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September 17, 2001
Volume 79, Number 38
CENEAR 79 38 pp. 25-32
ISSN 0009-2347
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Consolidation, significant investments in R&D, and savvy market development have created just a few major forces in agbiotech


STAKING A CLAIM DuPont's Pioneer seed business commands one of the largest corn seed market shares and is a major developer of agbiotech crops. The 33A14 corn hybrid contains a gene that protects it from the European corn borer.

A handful of companies have spent billions of dollars over the past decade to buy most of the first generation of small agricultural biotechnology companies, major seed producers, and others' agrochemical operations. Driven by the need to consolidate in a dismal agrochemical market, these developers of agbiotech products also were trying to build technology bases and market access. They've succeeded.

For example, during a spate of activity from 1995 to 1998, what are now the five leading companies acquired or allied with nearly 70 different seed companies. They gained significant market channels through which they could introduce products. While antitrust authorities watched these combinations closely, the result is that Monsanto, Syngenta, DuPont, Dow Chemical, and Aventis CropScience dominate agbiotech today.

Consolidation can combine complementary resources, result in lower cost production, and create needed economies of scale. Nevertheless, opponents of agribusiness consolidation, if not of agbiotech itself--such as the advocacy groups Action Group on Erosion, Technology & Concentration (ETC, formerly the Rural Advancement Foundation International), Institute for Agriculture & Trade Policy, and Greenpeace are alarmed by what they see as unprecedented control over markets, technology, and, some say, the very processes of life.

"Fewer and fewer companies are making critical decisions about the agricultural research agenda, and the future of agriculture," ETC's research director, Hope Shand, told the World Agricultural Forum in St. Louis in May. "The Gene Giants' control of patented genes, traits, and fundamental research tools has already created legal barriers which make it difficult or impossible for small companies or public-sector researchers to compete, or to gain access to new agricultural technologies."

Industry and supporters of intellectual property ownership view IP as a needed incentive to advance technology and product development. "In developing and sharing technology with the world, it is essential that our intellectual property rights are protected," A. Charles Fischer, Dow AgroSciences' president and chief executive officer, said at the May forum. "Without that protection, companies will not be motivated to invest in new products."

"There are so many things still to be patented--no large company has cornered all the creativity."
THE PATENT SYSTEM was created to help inventors recoup the cost and reduce the risk of investing in R&D by granting the right to exclude others. Within just the past two decades, the system has been extended to include plants, other living organisms, gene sequences, and biotechnology inventions. Many groups now questioning the scope and use of agbiotech IP fundamentally oppose genetic transformations and the patenting of living things.

Others are concerned that genetic resources are being removed from the public domain and claimed as private property. In particular, there is worry about crops traditionally planted by subsistence farmers in developing countries. Such farmers also may be accustomed to saving seed from previous crops to replant--something that IP protection might preclude. Thus, ownership of genetic resources, access to food versus commercial or profit interests, and gaps between rich and poor are among the issues activists are raising.

Greenpeace and Misereor, the German Catholic Church development agency, recently filed an objection with the European Patent Office regarding a patent on corn (maize) with high oil and oleic acid content awarded to DuPont. They claim that European patent law doesn't cover plants and that such varieties are unpatentable anyway since they "may exist naturally and have been developed by [Latin American] maize breeders for a long time."

"If the patent is upheld in this form, it will be a clear case of biopiracy," says Martin Bröckelmann-Simon, Misereor's executive director. "Farmers across the world could suffer in the form of trade restrictions, license fees, and the loss of marketing rights." DuPont did not respond to C&EN inquiries about this challenge or its licensing policies.

SIMILARLY, ETC takes issue with patents held by Monsanto and Syngenta, alleging that the two companies could "stifle innovation, shackle public-sector research, and foster ever-increasing industry consolidation." The two companies, ETC contends, have a potential monopoly over gene marker systems that are used to identify successful gene transfer.

Even worse, Shand believes, a U.S. patent awarded in January to Monsanto has "blindsided biotech scientists," who already widely use the covered gene marker technology and could, she believes, now be denied access. ETC calls Syngenta's patented Positech technology "the only practical alternative."

