humblot 1912).


Schumpeter identified 5 types of ‘innovation:’ (1) The introduction of a new good – that is one

with which consumers are not yet familiar – or of a new quality of a good; (2) the introduction of a

new method of production; (3) the opening of a new market; (4) the conquest of a new source of

supply of raw materials or half-manufactured goods; and (5) the carrying out of the new organization of any industry (e.g. by creating or breaking a monopoly position). As quoted in Thomas

K. McCraw Prophet of Innovation: Joseph Schumpeter and Creative Destruction, 73.


Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (first published

1796, Pennsylvania State University Electronic Classics Series Publication 2005) 364
www2.hn.psu.edu/faculty/jmanis/adam-smith/wealth-nations.pdf> accessed November 2, 2014.


Indeed, Schumpeter (known also as the ‘Prophet of Innovation’) was of the broader view, limited

not just to innovations per se, that one ought not to mix value judgments with science. Particularly

within the discipline of economics, he preferred a ‘value-neutral analysis that took multiple

perspectives into account.’ See Thomas K. McCraw Prophet of Innovation: Joseph Schumpeter

and Creative Destruction, 65.

6.1 Schumpeter and the ‘Value-Neutrality’ of Modern IP Regimes


classical economists overlooked (or ignored) the negative consequences that could

(and do) result from ‘unfettered pursuit of private gains.’5

The negative ‘side effects’ that result from pursuing one’s own self-interest

(including economic activity) that remain unaddressed by the ‘invisible hand’ of

the market mechanism, are now commonly termed ‘negative externalities.’ This

term can be used to denote any and all undesirable consequences of economic or

innovative activities that may, inter alia, lead to long term non-sustainability—not

only of the environment and the delicate ecological system that sustains all of

existence, but the process of innovation itself.6

Another dimension must therefore be attached to Schumpeter’s ‘value-neutral’

innovation to convert it into what can be termed as ‘desirable’ innovation, namely that

in addition to ‘adding’ something ‘new’ and ‘of value’ to a society, a truly ‘desirable’

innovation must also create the minimum number or amount of negative externalities.

However, ignoring the issue of ‘externalities,’ the resolution of which is admittedly difficult in most fields of innovation and technology, and remaining true to the

‘value-neutrality’ prescribed by Schumpeter and Smith, increasingly, intellectual

property laws promote and protect all innovations,7 and are implemented, in several

parts of the modern world, with this ‘value-neutrality’ as a central guiding principle.

Thus, for example, despite continuing debates and disagreements raging among

large sections of civil society regarding the ethics and unknown long term impact of

patenting (and thereby promoting R&D in) living organisms, and genetically

modified seeds, countries, both developed and developing, often grant and implement patents on innovations as controversial as the Harvard Oncomouse,8 Dolly the

sheep,9 live viruses,10 microorganisms,11 and seeds and plant varieties12 including

those incorporating genetic use restriction technology, to name a few.


Recent discussions bring to the fore that well before the dawn of “welfare economics” as a dominant

discipline, prominent classical economists had themselves underscored the indispensability of government intervention and regulation, albeit, in limited circumstances. See generally, Steven G. Medema,

‘The Hesitant Hand: Mill, Sidgwick, and the Evolution of the Theory of Market Failure’ (2007) 39

(3) History of Political Economy 331. Also, Steven G. Medema, ‘The Economic Role of Government

in the History of Economic Thought’ in Jeff Biddle, John B. Davis, and Warren J. Samuels (eds) The

Blackwell Companion to the History of Economic Thought (Oxford Blackwell 2003).


See generally, Timothy Swanson and Timo G€

oschl, ‘Property Rights Issues Involving Plant

Genetic Resources: Implications of Ownership for Economic Efficiency.’


See Article 27 of the TRIPs Agreement.


Daniel J. Kevles, ‘Of Mice & Money: The Story of the World’s First Animal Patent’ (2002) 131

(2) Daedalus 78.


‘Dolly Cloning Method Patented’ BBC News, (20 January 2000)
science/nature/611253.stm> accessed November 2, 2014. Also Jim Giles and Jonathan Knight,

‘Dolly’s Death Leaves Researchers Woolly on Clone Ageing Issue’ (2003) 421 Nature 776.


Dimminaco A.G. v. Controller of Patents Designs and Ors. [2001] AID No. 1 (Decision of the

High Court of Kolkata, India).


