Valuing Intellectual Property Rights in an Imperfectly Competitive Market: A Biopharming Application

Genti Kostandini and Bradford Mills

Journal of Agricultural and Applied Economics, 2009, vol. 41, issue 3, 571-583

Abstract: Small research firms developing biotechnology applications often focus on establishing intellectual property rights (IPRs), which can then be sold to more established firms with existing market channels. This paper presents a method for valuing the IPRs for an innovation that lowers product production costs below those associated with the patented process of a monopolist. The application to Glucocerebrosidase enzyme from transgenic tobacco suggests an IPRs value of about $1.75 billion. Despite the innovator's market power, significant surplus gains also accrue to consumers. Further, U.S. antitrust laws that prohibit IPRs acquisition by the current monopolist increase consumer welfare by almost 50%.

Date: 2009
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