10 - Proprietary Rights and Collective Action: The Case of Biotechnology Research with Low Commercial Value

Summary

In areas of cumulative research, such as biotechnology, broad patents on fundamental research tools have the potential to create impediments to follow-on research and development (R&D). Impediments to R&D may also be created by a possible “anticommons” or “thicket” of upstream rights. Whether such impediments actually arise in any given case is of course an empirical question. From an empirical standpoint, the net impact of recent increases in upstream biotechnology rights is far from clear. It is fair to say, however, that one standard market solution to greater rights intensity – the reduction of transaction costs through formal or informal pooling and exchange of rights – has not emerged. Rather, in the commercial arena, significant transaction costs and licensing fees have simply become part of the cost of doing business. Although these costs have probably reduced profits, foreseeable sales revenues have generally been sufficiently high at least for ongoing projects, that the profit incentive has not been eliminated.

In contrast, when follow-on research is conducted in the university context, or by non-profit institutions that target the developing world, foreseeable payoffs are either highly uncertain or are clearly small. In these contexts, large transaction and licensing costs may pose a more pressing problem. On the other hand, at least in the context of low-margin research, there is reason to be optimistic that the “standard” solution of collective rights management may actually emerge.