Syngenta's position on the gene marker has been that it will "make the technology widely available to both the biotechnology industry and the academic scientific community through simple licensing procedures." As of May 2000, more than 100 labs had been licensed to use Positech. The company also provides it "royalty-free for subsistence farmers in developing countries through local institutes or companies." ETC criticizes Syngenta, however, for agreements that the advocacy group says give the company rights to any results.

For Monsanto, "it can be very strongly documented that we have very actively helped the broad scientific community around the world get access to, and be able to use for research, the enabling technologies that we've helped to pioneer," says Robert Horsch, Monsanto vice president for product and technology cooperation.

Along with enabling patent disclosures, publishing scientific papers, and making materials available, the company has "a long history of making research licenses available free of charge to people who felt they needed one," Horsch says. "And that will continue because it's our practice to actually facilitate the advancement of science."

Monsanto, DuPont, and others have rights to several technologies fundamental to the genetic transformation of cells in agbiotech research. Common approaches include using Agrobacterium tumefaciens or microprojectile systems, often called "biolistics" or the "gene gun." Cornell University developed the gun and sold it to DuPont in 1990.The companies' openness toward the sharing of these technologies has been mixed. DuPont has been accused of holding tightly to the gene gun technology. Yet, DuPont and Monsanto are on separate collaborative teams that recently publicly released the Agrobacterium genetic sequence so that scientists could better understand and improve on its use as a tool. The Federal Trade Commission required Monsanto to transfer Agrobacterium rights to the University of California, Berkeley, as a condition for buying seed producer DeKalb Genetics in late 1998.

However, Students for Responsible Research at UC Berkeley have opposed the technology transfer and "question the benefits of such strong ties between a public university and a private company," whose products the group does not support. The group also believes that a $25 million alliance that the university formed in 1998 with the agbiotech R&D institute of Novartis, now Syngenta, conflicts with a land-grant university's mission and hurts its scientific integrity.

Despite these public-private ties, there has been a "privatization" of agricultural research and IP in the U.S. "Expanded intellectual property rights for biological inventions, the development of hybrid seeds, and biotechnology applications have stimulated private-sector efforts in the past 25 years," the U.S. Department of Agriculture's Economic Research Service (ERS) concludes in its on-line briefing room.

Prior to 1980, public agricultural research resources exceeded private industry's, ERS reports. Private investment overtook the public side in the mid-1980s and continues to grow in real terms, whereas public spending has declined slightly. In 1996, the most recent year for which ERS gives figures, industry was spending about $4 billion per year compared with $3.1 billion on the public side.

Companies dominate among top 10 holders in agbiotech
Monsanto 287
DuPont 279
Syngenta 173
Dow Chemical 157
U.S. Department of Agriculture 102
Aventis 77
University of California 48
Savia 38
Cornell University 33
Iowa State University 29
a Includes other companies gained through acquisitions. b Through 1998. For enabling technologies, genes, germplasm, plant varieties, and hybrid lines. SOURCE: University of California, Berkeley
Coupled with this substantial R&D investment, consolidation and acquisitions have created significant IP estates for just a few companies. According to figures from UC Berkeley researchers, the U.S. Patent & Trademark Office awarded 1,386 agbiotech-related patents through 1998. Private companies hold 79% of these, with 71% at the five leading firms. USDA has more than a third of the 21% in public-sector hands.

"Industry patenting of IP hasn't affected university research, if that research does not have commercial impact," says the director of a leading Midwest agricultural research institute. "If the research does, then it becomes quite important to make sure that one is not using technologies that represent the holdings of a company and for which there would be substantial licensing issues to move that work ahead."

Patent law includes a research exclusion that allows anyone to practice on an invention for improving it, Horsch points out. On top of that, he adds, "Monsanto would never want to try to get judgments against universities for patent infringement" on research uses of technology. It has, however, sued farmers for failing to abide by licensing agreements that cover use of its seeds, defending its IP successfully at least once.

"One of the things that's nice about intellectual property is that you can segment its uses between research and commercial applications," Horsch says, "and we do that where it's appropriate." In some crops, such as the sweet potato, the company may not be interested in retaining commercial rights, he explains. "But in something like sharing access to the genome of rice," the company wants the ability to license back inventions that are relevant to other crops, such as corn.

