An economic evaluation of the roots and fruits of intellectual property Rights for U.S. horticultural Plants.

Abstract

Most prior studies have failed to empirically reveal any significant economic or innovation effects of intellectual property rights for plant products. Perhaps this is because these studies focused on the wrong crops (i.e., wheat, soybeans, and corn) or were unduly circumscribed in the types of intellectual property under consideration (i.e., U.S. plant variety protection and utility patents). This study's focus is on the economic effects of intellectual property rights for horticultural crops in the United States which have garnered the lion's share of the plant protection. Highlighting differences between the horticultural and agricultural sectors, the first part of this study analyzes the roots of intellectual property rights for plants and associated plant markets and their evolution in the United States. This analysis reveals large structural changes in the pattern of intellectual property protection for plants in the United States which reflects advances in plant related science and technologies, market changes, as well as policies and practices affecting plant-related intellectual property. These structural changes include changes in the form of protection being sought—be it plant patents, utility patents, or plant variety protection certificates; the agent (e.g., individuals, firms, universities, or government agencies) seeking protection; and the plant species being protected. Ornamental plants account for a large and growing share of the U.S. plant economy whether measured as a share of property rights issued or the real value of plant products produced. The notable increase in plant patent applications in the horticultural sector in recent years is paralleled by a rapidly growing effort to brand high–valued crops and garner value by protecting of cultivar innovations with other forms of legal protection such as trademarks. The second part of this study focuses on the fruits of intellectual property rights for ornamental plants. Ornamental plants account for much of the intellectual property rights for plants, thus providing a potentially more fertile area in which to examine the price consequences of plant-related intellectual property rights. A large, unique, purpose built data set is used to identify the sources of differences in the wholesale price of ornamental plant varieties. A hedonic pricing model was adapted to the particulars of the ornamental plant sector and the data. The hedonic decomposition of plant prices made it possible to identify varietal price premiums associated with plant patent and trademark attributes. After controlling for a host of plant attributes that affect plant prices, an average price premium of 23 percent was identified for plants protected by plant patents compared with those with no such protection. Likewise, the average value of the trademark premium was 2.5 percent, indicating that the branding value of the name trademark is much lower. Surprisingly, when these two plant intellectual properties were used together on one cultivar, premiums were nearly 7 percent lower than if neither were used, a result which raises questions for further research. The premiums for the plant patent and name trademark vary between different firms and between different species particularly between herbaceous perennial and woody species and specializing firms.