Monsanto's Seeds Of Growth
News Feb 17, 2010
'Don't punish innovation with antitrust law.'
No one wants to see a welcome sign that says "America: Land of Some Opportunity." It would be an especially bad message to send if you wanted to encourage investments that drive economic growth, job creation, and exports.
Over the past 30 years, American investments in invention and creativity--activities protected by intellectual property law--produced world-class businesses in computer hardware and software, semiconductors, entertainment and biotechnology, making global icons of Avatar and Intel, Microsoft and Monsanto, Viacom and Viagra, among others. Market skeptics and less successful competitors, however, are pressing governments to use antitrust laws to limit returns to market-leading patent and copyright holders, pitting antitrust against intellectual property law. That's a dangerous game.
Antitrust and intellectual property laws are complements, not opposites. Intellectual property law is designed to provide incentives for increased invention, development and diffusion of practical ideas and creative works. Antitrust is supposed to deter serious interference with normal operation of competition in commercial markets.
In a world in which more and more business involves competition based on ideas, intellectual property law helps protect some investments that provide the building blocks for future competition. Of course, being property laws, they function by granting exclusive control rights for a time. Any grant of exclusivity can be cast as limiting competition, but that is hardly useful to legal analysis. Antitrust doesn't prohibit everything that limits competition in any way--a law that broad would bring commerce to a standstill by stopping the entire array of contracts and rights that underlie modern business. No one contends that antitrust law goes that far. Yet many scholars, lawyers and pundits casually assert that IP law conflicts with antitrust simply by limiting competition in some dimension.
Cases dealing with high-technology products are the common setting for claims that competition is unfairly impeded when a leading firm keeps others from building on patented or copyrighted technology that its rivals--having failed to supplant it with their own offerings--deem critical to success. Inevitably the technology at issue represents the result of successful investment in research and development, and gives the investor only temporary leadership unless it continues to innovate and successfully commercialize the right innovations. Just as Avatar doesn't give James Cameron permanent hegemony over cinematic entertainment, other successes built on good ideas don't guarantee continued leadership. Giving innovators exclusive rights to their innovations doesn't prevent competition; it channels the competition into the search for better ideas and better ways of bringing them to consumers.
Surprisingly, inquiries by the U.S. Departments of Agriculture and Justice into competition in agriculture have elicited comments similarly miscasting market-leading innovation as an antitrust culprit to be eliminated, rather than an IP success to be emulated. Take, for instance, suggestions that the seed industry needs regulation because one company (Monsanto ( MON - news - people )) dominates competition for production of seeds that incorporate that company's own patented, herbicide-resistant trait or very similar traits. The seed industry is highly competitive; farmers choose seeds each year and can switch producers if they please; hundreds of firms produce and sell seeds; and other major firms (including firms far larger than Monsanto) invest heavily in developing their own competing seeds and seed traits.
In fact, the primary push for regulation here comes from DuPont ( DD - news - people ), a firm roughly three times Monsanto's size that has far-flung interests and about the same share of the seed market as Monsanto. Monsanto, however, has enjoyed far more success in some important segments because of their research and development triumphs--which is why DuPont and its advocates are pushing the argument that competition has to be analyzed in terms of how well firms succeed in just those segments where Monsanto is on top.
One think tank, the American Antitrust Institute, even claims that analysis has to be restricted to how well firms do in selling seeds that incorporate Monsanto's patented trait. Obviously, Monsanto dominates that race, just as Coca-Cola ( KO - news - people ) dominates sales of soft drinks based on the formula for Coke and Ford dominates sales of cars built around Ford engines. It is hardly a sensible way to define the relevant market, even if it suits the desire to paint Monsanto as a dominant firm. While businesses often seek to have government restrain more successful rivals, if competition in seeds is being pitched as a David against Goliath struggle, DuPont is going to have a hard time squeezing into the David costume.
Hypocrisy aside, the push to have government limit competition by firms that have had success in research and development--to have regulatory authorities take away rights associated with patents and copyrights by restricting right holders' freedom to set license terms--threatens to undermine the very investments that are producing America's signature successes. Government inquiries organized around the prospect of reining in businesses that successfully innovate prompt those businesses to spend money protecting rights tied to the fruits of innovation. Like a tax on research and development-fueled success, that diminishes the rewards from innovation and reduces incentives to invest.
Anyone interested in stable laws and economic growth should hope that officials at Agriculture and Justice recognize what is at stake in their inquiries, and quickly signal their support for innovation and for the intellectual property laws that promote it. It's far better for the companies to compete in research and marketing rather than in lobbying, and more likely to safeguard the seeds of our long-term success.
Ronald A. Cass, former commissioner and vice chairman of the U.S. International Trade Commission, is dean emeritus of Boston University School of Law, chairman of the Center for the Rule of Law and president of Cass & Associates, PC. Dean Cass also is a senior fellow at the International Centre for Economic Research.
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