-----Original Message-----
From: Biotech-Mod2
Sent: 10 April 2001 09:20
To: 'biotech-room2@mailserv.fao.org'
Subject: Re: Liability for biotech products in developing countries
I want to react to two interesting but very debatable points in Jan Wendt's message [5 April].
1) Wendt seems to consider that the force relations between Monsanto or any other similar companies and farmers (and worse when they are poor farmers of the developing countries) are quite symmetrical and balanced. Monsanto and other have fantastic means to defend their IPR. Since when are IPR from individuals or communities of the South taken into account? In which proportion of the IP, will their rights have the chance to be recognised ? The principal responsable of an international organisation, officially created to contribute to fight against desertification, told me recently that, if he can not access by the official way the genetic resources that interest him (for his research and his country), he will find a way to get them by paying some collectors.
2) Wendt seems also to consider that the integration of farmers activity either by the up-side sector (seeds and pesticides companies) or the down-side sector (transformation and distribution), and sometimes they are controlled by the same companies, is something natural and good. We know that the ultra productivism of agriculture in western countries with all its terrible consequences (the mad cow disease is one of them) is mainly the result of the intense integration of agriculture by industry and trade. Is this kind of integration to be defended as a model for developing countries (disappearance of small non-competitive farmers who could not live with the prices offered by the industry; overuse of fertilisers and pesticides;..) ?
Michel FERRY
Directeur scientifique
Station de Recherche sur le Palmier Dattier
et les Systèmes de Production en Zones Arides
Apartado 996
03201 ELCHE
Espagne
tél: 34.965421551
fax: 34.965423706
e-mail: m.ferry@wanadoo.es
[To contribute to this conference, send your message to biotech-room2@mailserv.fao.org For further information on the FAO Electronic Forum on Biotechnology in Food and Agriculture see http://www.fao.org/biotech/forum.asp ]
-----Original Message-----
From: Biotech-Mod2
Sent: 10 April 2001 10:40
To: 'biotech-room2@mailserv.fao.org'
Subject: Patenting and relevant business decision factors.
This is from Thomas M. Saunders, a patent attorney in the United States with over 20 years of experience and who specializes in representing biotechnology and pharmaceutical startup companies worldwide.
In the context of this conference, it might be worthwhile presenting some business considerations attendant to the patent process.
1. Patent applicants hope to profit from their inventions.
Patents exist state (country) by state. Ownership of a patent in a particular state is a negative right. It permits the owner to exclude others from practicing the invention. A patent does not act to permit the patent owner to do anything.
This monopoly is granted as an incentive to disclose to the public the manner of practicing the invention.
In a primary sense, obtaining profit from a patent requires two elements: (1) a significantly valuable market for the invention and (2) a means to enforce the patent such as a functioning legal system. "Means to enforce" also entails sufficient capital to take enforcement steps even if available. These two threshold elements are seldom both present in developing nations.
An alternative basis for seeking patent protection in a developing country is to exclude that country as an international source of infringing product. This basis is only reasonable for the largest international companies. First, engaging in patent enforcement at a distance is expensive. Second, most efforts will be for naught without having access to high level governmental officials. Generally, only large corporations have such access.
Dedicating a biotechnology patent to the public -- that is foregoing patent protection - will prevent that technology from ever being commercialized.
Virtually every technological advance requires development. Development (i) requires money and (ii) incurs risk. Any "for-profit" developing party hopes to recoup the development money with enhanced profits offered by the patent monopoly. The anticipated enhancement of profit is required to justify the risk. There are no "sure things" and every new product or process has an opportunity to fail. A developing party is unlikely to risk substantial development sums if a competitor can immediately begin providing the same product but without the development cost.
2. Patenting parties
Without regard to the country or region of origin, patent applicants seeking to profit from IPR will first assess markets (in financial terms) for the subject matter of any particular invention. For example, forestry and paper related inventions would reasonably look to Canada, Scandinavia, Japan, the US, Brazil, and perhaps Myanmar and Thailand. The decision at that point is a business decision relating the required outlay against the prospective return, the likelihood of return, and the timing of return.
It is not necessary, nor is it possible, to obtain all conceivable royalties. Using the above-example, with limited resources it may be reasonable to proceed to patent only in Canada and the US. Certainly, a royalty stream from two major markets will not be insignificant. As to the "lost" markets, the fact that some income escapes does not detract from income received. Neither does it mean that there will be no income from commerce in countries without patent protection. In those countries there may be greater price competition.
Profiting from IPR does not favor or disfavor by region. It favors and disfavors by wealth. Profiting from IPR first requires a patent applicant to have the funds to apply for a patent. Next, it requires an applicant to have funds and sales ability to license a patent application, and/or obtain a patent. Profiting also (occasionally) requires the funds to enforce a patent. Enforcement is actually a rather lesser problem. Failed patents are never copied; only the most successful are copied. In the case of successful patents, the technology itself can reasonably be expected to provide the funds for enforcement. Clearly though, the more distant one is from the major markets, the more difficult and expensive it is to find a licensee or realize profits.
3. Licensees
Licensees of patent rights will ordinarily stand in the same position as patent holders. A licensee will conclude a patent license on the assumption that the royalty payments due the patent holder will still allow the licensee to profit from the patent. To the extent that the market licensed is small or that enforcement is too expensive, too slow, or too uncertain - in the territory being licensed - a prospective licensee will be less inclined to either take a license or pay a substantial royalty. By these standards, in-licensing is less attractive in developing regions.
4. Potential Infringers
Sophisticated technologies such as the production of complex compounds derived from sophisticated intermediates, or hybrid and engineered plants and seeds are priced at a premium - with or without a patent. The increased price demanded by patent holders under these circumstances is only incrementally increased by reason of the patent. Any product, including hybrid and engineered plants and seeds, is generally priced to maximize profit. In any country, developing or developed, hybrid and engineered plants and seeds will command higher prices than non-proprietary materials only if the market finds them "better." While "better" may be based on salesmanship and perception, it is more often related to the usual factors of quality, cost, and yield. In a reality pricing model, the price premium can only be a portion of the profit advantage offered by the technology.
A patent holder demanding "too high" a price creates a market for infringers. An infringer succeeding too well at infringement invites the patent holder to enforce. However, infringement is favored in a developing country by the increased cost of enforcement by a distant patent holder seeking to limit price erosion in a small market. There is a great deal of room "under the radar." And the last and final rule of patents and patent enforcement: Being almost as good and substantially less expensive always makes money.
Thomas M. Saunders
Lorusso & Loud
440 Commercial Street
Boston, MA 02109
USA
Voice (617)227-0700
Fax (617)723-4609
tmsaunders@aol.com
[To contribute to this conference, send your message to biotech-room2@mailserv.fao.org For further information on the FAO Electronic Forum on Biotechnology in Food and Agriculture see http://www.fao.org/biotech/forum.asp ]