October 31, 2005
Effective intellectual property protection is needed to encourage private agricultural seed companies to invest in research and development that will bring new technologies to farmers around the world. Yet protection standards that are too high would restrict benefits to society. Those are two conclusions of a comprehensive economic study conducted by Iowa State University researchers of the effect of intellectual property protection on agricultural seed companies, producers and consumers. A paper detailing the research is published in the November 2005 issue of the American Journal of Agricultural Economics. "The agricultural seed market is unique," said Sergio Lence, professor of economics at Iowa State. "It's not like the medical sector where the customer directly consumes the benefits of the newly developed technology." Instead, the seed customer is a farmer who sells the resulting crop from the newly developed technology into a competitive market. "The higher yields from newly developed hybrids and varieties generally encourage farmers to purchase seed each year," said Lence. "Unlike previous studies, we wanted to measure the expected benefits and costs of stronger intellectual property protection before the development of a new seed takes place," he said. "Studying the issue from this perspective is essential. Otherwise, we would be ignoring the fact that the main purpose of intellectual property rights is to provide incentives to develop better seeds." Lence and Dermot Hayes, professor of economics at Iowa State, developed a model that allowed them to calculate the economic impact on producers and consumers of changes in the level of intellectual property protection under various scenarios. It also measured the effect on agricultural seed companies æ both while legal protection exists and after protection ends. The model showed there is a level of intellectual property protection at which the combined interests of consumers and producers are complementary to the interests of the seed companies. "We also found there is a level where the combined economic benefit to producers and consumers can be increased only at the expense of the seed companies," Lence said. "Our results suggest the optimum level of intellectual property protection is greater than what existed in the North American seed corn market in the late 1990s," Hayes said. "It also shows companies need to have incentives to develop new products or there won't be any new products." The model also has been used to look at intellectual property rights for agricultural seed companies on an international scale. Bill Niebur, Stephen Smith and Alan McCunn, with Pioneer Hi-Bred International Inc., a subsidiary of DuPont, collaborated with Lence and Hayes on the project.