Public- and private-sector researchers agree that the present system drives many to creatively "invent around" patents and to develop alternatives. "There is still great opportunity for people to develop their own set of tools," the institute's director says. "It may sound like going back to ground zero, but there needs to be more scientific discovery because additional tools are really required to address the problems we've seen, improve capabilities, and drive research."

THE IP SYSTEM also motivates choices about which areas of research or business to pursue. "The public sector has conducted research with limited private incentives," ERS reports, such as in minor crops, or where the work is too long term, too risky, or serves social needs, rather than being focused on marketable products.

"Public-sector research institutions, such as USDA's Agricultural Research Service, have increasingly shifted their plant-breeding research toward conservation and characterization of plant genetics resources relatively neglected by the private sector," USDA notes. Industry, on the other hand, has focused largely on input traits, such as herbicide tolerance and insect resistance, and major crops where large markets offer opportunities for a return on investment.

Many involved in agricultural research say that this division between public and private efforts--and the diversity it brings to research--is both positive and needed. Others, however, believe industry's alignment of R&D and profit incentives has led to a neglect of large segments of agriculture. Because many key technologies are in private hands, ERS believes that further agbiotech developments will require partnerships between firms, along with public-private collaborations.

This past February, UC Berkeley's Center for Sustainable Resource Development and UC's Office of Technology Transfer held a meeting to address "the continuing concern of researchers at universities and public-sector research institutions--in both the U.S. and developing countries--with their lack of access and limited capacity to commercialize new technologies because of IP considerations." Among the participants' recommendations were increasing technology access and transfer, leveraging their licensing power, and improving IP management.

"Technologies clearly need to be made more readily available to universities and essentially royalty free in minor crops," says Ralph W. F. Hardy, president of the National Agricultural Biotechnology Council, a group of largely land-grant universities that promotes discussion on agbiotech issues. "If a university develops something new in a minor crop, a reasonable thing would be right of first refusal to the company that provided the technology. But the university should have the right to file a patent, too."

THE PUBLIC SECTOR--namely, USDA--was the one to license the most vilified of patented agbiotech inventions, that for producing sterile seeds, to its seed industry partner while Monsanto and Syngenta, with similar patented technology, have vowed not to commercialize it. Public research policy and the role of universities and government labs in creating, owning, and commercializing IP is a hotly debated area, and not only in agbiotech. In the corporate world, IP functions more clearly as a competitive tool.

When it comes to doing business, "generating IP and blocking other companies' positions is nothing new, and anyone that can do it, does it," says Gary H. Richardson, president, chairman, and CEO of Akkadix, a small San Diego-based agbiotech firm.

He does not see IP access as a problem at the research stage. "IP certainly is important and makes you think about how you go forward," he explains. However, it is only one among many factors to be considered when choosing what business to pursue, he says, especially when others have already made sizable investments and carved out market positions.

"When you get right down to it, it's still the market segment and how you can participate in it," Richardson says. He suggests that, in agbiotech, getting a product into the now highly concentrated seed distribution channels actually presents a bigger challenge than the IP area.

"I can get people as smart as the large companies have to generate IP to invent around or block them, if that were my goal," he explains. "But the reality is that I can't get the market access they've got with the infrastructure they've developed."

As the agbiotech industry began building its technology and marketing infrastructure, companies also started battling each other in lawsuits alleging antitrust violations and patent infringement. Many are still not resolved, whereas others have resulted in both sides losing rights.

"Patents are a double-edged sword--they cost a lot to get in place and they cost a lot to defend," Richardson says. "I believe many people have found out that it's easier to collaborate than to fight and destroy each other's work after all the years it took to get there."

"One of the things that's nice about intellectual property is that you can segment its uses between research and commercial applications."
WITH THIS CHANGE in attitude, he's optimistic that, if the need arises to discuss licensing, "the doors would open and we could go in and talk." Small companies still have much room to create technologies or products that will interest larger firms and lend leverage to negotiations. "There are so many things still to be patented--no large company has cornered all the creativity," he adds.

"Both Monsanto and the industry as a whole engage in quite a bit of cross-licensing," Horsch says, "but you don't hear about it because it's not contested." The patent system also has a tendency to self adjust, he adds, especially when it comes to very broad patents that are the easiest to challenge and offer the most incentive to be challenged.

