Monsanto at the Supreme Court

According to NPR:

This week, the Supreme Court will take up a classic David-and-Goliath case. On one side, there's a 75-year-old farmer in Indiana named Vernon Hugh Bowman; on the other, the agribusiness giant Monsanto.

The farmer is fighting the long reach of Monsanto's patents on seeds — but he's up against more than just Monsanto. The biotech and computer software industries are taking Monsanto's side.

Here is what's at the issue according to the report:

Starting in 1999, he [Bowman] bought some ordinary soybeans from a small grain elevator where local farmers drop off their harvest. "They made sure they didn't sell it as seed. Their ticket said, 'Outbound grain," says Bowman.

He knew that these beans probably had Monsanto's Roundup Ready gene in them, because that's mainly what farmers plant these days. But Bowman didn't think Monsanto controlled these soybeans anymore, and in any case, he was getting a motley collection of different varieties, hardly a threat to Monsanto's seed business. "I couldn't imagine that they'd give a rat's behind," he snorts.

Bowman told his neighbors what he was doing. It turned out that Monsanto did, in fact, care.

"He wanted to use our technology without paying for it," says David Snively, Monsanto's general counsel.

I don't know if what Bowman did was legal or not.  However, I have previously commented that many people do not seem to grasp the economics of the situation.  Here's what I said back in October at the case:

What do you think will happen to the price of the first generation seed if farmers are able to freely replant the progeny?  . . . if the Supreme Court rules that Monsanto does NOT own the progeny, then the value of the seed to farmers rises since they can re-use the seed.  . . .  For the indifference principle to hold (i.e., for equilibrium to be restored), the price must rise.  Monsanto will charge more for it's initial offerings if farmers can freely replant.      

I also subsequently posted on several myths that seem to be circulating in relation to this case.

The implications of the case could be far reaching.  For example, when I sell a book, I get royalties when a new copy is sold.  But, when it is re-sold as used I no longer make any money (but it seems that perhaps I could under the logic used by Monsanto).  What about music?  Back when I was in college, Napster was a big deal, but was subsequently shut down because it was apparently illegal to share songs in this fashion.  It seems that some forms of music (electronic) are treated like Monsanto seed but other forms (old vinyl records) are not.  Picasso made money the first time he sold a painting but not when the buyer re-sold it.  But, what if he had copyrighted the image? Or patented his painting process?

The underlying issue here is when and how long do innovators hold the rights to their creations?  And, are these rights maintained even after the original invention is re-sold?  

GMOS and Crop Yield

There was an interesting paper published last week in Nature Biotechnology by some University of Wisconsin professors of agricultural economics and agronomy (by the way, one of the authors, Chavez, is a preeminent agricultural economist - he's also one of the most well read economists I've ever been around).

The study used crop yield data from plots in Wisconsin and showed that not all biotech corn varieties outperform conventional varieties in terms of yield.  As they put it:

Compared with conventional hybrids, the impact of transgenic traits (both single and stacked traits) on mean yield ranges from −12.2 to +6.5 bushels per acre.

Not surprisingly, the result has been picked up by the anti-biotech crowd, such as Tom Philpott at Mother Jones.  

According to the biotech industry, genetically modified (GM) crops are a boon to humanity because they allow farmers to "generate higher crop yields with fewer inputs," as the trade group Biotechnology Industry Organization (BIO) puts it on its web page.

Buoyed by such rhetoric, genetically modified seed giant Monsanto and its peers have managed to flood the corn, soybean, and cotton seed markets . . .

Turns out, though, that both assertions in BIO's statement are highly questionable.

There are numerous problems with Philpott's arguments.

First, is rhetorical.  Monsanto didn't "flood the market."  Somebody had to buy those seeds.  Those somebodies were farmers who willingly adopted, and even paid price premiums to have biotech seeds.  Which leads to the second issue.

As the Nature Biotechnology study shows, the biotech varieties had an important risk-reducing effects, even if they sometimes led to slightly lower yields.  Moreover, biotech can save on other inputs like labor.  When I was a teenager, I spent a lot of time hoeing and spraying cotton weeds. That job is (thankfully) now obsolete due to biotechnology.     

