Monsanto's patent expiration dance

Via Parke Wilde at U.S. Food Policy, an interesting NYT article on the dynamics of patent expiration on Monsanto's widely-used Roundup Ready 1 soybeans, which occurs in 2014.

In letters to seed companies and farm groups this week, Monsanto said that it would allow farmers to continue to grow its hugely popular Roundup Ready 1 soybeans even after the patent protecting the technology expires in 2014.

The letter countered a widespread impression in the agriculture business that Monsanto planned to force farmers and seed companies to migrate to a successor product called Roundup Ready 2 Yield, which will remain under patent and is more expensive.

Monsanto is trying to position this as a clarification rather than a retreat:

Gerald A. Steiner, executive vice president for corporate affairs at Monsanto, said Thursday that Monsanto was not changing its policy on how it would handle the soybean patent expiration, but was merely clarifying its intentions.

“What’s different,” he said, “is we have made a very comprehensive communication of what we are going to do.”

But the widespread impression in the seed business was that Monsanto was backing away from a previous policy.

Monsanto appears to have strong legal protections in their existing contracts, but it doesn't look like those will stand up to the weight of public criticism:

Some seed industry executives and academic soybean specialists say that Monsanto was not planning to renew licenses for that Roundup Ready 1 trait that expired before 2014, so that seed companies would have no choice but to move to Roundup Ready 2.

But in its letters this week, Monsanto said it would now extend all contracts for Roundup Ready 1 until the patent’s expiration date. It also said it would not enforce language in some contracts that would have required seed companies to destroy or return Roundup Ready seed when the patent expired.

But Monsanto may have another out a few years down the road:

Still, it is uncertain how long Roundup Ready 1 would survive in generic form. Some nations require licenses for the import of genetically engineered crops to be periodically renewed. Monsanto said it would maintain those licenses through 2017. But if they expired after that, American farmers would not be permitted to export the Roundup Ready 1 generic soybeans to certain countries, which would discourage them from growing those crops.

One final thought - Monsanto is much-demonized as a monopolist and worst, but it is hard to get textbook industry structure and competition in industries which require massive R&D investments. Those investments simply don't get made privately without patent protection, which looks suspiciously like a monopoly after the fact.