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Intellectual Property Protection in the American Chicken–Breeding Industry

Published online by Cambridge University Press:  13 December 2011

Glenn E. Bugos
Glenn E. Bugos
Affiliation:
Glenn E. Bugos is a fellow of the German Marshall Fund of the United States.
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Abstract

The capture and protection of returns from research investments have always been issues in business; in the modern era, they have most often been dealt with through copyright and patent registration. In the chicken–breeding industry, however, the laws of nature served to safeguard the hybridization process and to provide a biological “lock” on specific strains. As new techniques of genetic manipulation came into play, chicken breeders, like others in bio–technology industries, had to reassess their use of intellectual property protection. The following article provides a history of the interplay among the tools for such protection, genetic research, and industry structure.

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Articles
Information
Business History Review , Volume 66 , Issue 1: High-Technology Industries , Spring 1992 , pp. 127 - 168
Copyright
Copyright © The President and Fellows of Harvard College 1992

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References

1 Since the poultry industry is one of those neglected topics in American business history, I must present more background information on the industry than needed to make my argument about innovations in intellectual property protection. For two exemplary studies of the evolution of intellectual property protection in the seed industries, see Kloppenberg, Jack Ralph, First the Seed: The Political Economy of Plant Biotechnology, 1492–2000 (New York, 1988)Google Scholar, and Fitzgerald, Deborah, The Business of Breeding (Ithaca, N.Y., 1990)Google Scholar.

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27 J. R. Eddington to Edmund Hoffman, 18 May 1943, quoted in J. Frank Gordy, “Broilers,” in Hanke, American Poultry History, 396.

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32 The female broiler parent was the greater breeding challenge because it must remain a good egg–layer, despite a direct trade–off between the genes for meating and laying. Hatcheries could keep smaller flocks of parents if the females laid fertile eggs prolifically but, despite all efforts, Arbor Acres parents, in 1988, laid only 140 eggs per year for the hatching egg market, compared to 285 eggs from Leghorns bred explicitly for the table–egg market. Furthermore, because one rooster can impregnate seven hens—sperm lives three weeks in a hen's oviduct—the market for hens was seven times bigger. Only recently has Arbor Acres bred a male parent. Since the Arbor Acres female parent was designed to grow quickly, they designed their male to have good muscle conformation. If the two parents “nicked” well, both rapid growth and full conformation would yield a balanced broiler for dinner. “The Arbor Acres Male Line: How We Breed It… and Why,” Arbor Acres Review, March 1989.

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35 In the early 1950s, Ralston–Purina supplied 10 percent of America's live broilers, followed closely by the Cotton Producer's Association, the Atlanta–based farmer's cooperative, then Arkansas Valley Industries, Central Soya Company, Pillsbury, and Swift and Company. But these feed companies entered the broiler business accidentally. To boost feed sales, they sold broiler chicks at cost to farmers on a “chattel–mortgage.” Since many broiler farmers went bankrupt each year, the feed companies regularly collected birds they needed to dispose of. Tobin, Bernard F. and Arthur, Henry B., Dynamics of Adjustment in the Poultry Industry (Boston, Mass., 1963), 84Google Scholar.

36 Between 1959 and 1964, the number of broilers raised under direct contract with all integrators (“grow out contracts” or “feed financing” with the integrator assuming the risks of survival and feed costs) grew from 12 to 59 percent. David Arney, “Nation's Top Broiler Companies,” Broiler Industry, Dec. 1988, 34ff.

37 Articals critical of the integrators include “We Lost Broilers—What's Next?” Farm Journal 83 (July 1959): 33ffGoogle Scholar; Jack Bickers, “The Big Integrator [Chemell Corporation] Who Went Bankrupt,” ibid. 84 (March I960): 105ff.; Roy, E. P., Contract Farming U.S.A. (Danville, Va., 1963)Google Scholar. Arguments in favor of integration include George Soule, “The Chicken Explosion,” Harpers 222 (April 1961): 77–79Google Scholar; Lasley, Floyd A., The U.S. Poultry Industry: Changing Economics and Structure (USDA, Economic Research Service, 1983)Google Scholar; Rogers, George B., “Poultry and Eggs,” in Another Revolution in U.S. Farming? ed. Schertz, Lyle P. et al. (USDA) (Washington, D.C., 1979), 148–69Google Scholar.

38 The Kennedy administration responded minimally to the broiler glut, by forming a Broiler Stabilization Advisory Committee to improve the USDA Market News Service. Once an egg was set to incubate, the system relentlessly turned it out as a broiler eleven weeks later. the committee hoped that improved data on broiler demand might let hatcheries better predict short–term demand for baby chicks. U.S. Congress, House of Representatives, Small Business Problems in the Poultry Industry: Hearings before the Select Committee on Small Business, 87th Cong., 1st sess., 1961. On the minimum efficient scale of new plants, see U.S. Packers and Stockyards Administration, The Broiler Industry—An Economic Study of Structure, Practices and Problems (Washington, D.C., 1967), 10Google Scholar; U.S. Congress, Senate, Committee on Labor and Public Welfare, Hearings: Mandatory Poultry Inspection (9 and 10 May 1956), 84th Cong., 2d sess.