You also can't just cherry-pick the results you want to emphasize if you want to actually be objective.  As I reported earlier, larger studies conducted over a much wider geographic region DO show yield improvements from biotech adoption (though that study shows - like the more recent one in Nature - that yield effects of traits are not additive).  Moreover, check out table 1 (gated) of the aforementioned study in the American Journal of Agricultural Economics, which shows 31 different results from numerous studies, almost all of which show a yield boost from biotech.  Or see this study in Science by another preeminent agricultural economist showing significant yield gains (and pesticide reductions) from biotech adoption in India.  The totality of the evidence suggests that - in most locations and for most crops - biotech does increase yield most of the time (though not always and not in all locations and not for all crops).

That gets to my last issue with Philpott.  He (and others) continually reference the work of Charles Benbrook on pesticide use associated with biotech.  But, rarely do they differentiate between pesticides use (which biotech DOES reduce) and herbicide use (which biotech has increased).  Also ignored is the relative toxicity and environmental effects of pesticides vs. herbicides or the reduction in toxicity that has occurred over time as a result of biotech (see this recent critique of Benbrook's work).  If that weren't bad enough, such authors also fail to point out that use of herbicide-resistant biotech facilitates no- and low-till farming practices, which are a real environmental benefit (indeed, the data shows that biotech adoption is strongly correlated with no- and low-till adoption).  

I'm not saying there are no downsides to biotech use (e.g., more rapid development of herbicide resistant weeds; potential market power in the seed/chemical sector).  But, one has to look at the totality of the evidence and not just cherry-pick.  Moreover, you have to look at the decisions made by real-life flesh and blood farmers all over the world who have voluntarily adopted GMOs.  The fact that biotech was so readily adopted by farmers (and is still so widely in use) aught to tell you something.  

Does Organic Food Cause Autism?

Of course not.  But if you applied the same logic used by many anti-GMO activists who claim that the increased use of GMOs caused the rise in autism, one would have to claim that the of organic food also caused autism.  That's according to this post by Kevin Folta.  

His little parody shows how easy it is to create a scary sounding food story based on spurious correlations.  In fact, he shows three graphs illustrating the rise in autism, the rise in diabetes, and the rise in organic food consumption over time.  All three track each other almost perfectly.  But no one reasonable would claim that diabetes causes autism or that organics cause autism.  Likewise, no reasonable person should claim GMOs cause autism unless they can provide some causal biological biases for the claim.  

It is exactly this sort of fallacious correlational analysis that "suggests" adoption of GMOs in India caused an increase in suicides.  This little tidbit spread like wildfire around the web, made its way into food documentaries, and now is often repeated as fact.  The trouble is that when you actually look at the facts, the story doesn't hold much water.  

Here are the first two paragraphs of Folta's parody:

While people think of "organic" cultivation techniques as natural and safe, there are important points we might consider.  Most of the plants used today have only been developed genetically in the last 100 years, and even "heirloom" varieties were bred relatively recently.  There have been no long term studies, and plants certainly are known to produce a wide suite of toxic compounds.  

Worse, organically cultivated plants are placed in highly artificial environments.  Rather than growing in soil as it exists, soils are highly amended with composts and manures. High levels of nitrogen and carbon dramatically alter gene expression leading to patterns never observed in nature. Van Djik et al. (2012) found that there were dramatic differences in gene expression between conventional and organically-grown potatoes, with organic potatoes showing higher expression of stress-related genes. There have been no long-term studies to assess the effects of this un-natural gene expression. 

The Next Food Technology Worry?

It's nanotechnology.  A blog post at Scientific American raises concerns about the use of nanotech in food.  According to the piece:

A new report from an environmental health group, As You Sow, raises concern about nanoparticles in some popular sweets. The group says it found particles of titanium dioxide less than 10 nanometers in size in the powdered sugar coating on donuts from Dunkin’ and Hostess (now sadly defunct). The group argues that the nanoparticles have no business in any kind of food until safety testing is done; in this case, the tiny bits could make donuts even unhealthier.

Nano-sized particles, roughly one-billionth of a meter in diameter (much smaller than the width of a human hair), have been in food for decades at least, often an unintentional byproduct of processing techniques. But a whole range of novel nano-sized particles—ranging from tiny flakes of titanium dioxide to whiten powdered donuts to submicroscopic silver bits to kill microbes—are showing up today in food and food packaging on purpose.

Are these nanotechnologies dangerous?  I don't know.  I do know scientists have been working for years on a variety of nano-tech developments and many products we use today (particularly sunscreen) have nanoparticles.  

