Public policy decision makers face a conundrum when choosing an IPR system. A legal IPR system is necessary for providing the incentives to motivate private resources in the research sector when a society is unwilling or unable to commit to fully fund public research activities. However, a DWL is incurred in a move from a fully funded and efficient public research sector to a private IPR-driven system. This DWL is exacerbated if the remaining public research expenditures compete with (rather than complement) private expenditures or if the monopoly privilege endowed by legal IPRs is employed strategically to create a barrier to entry.

If private investments in research are to be made, legal IPRs must provide a reasonable assurance to private agents of the ability to extract rent from the resulting products. These incentives must, at the same time, be balanced with institutions for the public good that ensure market distortions are not increased by private abuses of the monopoly privilege. The less readily IPRs are licensed, the less legal IPRs provide an effective counter to the problem of limited public resources in research activities. In the Canadian agricultural biotechnology sector, two potential private research investment holdups exist: strategic behavior in licensing of intellectual property and uncertainties in patent ownership. The former is acknowledged by the mandatory licensing provisions in the writ of the Patent Act. However, in order to be effective, a commitment to the appropriate use of these provisions needs to be made. The latter can be dealt with, in part, through increased resources to the patent office. A narrower and more careful granting of monopoly privileges in the first instance will reduce the likelihood of the necessity to remove or redistribute holdings of the intellectual property in the future as well as reduce the a priori investment uncertainties of ownership.

Finally, less-developed countries (LDCs) that, in aspiring to participate more fully in the world trading system, find it necessary to develop legal intellectual property protection should consider Canada's intellectual property model. It has proven effective for motivating private research expenditures yet contains provisions for not only protecting the public interest but also enhancing the public benefit. The mandatory licensing provision, if stated clearly and credibly, provides protection of the public interest. It will not scare off private agents who only desire to make a reasonable rate of return as long as the bureaucratic procedures are timely and fair. The research exemption provisions enhance the public benefit by encouraging locally targeted research, which simultaneously creates the opportunity to capture some human capital spillovers. These provisions are particularly important for regions that lack the financial resources to make the necessary infrastructure and human capital investments. Canada's patent law provides a model that is amenable to both international business interests and LDCs unique needs.

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