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45 “Further processing” later gripped the egg industry in the 1970s as the cholesterol scare led the industry to find new uses for the egg. “When demand is stagnant or declining and supplies are abundant, research into production efficiency will not save the industry. It will only flood the market with lots of cheap eggs.” Scott A. Woodward, “Developing a Value Added Egg Industry,” Poultry International, Dec. 1988, 62–67; Keith Schneider, “Health Claim for New Eggs Stirs Dispute,” The New York Times, 14 May 1989, 1ff.; Michelle Stacy, “Reinventing the Egg,” The New Yorker, 1 Oct. 1990, 73–88.

46 National Broiler Council, Report 16 (29 March 1989): 24; Tobin and Arthur, Dynamics of Adjustment, 11; Edward H. Easterling and Thomas A. Stucker, “Brand Names Sell Broilers,” National Food Review, Fall 1985, 15–17; Consumer Reports, May 1978, 43–47.

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48 Arney, “Nation's Top Broiler Companies,” 34; interview with Bill Falls of Tyson Foods, Inc., Cumming, Ga., 11 July 1989.

49 On early experiments in auto–sexing, see Serebrovsky, A. S., “Crossing Over Involving Three Sex Linked Genes in Chickens,” American Naturalist 56 (1922): 571–72CrossRefGoogle Scholar; Warren, D. C., “Inheritance of Rate of Feathering in Poultry,” Journal of Heredity 16 (1925): 13–18CrossRefGoogle Scholar; Punnett, R. C. and Pease, M. S., “On a Case of Sex Linkage within a Breed,” Journal of Genetics 22 (1930): 395–97CrossRefGoogle Scholar. On vent–sexing, see Masui, Kiyosi, Sex Determination and Sexual Differentiation in the Fowl (Ames, Iowa, 1967)Google Scholar. In 1956 Arthur Goldfarb, director of research for Vineland Poultry Industries, applied for a patent on a method to control the sex of baby chicks. The patent application stated that fertile eggs dipped in a solution of androgen hormones hatched into males, while eggs dipped in an estrogen solution hatched into females. The story swept through the national newspapers before further tests disproved his claims. Sawyer, Agribusiness Poultry Industry, 102–3; “Control Sex of Chicks,” Science Digest, May 1956, 93.

50 Animal and Plant Heath Inspection Service, Poultry Improvement: Partners in Progress (USDA, 1984), 13Google Scholar; Hunton, Peter, “Selection Limits: Have They Been Reached in the Poultry Industry?” Canadian Journal of Animal Science 64 (1984): 217–21CrossRefGoogle Scholar. An interesting bit of biological archaeology suggests this improvement came from genetics rather than from feed. In 1958 the Animal Research Centre in Ottawa created a control group of broilers. They interbred pure–bred chicks until they reflected industry averages for performance and conformation, then let them breed randomly to prevent any type of genetic improvement. In 1978 chicks from this control flock competed in a grow–out contest with hybrid chicks then available commercially. The results reflected how commercial breeders had been selecting. Compared to the 1958 flock, the 1978 broiler flock was more genetically uniform, grew smaller wings but bigger thighs and legs, and grew to slaughter weight more quickly, though their final size was smaller. Their rapid growth resulted from substantially larger fat deposits, which also explained the minor improvement in feed conversion, since it takes more calories to make fat than meat. Clearly commercial breeders were selecting not for better feed conversion, but for quick growth, seeking rapid throughput rather than ultimate efficiency. Economies in feed conversion would give a greater return than economies of speed, since 70 percent of broiler costs in the late 1970s were for feed, but only 17 percent were time–dependent (interest, depreciation, heat, vaccines). Chambers, J. R. et al., “Genetic Changes in Meat Type Chickens in the Last Twenty Years,” Canadian Journal of Animal Science 61 (1981): 555–63CrossRefGoogle Scholar; R. S. Gowe and R. W. Fairfull, “Genetic Controls in Selection,” in Crawford, ed., Poultry Breeding and Genetics, 935–54; Fairfull, R. W. and Chambers, J. R., “Breeding for Feed Efficiency: Poultry,” Canadian Journal of Animal Science 64 (1984): 513–27CrossRefGoogle Scholar.

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52 Application of Philippe Pierre Jean–Baptiste Merat and Leon Paul Jacques Cochez, 519 F. 2d. 1390 (1975), quotation on 1393. The Bundesgerichtshof of the Federal Republic of Germany had reached a similar conclusion in 1970. In a patent application claiming a method of breeding a red dove, they held that “A method of breeding animals can be patented only if the procedure is repeatable,” but that “the phenotypical approach [described in this application] does not promise a sufficiently predetermined result.” See “Taube, Rote,” IIC: International Review of Industrial Property and Copyright Law 1 (1970): 137, 142Google Scholar.

