Ch. 12 — Patenting Living Organisms • 243 
St‘\ ei'al re’asoiiahle arguments ha\ e been pre- 
sented to suppor t the pi'esum[)tion that the pat- 
ent system stimulates innovation. First, the po- 
tential I'oi' tlie e.xclusive eommei'eialization of a 
new pi'ocluet or- pi'oeess ei'eates the ineentiv e to 
undertake tlie long, I'isky, and e.xpensive pi'oc- 
ess from I’eseai'ch thi’ough de\ elopment to mai'- 
keting. ,\t evei'v stage of innovation— from de- 
fining })riorities and making initial estimates of 
an invention s value to advertising the finished 
|)i’oduet— the inventor and his barker's must 
spend time, money, and effor t, not onlv to de- 
velop a pr'oilirrt hirt to convince others of its 
vvor'th. Onlv a small per'centage of new ideas or 
inv entions sur v iv e. If a competitor, particularly 
a lar'ger' fir'm with a well-developed mar keting 
cafKihility, vver'e free to copy a product at this 
point, smaller' firms would have little incentive 
to r.mdertake the pr'ocess of inr'rov ation. 
Second, the infor'mation and new knowledge 
disclosed by the patent allows others to develop 
competing, and pr'esirmahly better, prodircts by 
impt'oving on the patented pt'oduct or "in- 
venting ar'ound” it. Third, patents may r'edirce 
unnecessat'v costs to individual firms, thei'ehy 
freeing resources for firrther innovation. Once 
a patent is issued, competitors can r'edii'ect 
t'esearch and development (R&.D) funds into 
other at'eas. For the firm holding the patent, 
maintaining control over the technology is 
theoretically less e.xpensive, since the costs of 
trade secret protection are no longer 
required. * * 
Anecdotal accounts support the proposition 
that patents stimulate innovatron; probably the 
best known is the story of penicillin. Although 
dent Carters recent report on industrial innovation, the patent 
policy committee, composed of industry representatives having 
long e.xperience with the patent system, recommended ways of 
enhancing inno\ ation by impro\ing the patent system, including 
the patenting of industrially important liv ing organisms. However, 
they pro\ ided no hard economic data to support their recommen- 
dation.’ 
“Carole Kitti, and Charles L. Trozzo, The Effects of Patent and 
Antitrust Laws, Regulations, and Practices on innovation, vol. II (Arl- 
ington, V a.. Institute for Defense Analyses, 1976), pp. 2,9. 
’L'.S. Department of Commerce, Advisory Committee on Indus- 
trial Innovation: Final Report, September 1979, pp. 148-149. 
■ ■ Patent rights can be very e.xpensive to enforce against an in- 
fringer, howev er, should litigation be necessary. 
Sir .Alexander Fleming had discovered a prom- 
ising weapon against bacterial infection, it took 
him over 10 years to get the money and facilities 
he needed to pui'ify and produce penicillin in 
hulk. Only W orld W'ar II and an international ef- 
fort finally accomplished that task. Sir Howard 
Florey, who shared the Nobel prize with Flem- 
ing foi' developing penicillin, attributed the 
delay to their not having patented the drug, 
vv hich he termed "a cardinal error. 
Some have claimed that the monopoly power 
of a patent can he used to retard innovation. A 
corporation can legally refuse to license a pat- 
ent on a basic invention to holders of patents on 
improvements, thus protecting its product from 
becoming less attractive or obsolete. On the 
other hand, unless the corporation can satisfy 
the market for its product, it is usually in its 
economic interest to engage in cross-licensing 
arrangements with holders of improvement pat- 
ents; it receives royalties and all parties can 
market the improved product. Cross-licensing 
has been misused several times by a few domi- 
nant firms in an attempt to exclude innovative 
new firms from their markets. Such arrange- 
ments v iolate the antitrust laws. W'hether or not 
that body of law adequately prevents patent 
misuse is beyond the scope of this report. 
THE ADVANTAGES OF PATENTING 
LIVING ORGANISMS 
Given the presumed connection between 
patents and innovation, the next question is 
whether patenting a living organism would add 
significant protection for the patent holder, or 
whether alternative approaches would be suffi- 
cient. In this context, it is necessary to focus on 
the present industrial applications— which in- 
volve only micro-organisms- to examine alter- 
native forms of patent coverage and to compare 
the protection offered by trade secrecy with 
that offered by patents. 
Opinions vary widely among spokesmen for 
the genetic engineering companies on the value 
of patenting micro-organisms.” Spokesmen for 
Genentech, Inc., have stated numerous times 
'“Ibid, pp. 170-171. 
”D. Dickson, "Patenting Living Organisms: How to Beat tbe Bug- 
Rustlers,” Nature, vol. 283, Jan, 10, 1980. pp. 128-129. 
