Week 1

1st Day, Tuesday, January 23, 2018

Lecture 1, Thursday, January 25, 2018

Monsanto and Patents

We finished our Thursday's Lecture talking about Monsanto and Patents as this topic is related to the intellectual property rights, copyrights, and creative commons that we were disusing in relations to the OER pedagogy.

First, I would encourage you to watch a very good documentary called The Future of Food that discusses the issue of Monsanto and patents right in great detail.

One of the main topics in the documentary has to do with the issue of patents. We will discuss this in a lot more details later, when we will be talking about market structure, monopolies, and barriers to entry, but here are some of the basics.

A patent gives the inventor an exclusive right to sell a new and useful product, process, substance, or design for a fixed time. A patent grants an inventor the right to be the monopoly provider of the good for a number of years. Similarly, a copyright gives its owner the elusive production, publication, or sales right to artistic, dramatic, literary, or musical works.

The length of a patent varies across countries. The U.S constitution explicitly gives the government the right to grant authors and inventors exclusive rights to their writings (copyrights) and to their discoveries (patents) for limited amount of time. The legal patent period in the U.S. was changed from 17 to 20 years in 1996.

As we will discuss in later chapters, monopolies in general are bad for the society as they create deadweight loss. If that is the case, why then would the governments grant patents and create monopolies? The argument in favor of patent rights is that patent is necessary to protect the economic profits of the innovating firm over some period. Otherwise, easy imitation, lower prices, and smaller profits reduce the financial incentive for firms to undertake risky and costly, but socially valuable, research and development activities. Patents can encourage a greater, more efficient output of new knowledge. Because inventors receive a temporary monopoly right, they get a return above the cost of producing new products to compensate for the research costs. The prospect for this gain stimulates inventors to devote resources to the production of new knowledge.

The economic rational underlying the patent system is that even thought the patent confers monopoly power on the innovator, the monopoly market inefficiencies are better than having no product at all. In other words, the government is explicitly trading-off the long-run benefits of additional inventions against the shorter-term harms of monopoly pricing during the period of patent protection.

You should also understand, that although the existence of patent laws is intended to increase innovation. abuses of patent law may inhibit innovations. There are also patent trolls that obtain patent rights in order toe use them in lawsuits to block other more serious inventors unless they are paid a ransom.

Here is a short and clip from one of my favorite TV series Silicon Valley (see Season 4, Episode 7 for more) that showcases an example of a patent troll.