Diamond v Chakrabarty, 447 US 309 (1980).


Bowman v. Monsanto Co. et al. Certiorari to the United States Court Of Appeals For The Federal

Circuit No. 11-796. Argued February 19, 2013—Decided May 13, 2013.


6 Addressing Market Failures for Sustainable Innovations in Plant Varieties

While the negative side effects (if any) of several of the above named innovations are yet to see the light of day, innovations in the agricultural seeds sector are

replete with instances of unchecked negative externalities. Some of the key negative externalities of modern agricultural seed innovations, as discussed in Chaps. 3

and 5 above, include their negative impact on

1. the environment: As noted in Chap. 3 above, modern formally bred varieties,

including innovations such as Bt Cotton, Roundup® Ready seeds, and most

hybrid, transgenic hybrid or HYV seeds require large amounts of chemical

fertilizers, pesticides and continuous supply of water to give the promised high

yield. This leads to erosion of soil quality and water resources, thereby

compromising the long term sustainability of agriculture itself. Traditional

varieties, especially when coupled with traditional farming practices, on the

other hand, are often better equipped to deal with pests without the need to use

chemical pesticides or weedicides, need less water and give high yield with

natural manures.

2. on agrobiodiversity, and therefore, also on the sustainability of the innovation

process itself: As noted in Chaps. 1, 3 and 5 above, unlike in other fields of

technology, where the continuation of the ‘old’ is not necessary for the creation

of the ‘new,’ in plant varieties, the old, traditional varieties, preserved and

improved in situ provide the updated genetic materials necessary to ensuring

continuing formal innovations. Further, although the process of (formal)

improvement reduces the genetic variability of seeds and therefore also reduces

the scope of possible future (downstream) informal improvements by farmers,

modern agricultural seed-related innovations, particularly hybrids and GURTs,

preclude downstream informal innovations (such as took place in the the HMT

case) altogether. When coupled with policies such as the seed replacement

policy, the possibility and incentive to engage in in situ agrobiodiversity conservation is removed almost entirely.

3. on the cultures and traditions associated with traditional farming such as the

culture of seed sharing and seed exchange: As noted in Chap. 5 above, there

appears to be some evidence suggesting that in regions where farmers start

adopting formally improved seeds, the culture of saving and exchanging seeds

appears to get eroded. This is a highly unwelcome trend as the culture of sharing

and exchanging seeds is necessary for continuing informal innovation in seeds

and also for quick dissemination of good seeds.

None of the above-identified negative externalities resulting from widespread

adoption of modern seeds can be adequately addressed within the framework of a

historically ‘value-neutral’ intellectual property rights regime. As discussed in the

following section, therefore, intellectual property protection regimes are not appropriate means of promoting sustainable innovations in plant varieties. In fact, we

noticed in Chaps. 3 and 4 above, that due to the very nature of modern innovations

in plant varieties, these negative externalities will result even in the absence of an IP

protection regime. However, the adoption of strong IP protection regimes can

6.2 Market Failure and IP Protection


potentially worsen the negative externalities associated with the types of innovation

that are currently common in the formal plant breeding sector, as discussed below.


Market Failure and IP Protection

In a market of free knowledge, knowledge has all the characteristics of a public

good, i.e. it is non-rivalrous and non-excludable.13 Non-rivalrous meaning that an

individual’s use of the property does not diminish the availability of the property for

others, and non-excludable meaning that it is difficult to prevent others from using/

benefiting from the property once it is created and disseminated.14 This leads to

what is commonly termed as the ‘free-rider’ problem whereby once the knowledge

is disclosed, even those who contributed nothing to its creation and dissemination,

can benefit from it. Furthermore, in a market of free knowledge, the cost of

‘copying’ and (re)distributing the knowledge can be substantially less than the

cost of creating/disseminating the knowledge in the first instance. This leads to

substantial reduction in the price at which the knowledge is available in the market.

