[ExI] Gene Patents: Good or Bad?

Adrian Tymes wingcat at pacbell.net
Wed May 26 16:21:19 UTC 2010


--- On Wed, 5/26/10, Sondre Bjellås <sondre-list at bjellas.com> wrote:
So then we have X and Y, who are both putting a lot of money into R&D to develop CRM products. They both spend one billion dollars, a total of two billion. To cover these costs, they would need to price their products in the market to earn money back on their investments in R&D. So the market has to pay a minimum of two billion dollars for CRM software.

If no protection was possible and Y could "copy-cat" some of the ideas and innovations from X, then we potentially could cut the R&D costs in half, one billion dollars (for the point of the argument let's make it half, though would probably be higher). This means the two companies have used only one billion dollars to create two competing CRM software products, which the market only have to pay in total one billion dollars for. This means the market spend less money on CRM licenses and the two companies probably would earn more money since software generally are cheap anyway so they wouldn't lower their prices 50%.Problem is, that's not what happens.

If Y could copy-cat, then Y would copy-cat everything it could, and only charge
to cover its own expenses.  X has spent maybe $900 million (copying a bit of Y's
progress), while Y has spent maybe $100 million (it had to do a bit of work).  The
market only covers that $100 million; it has no reason to buy X's relatively
overpriced wares to cover the $900 million.

Great deal for the market!  Not bad for Y.  X gets screwed royally.

Along comes Z, with an idea for even better product.  It will take $1 billion to
develop.  Does it do this?

No.  It sees what happened to X, and knows the same will happen to it.  So it
has no reason to proceed: innovation is not profitable.  No amount of whining,
pleading, or cajoling that the market will get another great deal will change the
fact that Z knows it will get screwed royally, and Z only cares about Z (as it
should be).

Maybe, 10 or 20 years later, someone else figures out how to do the same
thing on much less.  But that's 10 or 20 years that the market literally doesn't
know what it's missing.  Notice that the maximum length of patents is 20
years - and that's assuming their holders pay to renew it that long.

That, in a nutshell, is the case for patents.
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