It will be interesting to see if nano-tech becomes the next bio-tech in attracting controversy.  I suspect it will be harder to vilify nano-tech foods (should we call them NTFs?) relative to GMOs.  The reason is that many of the nanotech developments were developed specifically with the consumer in mind to make their end-experience better by improving shelf life (often through improved packaging), nutrition, and taste.  These are much more tangible benefits for the consumer than the harder-to-see benefits that have accrued via food biotechnology (mainly reduction in the price of food).  Moreover, unlike GMOs, for NTFs it will be harder to find a company like Monsanto around which conspiracy theories can form.     

Are Plant Patents the Problem?

There is an interesting article at Slate.com by Frederick Kaufman on GMO seeds.  Although I don't agree with his conclusion, this is the sort of nuanced view about GMOs that deserves more attention.

In short, my take is that Kaufman sees some GMOs are good and some as bad, and the bad are mainly (in Kaufman's) view the result of plant patents.  Here is Kaufman:

Intellectual property laws need to be rethought. A copyrighted movie or book remains the same movie or book, but when food becomes a legal construct or an intellectual property right, it stops being food. Of course, you can eat patented popcorn the same way you can consume its unpatented cousin. But unlike an iPhone or a flatscreen TV, everyone needs food, and we need it every day. . . . Since everyone must participate in the food market to the tune of 2,700 or so calories a day, food property rights allow those who hold food patents a guaranteed portion of profits from a guaranteed purchase, which is fundamentally unfair. Why should Big Ag possess privileges beyond any other sort of business on earth? The rules that govern patents for electronics and entertainment should not be the same rules that govern the most vital element of human life.

I'm not at all convinced by the "we need food to live" argument that somehow makes the patent and copyright laws for food different than those for software, electronic books, or other technological innovations.   

The thing that Kaufman discounts is the incentive that patents give the innovator to innovate.  He seems to think many scientists will innovate from intrinsic motivation.  This is made explicit in the following quote:

Like many scientists, Dr. Ronald’s primary motivation is not profit, but insight into the workings of nature.

While that might be true of some, I doubt it is true for most.  And it is almost certainly not true for those innovators at the margin.  Patent (and copyright) laws try to balance two competing factors: 1) the incentive to innovate and 2) allowing the invention to be more widely distributed in the population so the gains are more widely shared.  I am open to the argument that these two things need some re-balancing - perhaps by shortening the time a patent or copyright is in effect.  But, to totally ignore the incentive to innovate is, I think, unwise.

Finally, I think we've got to take a step back and ask what a world would look like if Monsanto couldn't patent seed - if farmers could freely replant progeny.  Monsanto might very well use their terminator technology.  But, even if they didn't, they'd almost certainly change their pricing.  Here is what I had to say about the issue a couple months ago:

What do you think will happen to the price of the first generation seed if farmers are able to freely replant the progeny?  

As Steven Landsburg points out in his wonderful (and recently re-released) book The Arm Chair Economist the indifference principle must always be at work.  The principle suggests that at current prices, (the marginal) farmer must be indifferent to buying Monsanto seed given that he cannot replant the progeny and must buy seed again next year.  However, if the Supreme Court rules that Monsanto does NOT own the progeny, then the value of the seed to farmers rises since they can re-use the seed.  The marginal farmer is no longer indifferent.   For the indifference principle to hold (i.e., for equilibrium to be restored), the price must rise.  Monsanto will charge more for it's initial offerings if farmers can freely replant.      

As an analogy, consider the market for textbooks.  Bailey and I wrote an undergrad textbook on Agricultural Marketing and Price Analysis a few years ago (in which we somewhat ironically discuss the indifference principle).  Buying a new copy of the book is pricey (Amazon.com has the current price of a new copy at $97.41).  What do you think would happen to the price of the initial offering of the textbook (i.e., the price of a new copy) if Bailey and I (and the publishers who actually sets the price) could receive royalties when the used textbook is resold in bookstores after the semester?  The initial price for a new book would almost certainly fall.  

The Monsanto case is simply this example working in reverse.  

I'll conclude by admitting that I'd probably write fewer books if anyone could copy or distribute my work without attribution or compensation.  I think a lot of geneticists and plant scientists would feel similarly about their work.