Although the reduced prices generate a great deal of consumer surplus, they

potentially leave little incentive for the producer of knowledge to continue producing it. In a market of free knowledge, therefore, the demand for knowledge always

exceeds the supply, because the market mechanism is unable to incentivize the

production/creation of knowledge. This is a form of market failure, which, when

considered in the context of knowledge embodied in inventions and creative/artistic

works, results in sub-optimal inventive or creative activity, to the detriment of

society as a whole.15

The remedy that is most commonly adopted to address such market failures is

government intervention in the market via the adoption of intellectual property

(IP) protection regulations.16 Accordingly, IP protection regimes have been

adopted for a variety of intellectual creations embodying various forms of knowledge, ranging from inventions of a technical nature to artistic and cinematographic


David Throsby, The Economics of Cultural Policy (New York, Cambridge University Press

2010) 200. See also David W. Barnes, The Incentives/Access Tradeoff, (2010) 9 North Western

Journal of Technology & Intellectual Property 96, 99 where the author states: “[p]ublic goods are

not classified as ‘public’ simply because they are supplied by the government. Rather, some goods

are classified as ‘public’ because their characteristics of non-rivalrousness in consumption and

non-excludability in production inevitably prevent efficient private market supply.”


David W. Barnes, ‘Congestible Intellectual Property and Impure Public Goods’ (2011) 9 North

Western Journal of Technology & Intellectual Property 533.


David Throsby, The Economics of Cultural Policy, 200.


Ibid. See also, generally, Wendy J Gordon, ‘Fair Use as Market Failure: A Structural and

Economic Analysis of the Betamax Case and its Predecessors’ (1982) 82 Columbia Law Review

1600, and also, Wendy J Gordon, ‘Market Failure and Intellectual Property: A response to Prof.

Lunney’ (1984) 82 Boston University Law Review 1031.


6 Addressing Market Failures for Sustainable Innovations in Plant Varieties

works. In more recent times, new or modified versions of existing IP regimes have

also been developed for the protection of knowledge embodied in other forms of

inventions. In the light of the findings from the previous chapter, this chapter

investigates whether the market failure theory, which justifies the adoption of

older forms of IP protection regimes, also justifies the adoption of plant breeders’

rights or patent regimes for the protection of plant varieties.

Particularly, on the basis of the discussions in Chaps. 4, 5 and 7 above, if we are

agreed to two things, namely, (1) that F1 hybrids permit plant breeders (‘the formal

sector’) to appropriate the value inherent in their new varieties, even in the absence

of IP protection regimes17 and (2) that in order to ensure continuing formal sector

improvements in plant varieties, there is a need to incentivize the production of

plant genetic resources (PGRs) by promoting in situ agrobiodiversity conservation

by farmers (‘the informal sector’),18 it is necessary to investigate whether the form

of protection envisaged for farmers and breeders under India’s PPV&FR Act or

under UPOV is necessary to address market failures that generally affect markets of

free knowledge, and whether it provides a balanced playing field of incentives for

both formal and informal innovations in plant varieties.


‘Market Failure’ as a Justification for IPRs

Experts have defined the term ‘market failure’ in numerous ways. In the simplest

economic terms, it can be understood as a situation where ‘the individual pursuit of

one’s own self-interest, instead of promoting the interest of society as a whole, can

make society worse off.’19 It has also been defined as a ‘term of art, employed not

simply to denote actual failures of markets to appear, but also to embrace the many

other ways in which real world market systems can fail to align private and social

economic welfare.’ It has also been said to include circumstances in which ‘real

world markets. . . fail to achieve. . . non-economic social goals.’20 In such circumstances, it has been suggested that prudence lies in distrusting or disfavoring the

market as a suitable tool for achieving the desired (social) goals.21

As stated above, in the context of intellectual property, it is said that IP

protection regimes are designed to address market failures that lead to

sub-optimum innovation or creativity. For example, experts have observed the


See also, generally, Peter J. Goss, ‘Guiding the Hand That Feeds: Toward Socially Optimal

Appropriability in Agricultural Biotechnology Innovation.’


See also, generally, Timothy Swanson and Timo G€

oschl, ‘Property Rights Issues Involving Plant

Genetic Resources: Implications of Ownership for Economic Efficiency.’


Paul Krugman et al., Economics, (European ed, New York, Worth Publishers 2008) 3.


Wendy J Gordon, ‘Market Failure and Intellectual Property: A response to Prof. Lunney’

82 Boston University Law Review 1031, 1035.


ibid., 1038.

6.2 Market Failure and IP Protection


importance of intellectual property laws in promoting the creation of literary and

artistic works: It has been argued that absent appropriate IP protection, creators of

such works would have no incentive to continue being creative; free riders would

make copies of the works as soon as they hit the market stalls. Having not had to

incur any of the costs associated with creating the work, they would, thereafter, sell

these copies at throw-away prices to the economic detriment of the creator of the

original work. This inability of the market to prevent free riding is a market failure

in the form of the market’s inability to protect the original creator’s investment.

