Diana Moss, Apr 29, 2010
The recent flurry of publicity in transgenic (also known as genetically modified or “GM”) seed reveals a broader controversy over competition policy in high technology industries. What constitutes conduct by a patent-holder that is legitimately within its rights, versus what exceeds the scope of a patent? More specifically, how should antitrust deal with a patent-holder that is also a dominant firm, and alleged to have maintained or leveraged its monopoly by selectively enforcing its licenses? Does such conduct unduly control or influence competition and innovation, to the detriment of consumers?
Agricultural biotechnology giant Monsanto is at the center of the debate over the intersection between patent law and antitrust law in transgenic seed. In the spotlight are the markets for genetic traits and the complementary markets for transgenic seed. There are two categories of genetic traits: input and output. Input traits affect the agronomic performance of the plant in order to enhance yield, including tolerance to herbicides (Ht traits) such as glyphosate and resistance to insects (Bt traits). These traits in corn, soybeans, and cotton have been established for some time. But other input traits (e.g., drought resistance) and output traits are more novel. Output traits affect the characteristics of the plant’s output (e.g., high oleic soybeans) and therefore the value of the crop.
With substantial market shares in genetic traits for corn (about 75 percent), soybeans (about 95 percent), and cotton (about 97 percent), Monsanto potentially holds sway over the market. But there are growing complaints about substantial price increases for seed—about 25 to 30 percent for corn and soybeans in recent years. Moreover, seed companies have complained that they cannot access Monsanto technologies for the purposes of developing commercially valuable transgenic products, despite the firm’s policy of licensing broadly.
Together, the foregoing factors have had a catalyst-like effect. For example, there is an ongoing investigation into Monsanto’s conduct by the U.S. Department of Justice (“DOJ”). Momentum could be gaining in several states to bring an antitrust suit against the firm. And a series of high profile DOJ/U.S. Department of Agriculture workshops on competitive issues in agriculture are scheduled throughout 2010. This article explores what is driving these antitrust concerns. Given that Monsanto’s blockbuster Ht trait Roundup Ready 1® (RR1®) for soybeans goes off patent in 2014, it is also important to explore what policy tools are needed to best promote generic competition.