Property Rights Protection of Biotechnology Innovations

Protection of intellectual property embedded in self‐replicating biological innovations, such as genetically modified seed, presents two problems for the innovator: the need for copy protection of intellectual property and price competition between new seed and reproduced seed. We consider three regimes in two periods with asymmetric information: short‐term contracts, biotechnological protection, and long‐term contracts. We find that piracy imposes more intense competition for seed sales than does durability alone. Technology protection systems yield highest firm profit and long‐term contracts outperform short‐term contracts. Farmers prefer, in order, long‐term, short‐term, and biotechnical protection. Depending on monitoring cost, long‐term contracts may be socially preferred to short‐term contracts, with both preferred to biotechnical protection.