Regulations such as copyright laws help address these market failures.22 Similar

arguments can be made to justify patent protection for innovations such as those in

the pharmaceutical industry. In each of these instances, the creation of a work is

time and resource incentive and the copying of the resulting end product (work or

invention) is, relatively speaking, easy, cheap and sometimes also effortless.

We notice, however, that in the formal plant variety innovations sector, the

above scenario does not match. Scientific developments in the field of plant

breeding have developed, both with and without active intention, so as to make

copying either impossible (in the case of seeds incorporating GURTs) or difficult/

unprofitable (in the case of hybrids).23 Furthermore, historical and empirical

research undertaken as part of the research undertaken for this book, provides

evidence of formal innovations (including during the Green Revolution) having

taken place and spread widely and profitably without any underlying IP protection,

including in countries such as India that did not recognize any form of IP protection

for seeds until as late as 2001.24

A plant variety protection regulation, therefore, appears to not be justifiable

based on ‘market failure’ arguments used to justify other forms of IP protection. In

fact, experts have opined that ‘if a desired incentive could be forthcoming even

without an intellectual property rule in place, it would be wasteful’ to establish such

a regime ‘and have courts and the legislature to become involved.’25 In relation to

most intellectual property laws, there exists a situation that has been termed as

asymmetric market failure. In asymmetric market failure, ‘in the presence of. . . a

rule restraining strangers from copying, markets would succeed, not fail.’26 In other

words, in order for there to be asymmetric market failure, not only must there be a

situation where ‘an IP system is needed in the first place,’ but there must also be a

some kind of guarantee that once such a system is in place, ‘it will really provide the

incentives desired.’27

Wendy J Gordon, ‘Fair Use as Market Failure: A Structural and Economic Analysis of the

Betamax Case and its Predecessors’ (1982) 82 Columbia Law Review 1600, 1610–12.


See Chap. 3 above.


See Chap. 4 above.


Wendy J. Gordon, ‘Asymmetric Market Failure and Prisoner’s Dilemma in Intellectual Property’

17 University of Dayton Law Review 853, 856–857.


Ibid., 854.


ibid., 857.



6 Addressing Market Failures for Sustainable Innovations in Plant Varieties

The question that arises then is, what really are the desired incentives? In the

field of plant variety innovations, this study has revealed that there are a multitude

of desired incentives: At the level of the private (formal) seed sector, incentives are

desired for conducting R&D in self-pollinating crops in which heterosis is currently

not possible due to the floral biology of several crops.28 However, as seen in Chap. 4

above, the PPV&FR Act of India has not given the type of incentives necessary for

the private sector to engage in such R&D; their focus continues to be in crops for

which hybrid seeds can be profitably created using available and well-known


The obvious answer might then appear to be to introduce stronger IP rights, such

as those envisaged by UPOV 1991 or patents regimes.30 However, the introduction

of such a regime would defeat the desired incentives of the informal (farmer level)

seed sector, which is also the only sector that can meaningfully engage in in situ

agrobiodiversity conservation. From the discussion in Chap. 3, although we saw

that the formal improvement of crops, including self-pollinating crops, significantly

reduces the inherent genetic variability and also the room left for downstream

farmer innovations,31 cases such as the HMT controversy, clearly suggest that if

farmers are permitted to save, select and resow seeds, further downstream informal

innovations (including those of significant commercial importance) are possible.

Further, such informal farmers’ innovations are more likely to be well suited for

local climatic and soil conditions than formal innovations, as was the case with

HMT. In such a situation, although it can be argued that some form of IP protection

will also bring economic benefits to farmer-inventors of new varieties, it is necessary to remember that the very possibility of becoming a farmer-inventor is based

on the initial freedom to save and resow seeds—whether it be traditional seeds or

seeds improved and sold by the formal seed sector.32 Conserving the culture of seed

saving and seed exchange is therefore an integral part of any system than can

successfully provide the desired incentives for in situ agrobiodiversity conservation


See Chap. 4 above. See also Peter J. Goss, ‘Guiding the Hand That Feeds: Toward Socially

Optimal Appropriability in Agricultural Biotechnology Innovation.’ The author argues that UPOV

1978 type models fail to address the market failure, namely, of the private sector not participating

in R&D for self-pollinating crops.


