Patenting Genes and Gene Sequences and Competition: Patenting at the Expense of Competition

Abstract

The competition principles set out in the Trade Practices Act 1974 (Cth) are based on an economic model of perfectly competitive markets responding to the market and producing only the goods and services required in the market. However, effective competition together with good market information may create a disincentive to markets innovating (market failure) because new developments may be rapidly copied without the recovery of the innovation's development costs (a free ride). According to this model, a patent under the Patents Act 1990 (Cth) compensates for the disincentive to innovate and justifies a limited period of exclusive rights during which the innovator may exclude others in order to recover the development costs (confounding the free riders) and contribute to beneficial innovation by investing in new developments (with the added benefit of disclosure of the innovation). Patents are therefore generally assumed to produce overall economic benefit while at the same time having minimal social costs. The social costs are higher prices, restricted outputs, subsidised foreign inventors and the administrative costs of the patenting scheme.

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