The International Consortium on Agricultural Biotechnology Research (ICABR)
The Search for the Holy Grail?
Freedom to Operate in Canadian Agricultural Biotechnology,
Daniel A. Dierker and Peter W. B. Phillips
This paper demonstrates that the adoption of an intellectual property rights regime can be welfare enhancing. That is, a society that adopts a formal intellectual property rights system can expect that it will be capable of producing more goods from the same resources than a society that does not adopt such a system.
The paper goes on to demonstrate that if the intellectual property rights regime adopted incorporates freedom to operate, the ability to use other economic agents protected intellectual property, that the welfare enhancing capability of the system is increased. Following this, the paper shows that the welfare enhancing ability of the system with freedom to operate provisions can be curtailed or eliminated should industry participants act opportunistically (i.e. acting in self interest with guile) or if the transactions costs (the costs associated with doing business within the system) are high enough.
Using survey data we determine that the industry participants appear to be following an opportunistic patenting strategy. We analyze this apparent opportunistic behavior using a game theoretic approach. This allows us, assuming that the courts rule in the socially optimal manner at least fifty percent of the time, to infer that the probability of being sued by some other economic agent attacking the validity of a granted patent when following an opportunistic patenting strategy is approximately equal to the probability of being sued on the same grounds when following a non-opportunistic patenting strategy. The probabilities appear to approach zero. It also allows us to infer that the probability that a patent will be granted is approximately equal whether an agent pursues an opportunistic or a non-opportunistic patenting strategy. It also appears from our survey data that the probabilities of the grant of a patent converge to one under either patenting strategy. It does not, however, allow us to determine whether the apparently opportunistic behavior we observe is rapacious in nature or merely transaction cost limiting.
Finally, we examine several policy alternatives that may prove effective in allowing society to capture some of the welfare enhancing potential of an intellectual property rights system that incorporates freedom to operate that our survey data reveals us to be loosing.
 The authors wish to acknowledge Canadian International Development Agency who contributed to the funding of this research.
 Paper presented for the 5th International Conference of the International Consortium on Agricultural Biotechnology Research (ICABR) on " The Economics of Agricultural Biotechnology " Ravello, Italy, June 14-19, 2001.
 both of the Department of Agricultural Economics, University of Saskatchewan. Contact D. Dierker, Agricultural Economics, University of Saskatchewan, 51 Campus Drive, Saskatoon, Canada S7N 5A8; tel: 306-966-8411; fax: 306-966-8419; email: email@example.com