Furthermore, the empirical research discussed in Chap. 5 above also suggests that the promotion

of the policy of seed replacement is adequate incentive for the private sector to engage in

production and distribution and perhaps eventually also R&D in self-pollinating crops.


This suggestion has in fact been made: See generally, Peter J. Goss, ‘Guiding the Hand That

Feeds: Toward Socially Optimal Appropriability in Agricultural Biotechnology Innovation.’


Interview with Anita Babbar, Senior Scientist (Chickpea Breeding), Department of Plant

Breeding & Genetics, Jawaharlal Nehru Krishi Vishwavidyalaya (Jabalpur 21 February 2012),

available with author.


It must be noted here again, however, that the freedom or right to save hybrid seeds or seeds

incorporating GURTs is meaningless from the perspective of downstream farmer level seed

improvements or innovations. See generally, Mrinalini Kochupillai, ‘The Indian PPV&FR Act,

2001: Historical and Implementation Perspectives.’

6.2 Market Failure and IP Protection


and informal (including, but not limited to, downstream) farmer level innovations.

This culture, however, is antithetical to the very concept of exclusivity that IP rights

rely on to promote innovation.


‘Market Failure’ as a Justification for Limiting IP


Even if the existence of IP laws is a given in a society, arguments based on the

market failure theory have been used to limit the scope of such laws and expand

the scope of exceptions which justify the non-enforcement of rights guaranteed by

these laws.33 Several authors have identified ‘areas and ways in which individuals

and society can benefit less from a monetary market than they could from a flow of

information and works unimpeded by toll booths.’34 Indeed, from the foregoing

discussions, it appears that innovations in plant varieties are an example of such

an area: Absence of IP protection permits both formal and informal innovations to

take place unfettered, thereby leading to in situ improvement of crops and the

creation of locally adapted varieties, including high yielding varieties such as

happened in the HMT case (provided, of course, the government agencies do not

zealously promote the seed replacement policy!).35 It also prevents

agrobiodiversity from becoming proprietary material held by a few corporations

in the world. In the field of plant variety innovations, therefore, ‘the [current] lack

of exclusivity may be a delight rather than a tragedy.’36

Furthermore, in the past, rapid creation, dissemination, adoption and improvement of plant varieties took place without IP protection because of the culture of

sharing. Even today, the culture in rural and tribal societies is that of sharing, not of

claiming private ownership. Cases such as the HMT controversy may have arisen

the past as well. However, because of the predominant culture of sharing, they may

only have led to local, village, or district level prosperity rather than to controversy.

The possibility that IP law in the field of plant variety innovations will transform the

current culture of sharing into a culture of private property claims is therefore very

real, and highly undesirable for the sake of future innovations as well as for

agrobiodiversity conservation.

Wendy J Gordon, ‘Market Failure and Intellectual Property: A response to Prof. Lunney.’

Wendy J Gordon, ‘Market Failure and Intellectual Property: A response to Prof. Lunney,’



‘Dadaji Khobragade, The Creator of HMT Rice: A School Dropout Beats Trained Agriculturists’



14, 2014. The HMT rice was found to be more high yielding in small farmholdings than other

formally released varieties.


Wendy J Gordon, ‘Market Failure and Intellectual Property: A response to Prof. Lunney,’ 1039.





6 Addressing Market Failures for Sustainable Innovations in Plant Varieties

IP Law and ‘Missing Markets’

At the same time, absent a regime, policy or pointed efforts to promote in situ

agrobiodiversity conservation, any efforts to limit either the grant or enforcement of

IP rights to formal innovations would be redundant (ineffective) due to the above

discussed empirical evidence indicating the emergence of a ‘new’ market failure,

particularly in the Indian context:

As evidenced by the empirical survey conducted amongst farmers in India (see

Chaps. 4 and 5 above), the current market failures are not due to the operation of

exclusive rights conferred by IP laws; on the contrary, India’s IP laws guarantee to

farmers as well as breeders, broad researcher’s rights as well as farmers’ privileges

(to select, save, re-sow seeds season after season). However, not only has the

technological development been such that ensures exclusivity for the seller of

formally developed seeds even without IP protection, but farmers themselves,

attracted to the promise of high yields and supported by government policies

encouraging seed replacement, choose to continuously buy new seeds from the

market rather than engaging in traditional in situ conservation and improvement of

seeds, even when cultivating self-pollinating crops using non-hybrid seeds. This

choice indicates a clear preference for short term personal gains (in the form of

profits) at the cost of long term societal (and personal) benefit (in the form of

agrobiodiversity conservation and soil quality preservation). It is this new, emerging, and fast growing form of market failure (the ‘new market failure’) that needs to

be addressed by appropriate regulations. In the plant variety sector, therefore, we

have a unique circumstance where the adoption of intellectual property protection

regime would not address the existing negative externalities and market failures,

but would worsen the existing market failures (enumerated above) as well as this

fast growing ‘new market failure.’