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55 Interview with William Rishell, Arbor Acres Farms, Inc., 3 April 1989.

56 “Transgenic manipulation” means adding to the patented animal any foreign genes, genes either chemically altered in the laboratory or extracted from an animal other than the natural parents. On other transgenic research with chickens, see Freeman, B. M. and Aylesbury, N., “Transgenic Poultry: Theory and Practice,” World's Poultry Science Journal 43 (1987): 180–89CrossRefGoogle Scholar; Salter, D. W. et al., “Transgenic Chickens: Insertion of Retroviral Genes into the Chicken Germ Line,” Virology 157 (1987): 236–40CrossRefGoogle ScholarPubMed; Perry, M. M., “A Complete Culture System for the Chick Embryo,” Nature 331 (1988): 70–72CrossRefGoogle ScholarPubMed; Shoffner, R. N., “Perspectives for Molecular Genetics Research and Applications in Poultry,” Poultry Science 65 (1986): 1489–96CrossRefGoogle Scholar; Ruth M. Shuman, “Genetic Engineering,” in Crawford, ed., Poultry Breeding and Genetics, 954–84.

57 On Amgen's efforts, see Souza, Lawrence M. et al., “Applications of Recombinant DNA Technology to Studies on Chicken Growth Hormone,” Journal of Experimental Zoology 232 (1984): 465–73CrossRefGoogle Scholar. In competing efforts at Merck, Sharp, and Dohme Research Laboratories (the Merck Corporation also owned Hubbard Farms breeders), see R. M. Weppelman, “Effects of Conadal Steroids and Androgenic Agonists on Avian Growth and Feed Efficiency,” ibid., 461–64; and Leung, Frederick C., “Avian Hormones,” in Genetic Engineering of Animals: An Agricultural Perspective, ed. Evans, J. Warren and Hollaender, Alexander (New York, 1986), 113–26CrossRefGoogle Scholar. On USDA efforts, see Stephen H. Hughes et al., “Vectors for Gene Insertion into Avian Germ Line,” U.S. Patent No. 4,997,763, 5 March 1991.

58 Bosselman, R. A. et al., “Germline Transmission of Exogenous Genes in the Chicken,” Science 243 (27 Jan. 1989): 533–35CrossRefGoogle ScholarPubMed.

58 The gene sequences most researchers are working to isolate are those that boost resistance to diseases such as infectious bronchitis or salmonellosis. In layers, researchers are looking for a genetic fix to the trade–off between high cholesterol and egg production: when cholesterol production in the hen's body is shut down to reduce cholesterol in the table egg, the hen's ability to synthesize the female sex hormones that stimulate reproduction is also shut down. Stacy, “Reinventing the Egg,” 85. The first patent to claim an actual chicken (and the egg it laid) claimed any chicken with a chemically specified composition of body fat that resulted from adding certain fish oils to its feed. No genetic manipulation was involved. Howard S. Weiss et al., “Method and Composition for Increasing the Concentration of Omega–3 Polyunsaturated Fatty Acids in Poultry and Poultry Eggs and Poultry and Eggs Resulting Therefrom,” U.S. Patent No. 4,918,104 (17 April 1990).

60 U.S. Congress, Patents and the Constitution: Transgenic Animals, Hearings before the Committee on the Judiciary, 100th Cong., 2d sess. (11 June–5 Nov. 1987), 27. Similar comments on pp. 39, 97–98, 127, 129.

61 Ann Sorensen of the American Farm Bureau Federation supported animal patenting, but she advocated a short moratorium while Congress sorted out the “mechanics” of animal patents, especially how patent holders would collect royalties from farmers. She suggested a one–time fee collected when farmers bought broiler chicks: “Fanners hate paperwork. Whatever system is adopted, if it means excess paperwork for the farmer, the system will probably be rejected.” Patents and the Constitution, 121; and National and Environmental Resources Division, Animal Patents: Agriculture's Perspective (American Farm Bureau Federation, 1987). Breeding firms objected to this “farmer's exemption” and wanted to capture royalties if farmers reproduced the patented animals on their farms. A “royalty collection tribunal,” as used with juke–boxes, could collect a fee, perhaps at the slaughterhouse, on every animal that inherited the patented gene; see William Lesser, “Implications for Breeders,” paper presented at a symposium on “Animal Patents: The Legal, Economic and Social Issues,” Cornell University, 5 Dec. 1988; Office of Technology Assessment, New Developments in Biotechnology: Patenting Life, OTA–BA–370 (Washington, D. C, April 1989), 121–22.

62 Patents and the Constitution, 82–83.

63 Ibid., 110.