Protection of Biotechnology Intellectual Property Rights in Developing Countries: Economic Impact Analysis of Terminator Genes and Other Enforcement Mechanisms

The global area under genetically modified (GM) crops grew rapidly in the first ten years of GM technology adoption. However, the protection of innovators’ intellectual property rights (IPRs) has remained controversial, especially in developing countries, where IPR enforcement is lax. Weak enforcement of IPRs in developing countries has resulted in the failure of markets to transfer rents from the primary producers who sow GM crops to seed developers, and has reduced the innovators’ incentives to improve seed quality in developing countries. A range of IPR enforcement mechanisms has been developed to strengthen IPR protection in developing countries, which include: the World Trade Organisation’s (WTO) Agreement on Trade Related-aspects of Intellectual Property Rights (TRIPS), GM levies and genetic use restriction technologies (GURTs). GURTs, also called terminator genes, are technological solutions to the IPRs market failures in developing countries, by rendering the second generation seeds sterile to prevent unauthorized use of genetic material and self-supply of commercial seeds by farmers and other plant breeders. To explore the potential welfare effects of GURTs and other IPR enforcement mechanisms in developing countries, the economic surplus of producers, consumers and innovators in Roundup Ready® soybean production in Argentina is quantified and compared in several scenarios of IPR protection, employing a vertical linkage soybean model and a synthetic partial-equilibrium model. The results show that GURTs could markedly reduce welfare in the adopting country, unless the higher degree of rent appropriability leads to vastly more productive seeds. A simulation demonstrates that if GURT seeds become 90 per cent more productive than the current GM variety, then an adopting country could benefit from the adoption of GURTs.