What is needed, therefore, is not a law that primarily promotes formal innovations and in limited instances awards informal innovations (as is the case under the

Indian PPV&FR Act), but one that primarily promotes informal innovations and in

situ agrobiodiversity conservation (which are, in most instances, synonymous). In

other words, the creation of any incentive structure ought to facilitate the evolution

of markets.37 A market for formal (private sector) seeds exists and is thriving in

India. However, this thriving market is killing the market for traditional seeds, the

survival of which is a necessary pre-condition to encourage farmer level innovations and in situ agrobiodiversity conservation. Promoting farmer level innovations

and conservation of agrobiodiversity, in turn, will ensure the continuation of formal

seed improvement efforts, and would help alleviate all three key negative externalities associated with formal modern innovations in plant varieties enumerated


Wendy J. Gordon, ‘Asymmetric Market Failure and Prisoner’s Dilemma in Intellectual Property,’ 857.


6.2 Market Failure and IP Protection


Therefore, the current and urgent role of any incentive structure (whether based

on exclusive rights or otherwise), is to bring back a balance; a balance between

incentives to conserve on the one hand, and incentives to improve using that which

has been conserved, on the other. This balance is uniquely necessary in plant variety

innovations because unlike in other technology markets, in the seeds market, every

user or buyer of seeds is also a potential creator and improver of seeds. This is

unlike in other fields of technology where most users have neither the know-how

nor resources necessary to improve the products that they use. Changes in law and

policies both within and outside the scope of existing IP protection regimes will

therefore be necessary to promote sustainable innovations in plant varieties. Suggestions in this regard are provided in the concluding chapter below.

Chapter 7

Conclusions & Recommendations: Leveling

the Incentives Landscape to Promote

Sustainable Innovations in Plant Varieties

In 1958, Fritz Machlup famously stated:

If one does not know whether a system ‘as a whole’ (in contrast to certain features of it) is

good or bad, the safest ‘policy conclusion’ is to ‘muddle through’ – either with it, if one has

long lived with it, or without it, if one has lived without it. . . If we did not have a patent

system, it would be irresponsible, on the basis of our present knowledge of its economic

consequences, to recommend instituting one. But since we have had a patent system for a

long time, it would be irresponsible, on the basis of our present knowledge, to recommend

abolishing it. This last statement refers to a country such as the United States of America –

not to a small country and not a predominantly nonindustrial country, where a different

weight of argument might well suggest another conclusion. . .1

Most developing countries have only recently started on the task of designing

and adopting an IP regime for the protection of plant varieties. If the above

oft-quoted statements of Fritz Machlup hold any water, it is adequate reason for

most developing countries to stop in their tracks and continue, as they have for

centuries, without any IP protection for plant varieties. Indeed, the foregoing

chapters suggest that they would do well if they were to make this choice. However,

the expediencies of the twenty-first century globalized world make this choice a

difficult one to make, not least because of the obligations under Article 27.3(b) of

TRIPs. In this situation, it is up to each country to take advantage of the flexibilities

inherent in the current wording of Article 27.3(b), ensure that these flexibilities are

not done away with in future negotiations pertaining to its scope, and, most

significantly, build a system of checks and balances within and outside the framework of IP laws for plant varieties within their territories. Of particular relevance is

ensuring that incentive measures adopted for promoting innovations in plant varieties do not interfere with or disincentivize in situ agrobiodiversity conservation.

For this, it is further necessary to ensure that an equal measure of incentives is given

to both the formal and informal seed sectors to engage in innovative activity


Fritz Machlup, ‘An Economic Review of the Patent System’ (Study No. 15, U.S. Senate Subcommittee on Patents, Trademarks and Copyrights 1958) 79–80.

© Springer-Verlag Berlin Heidelberg 2016

M. Kochupillai, Promoting Sustainable Innovations in Plant Varieties, Munich

Studies on Innovation and Competition 5, DOI 10.1007/978-3-662-52796-2_7


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