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Valuing Intellectual Property Rights in an Imperfectly Competitive Market: A Biopharming Application

Published online by Cambridge University Press:  26 January 2015

Genti Kostandini  and
Bradford F. Mills
Genti Kostandini
Affiliation:
Department of Agricultural and Applied Economics, University of Georgia, Griffin, GA
Bradford F. Mills
Affiliation:
Department of Agricultural and Applied Economics, Virginia Polytechnic Institute and State University, Blacksburg, VA
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Abstract

Small research firms developing biotechnology applications often focus on establishing intellectual property rights (IPRs), which can then be sold to more established firms with existing market channels. This paper presents a method for valuing the IPRs for an innovation that lowers product production costs below those associated with the patented process of a monopolist. The application to Glucocerebrosidase enzyme from transgenic tobacco suggests an IPRs value of about $1.75 billion. Despite the innovator's market power, significant surplus gains also accrue to consumers. Further, U.S. antitrust laws that prohibit IPRs acquisition by the current monopolist increase consumer welfare by almost 50%.

Keywords

biopharmaceuticalsbiopharmingeconomic surplusimperfect competitionintellectual property rightsD23M13D43D60
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 41 , Issue 3 , December 2009 , pp. 571 - 583
Copyright
Copyright © Southern Agricultural Economics Association 2009

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