Gridlock Economy

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ImageHow too much ownership wrecks markets, stops innovation, and cost lives by Michael Heller (2008)

I never know that too much ownership in terms of physical property, bandwidth and intellectual ownership can create a lot of gridlocks and stop innovation as the innovator may face too many legal liabilities in creating a new product. It is very disturbing to know that, but I am glad the author points it out of such areas. I have taken some extracts out from the book. There are more examples that the author has given. If one is patient, you can slowly read on his other examples, I find it pretty interesting. Such gridlock can affect a country’s economic, technological advance.

 

Example The Golden Rice Story

The thread of gridlock erodes the incentive to produce drugs particularly for diseases that afflict the poorest people with the least ability to fend for themselves. The tale involves a breakthrough in health technology that was invented some time ago but delayed on the path to saving lives because of a tragedy of the anticommons.

According to the WHO, dietary vitamin A deficiency causes some 250,000 to 500,000 children to go blind each year. More than half of those children who lose their sight also die within a year. One early hope from gene research was to reduce blindness in developing countries by genetically modifying rice to produce vitamin A. By 1999, a group led by Professors Peter Boyer and Ingo Potrykus had created a prototype of vitamin A – enhanced rice, an impressive scientific achievement. But after they invented this “Golden Rice”, the project stalled.

To bring the rice to market and begin saving both sight and lives, Boyer and Potrykus had to negotiate licenses to as many as several U.S. patents. (there were fewer valid patents outside the United States). In addition, they needed access to fifteen other types of technical property. In total, they had to negotiate with more than thirty companies, universities and other institutions. Identifying and negotiating with all these parties was time-consuming and expensive, even though all the owners understood that the final product may avert millions of unnecessary cases of blindness and death.

With Golden Rice, the humanitarian benefits were clear, moral outrage at patent gridlock was high, and the private owners could contribute their patents for third world health without imperilling profits in their first world markets.

After much back-and-forth, the intellectual property owners involved in Golden Rice reached agreement to help bring this lifesaving crop to market. One company Syngenta (then Zeneca) took the lead in assembling the rights, developing the technology and donating the results to farmers in the afflicted countries. It arranged for intellectual property controlled by competitors such as Novartis, Bayer, Monsanto and Japan Tobacco to be licensed free of charged for the sole purpose of promoting Golden RIce.

Golden RIce is succeeding because it had forceful advocates who invented the product before they got the permission and later cajoled owners into cooperation. Inspired leadership makes a difference, and shame can be a potent tool for forcing agreement. Reputation matters : firms like to advertise their involvement in successful humanitarian ventures.

For this high profile, non profit use, private patent owners were persuaded that they should join. Their financial risks were relatively low because Golden Rice will be used primarily in poor, developing countries. Finally, American “land grant” colleges owned much of the relevant intellectual property ; these colleges have had a long tradition of public spirited agricultural technology transfer. This conjunction of factors is fortuitous and ad hoc. When the stakes are higher, then cooperation often fails and easy solutions give way.

 

However, the author has also written an example that a drug company scientists had found a treatment for Alzheimer’s disease. But they couldn’t bring it to the market unless the company bought access to dozens of patents. Any single patent owner could demand a huge payoff, some blocked the whole deal. This story does not have a happy ending. The drug sits on the shelf though it might have saved millions of lives and earned billions of dollars.

 

 

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