"When a company has a very broad patent, they are more reasonable about licensing it," Horsch says. "The rationale is that there is much more profit to be made by going for a large market share as possible by nonexclusive licenses." He points to Roundup Ready, or herbicide-tolerant, soybeans, where more than 200 soybean seed companies have licenses from Monsanto. On the other hand, he adds, "we do not let other companies use Roundup Ready technology for their own purposes."

Monsanto and other agbiotech majors have established policies about donating data and technologies, licensing intellectual property royalty-free, and working with researchers in the public sector and in developing nations. Monsanto's commitment to share knowledge and technology with public institutions to benefit health and the environment is part of its recent corporate pledge. It has at least a dozen such programs around the world, many begun a decade ago.

Although the shared technology may help developing countries meet their agricultural needs, oftentimes the donations are in crops or in countries and markets of little commercial interest anyway. Critics, therefore, see these actions as trying to curry public favor in light of questions raised about the safety, risks, and benefits of agbiotech products. "The agbiotech industry has found itself under such a cloud that it really had to do some things to be perceived as more socially responsible," NABC's Hardy says.

Horsch admits that Monsanto's programs might have external benefits, such as good public relations, but he says no single factor motivates the company. Instead, he says the motivation is a mix of factors that includes philanthropic interests; humanitarian needs; employee concerns; and the ability to leverage expertise, advance technology, and increase the company's impact through collaborations.

There are also aspects that are "in the long-term business interests of the company," Horsch says. "There are ways we can share our knowledge and technology that do not hurt the financial interests of our shareowners and don't detract from the commercial opportunities.

"What we share can translate into real benefits for farmers in developing countries. They will get richer and when they get rich enough, they'll start to look like customers," he continues. "So there is a long-term market development impact that will come from the sharing."

Monsanto and Syngenta both have donated technology and patent rights to help in the development of beta-carotene-containing, or "golden," rice. Syngenta has made its IP available and signed a collaborative development agreement with Greenovation, a German biotech firm that had received rights to golden rice from the university inventors. As part of the deal, Syngenta retained commercial rights for developed countries.

ALTHOUGH SUCH gestures might seem magnanimous, less developed countries actually don't lack access to technologies, according to the International Food Policy Research Institute. "Intellectual property rights assigned to the key-enabling technologies used to transform crops are mainly held in, and are therefore primarily relevant to, rich-country jurisdictions," it says. "Thus, for most of the crops that matter for food security in poor countries, researchers' freedom to operate is not impeded," if the crops are not exported to countries in which patents would apply.

In the case of golden rice, about 70 or more patents held by some 30 public and private entities are related to the rice. However, the International Service for the Acquisition of Agri-biotech Applications (ISAAA) has found that, depending on the country, zero to 44 patents actually apply. The largest numbers are in developed countries--40 or so in the U.S. and Europe, and about 20 in Japan--while 10 or very often fewer might be an obstacle in many developing countries.

However, whereas developing countries may not face patent obstacles today, the complex and contentious area of global intellectual property law is shifting. The implementation of new international agreements--now being finalized under the auspices of the World Trade Organization and United Nations--is likely to alter how intellectual property is protected and enforced. The new rules will bring about even more changes in agricultural practices; use of genetic resources; and agbiotech research, investment, and commercialization.




Agbiotech Adoption Continues To Grow

Amid controversy surrounding genetically engineered crops and food, agricultural biotechnology markets are continuing to expand in the U.S. However, the growth rate has slowed from a few years ago.

Companies that offer both agrochemicals and seeds--such as Monsanto, DuPont, and Syngenta--have very mixed results. They and the rest of the agricultural supply chain--seed producers, distributors, retailers, and farmers--are selling into a depressed market. Sales figures thus reflect shifts in pricing, volumes, and product use.

Sales at Monsanto's seeds and genomics division fell 10% to about $935 million in the first half of this year. However, the company reports that lower sales of conventional seeds were offset somewhat by increased revenues from biotech sales.

DuPont's Pioneer seed unit reported sales up just about 1% in the first quarter of this year to $929 million. Falling prices contributed a negative 2%, while volumes were up 3%. In the second quarter, Pioneer's sales fell 4%, to $771 million.

