Stéphane Lemarié

Bundle of Patents and Licensing of Biotechnology Traits

(avec Corinne Langinier).

 » We analyze the interactions between biotechnology companies that license their patented transgenic traits to a seed producer who combines them into seeds offered to farmers. If patented traits are licensed in a bundle, they cannot be unbundled; thus, the seed producer cannot combine traits from different biotech firms. Therefore, farmers cannot buy seeds with (potentially more efficient) traits from different biotech companies. We consider a model in which an incumbent biotech company in the upstream market can license its traits either separately or in a bundle to a seed producer (in the downstream market), who chooses to offer product lines containing seeds (that combine traits) to heterogeneous farmers. We first study a monopolist upstream market and then a competitive upstream market, in which a competitor offers a more efficient trait than the incumbent. We find that, in equilibrium, the incumbent always sells its traits separately, which enables it to extract more rent from the downstream market. The effect of the equilibrium strategy (compared with the bundling strategy) on welfare depends on a trade-off. While a double margin always reduces welfare, the seed product line effect increases welfare. Therefore, the equilibrium strategy might be welfare-reducing if the second effect is smaller than the former. This occurs when the product line contains seeds with similar trait efficiency ».