Property Rights Protection of Biotechnology Innovations

Protection of intellectual property embedded in self-replicating biological innovations, such as genetically modified seed, presents two problems for the innovator: the need for copy protection of intellectual property and price competition between new seed and reproduced seed. We consider three regimes in two periods with asymmetric information: short-term contracts, biotechnological protection, and long-term contracts. We find that piracy imposes more intense competition for seed sales than does durability alone. Technology protection systems yield highest firm profit and long-term contracts outperform short-term contracts. Farmers prefer, in order, long-term, short-term, and biotechnical protection. Depending on monitoring cost, long-term contracts may be socially preferred to short-term contracts, with both preferred to biotechnical protection.