Syngenta's sales of seeds for field crops fell 7% in the first half, to $407 million. Volumes were down 4%, prices up 1%, and currency exchange had a negative 4% effect. However, about 16% of the total sales was genetically engineered crops, compared with 15% in the same period last year. In North America, herbicide-tolerant soybeans are about 80% of its regional seed sales.

The U.S. plants nearly 70% of the world's acreage of biotech crops. The Department of Agriculture reported in June that U.S. farmers increased their combined planting of genetically engineered corn, cotton, and soybeans in 2001 by 18% to about 82 million acres, compared with no overall increase in 2000. Monsanto accounts for most biotech sales; the company reports an 11% increase in U.S. acres planted with its products in 2001.

Biotech corn, affected by the controversy over Aventis' StarLink variety (C&EN, Jan. 22, page 23), accounted for 26% of all U.S. corn acres, just 1% more than in 2000, USDA reports. Insect-resistant and herbicide-tolerant cotton was planted on 69% of cotton acreage, up from 61% last year. Farmers planted herbicide-tolerant soybeans on 68% of U.S. soybean acreage, compared with 54% in 2000.

While most farm and agriculture groups, such as the National Corn Growers Association, use the USDA figures, the American Corn Growers Association conducted its own June survey of 509 farmers in 14 states. It found 21% of corn acreage planted with biotech corn in 2001, or 6% fewer acres than the previous year.

Environmental activist groups, such as the Organic Consumers Association, also dispute USDA figures. The group warns that "current government or industry figures on biotech crops are all estimates, thereby subject to manipulation." It alleges that agency predictions in spring 2000 that biotech corn acres would decrease were "recently recalculated" to show no change, "apparently after hearing from Monsanto, Aventis, and Syngenta that projections like these were bad for their bottom line."

Beyond this year, the future for agbiotech markets, particularly international ones, remains uncertain. Argentina, which is second among nations planting agbiotech crops, recently granted new approvals. Elsewhere in the world, some products have moved ahead--even in Europe--while others haven't; the net effect could be more growth.

However, in the U.S., the Environmental Protection Agency is now reviewing renewal or extension of the time-limited registrations for insect-resistant corn and cotton. In response to requests, EPA just recently extended the time for public comment on the apparent risk and benefits of agbiotech crops.



Agbiotech Wheat Faces Obstacles

A major genetically engineered crop in development is Monsanto's herbicide-tolerant wheat. In the past, the company has said it anticipates a U.S. launch between 2003 and 2005, but only after receiving approvals in both the U.S. and Japan. However, even the idea of a biotech wheat is causing a stir, especially in light of what corn producers experienced when their harvests were contaminated with StarLink corn.

Japan, one of the largest buyers of U.S. wheat, is not receptive, and has said it would buy elsewhere if the U.S. could not guarantee biotech-free wheat. With restrictions on unapproved crops and new food labeling rules for genetically engineered content, Japan and other countries are concerned about the ability of the grain handling system to identify and segregate the wheat. Europe, another major wheat market, has its own rules and opposes biotech crops in general.

Wheat industry representatives have traveled to Japan to hold discussions and found "no market or consumer acceptance for wheat derived from biotechnology," reports the trade group U.S. Wheat Associates (USWA). The industry also is keeping an eye on Canada, a major wheat exporter and U.S. competitor, because it's unclear what position it will take. U.S. legislative bans on biotech wheat were proposed, but were later defeated in North Dakota and Montana.

USWA, as well as the National Association of Wheat Growers, Canadian Wheat Board, and many trade groups on the state level are taking a cautious approach. They urge technology providers to obtain international regulatory approvals and customer and consumer acceptance before commercializing biotech wheat. Many also want guarantees that identity preservation and segregation systems are in place.

In response, Monsanto has formed a wheat industry advisory committee to provide advice and counsel on how best to bring forward biotech wheat products. The committee includes participants from the seed trade, farming, grain handling, export, flour milling, and baking arenas. The company says it hopes to gain an understanding of the feasibility, strategy, and standards for acceptance; develop and review plans for grain handling; and learn how to steward and commercialize its wheat.

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