Yesterday, my post explored how patents can beget additional patents as people and corporations, like lemmings, following the patenting activity of others. Today, I want to explore one of the best examples of reactive propertization -- the emergence of exclusive property rights over raw genetic material.

Until recently, nations and individuals treated genetic material -- the subcellular sequences that direct the structure and characteristics of all living things -- as open access property. Like information in the public domain, genetic resources were available in principle for the use of all. No one held an exclusive ownership interest in this material, and individuals and countries freely shared samples of seeds, soil and even animal specimens containing it.

In sharp contrast, today extensive ownership rights envelop genetic material. Individuals and corporations patent genetic sequences that they have isolated. Patients no longer share biological specimens that they contributed in the course of receiving medical treatment as readily as they once did. Meanwhile, national governments of developing countries, which house most of the world's genetic material in its natural state, increasingly assert sovereign ownership rights over biological samples containing this material.(I discuss this trend in a prior article: http://ssrn.com/abstract=658421.)

What accounts for this transformation? The canonical explanation offered by Harold Demsetz for the evolution of property regimes is that private property rights emerge when the economic value of a resource changes relative to the costs of controlling it such that it becomes cost-efficient to establish a property regime over the resource and to internalize costs or benefits previously experienced as externalities. Changes in relative value typically occur when some external shock, like the introduction of a new technology or the opening or closing of particular markets, alters the costs and benefits of the existing property regime.

Demsetz's thesis as well as traditional theories for the granting of intellectual property rights explains the actions of those who first sought to patent bioengineered goods and isolated genetic sequences as well as developed countries' grant to them of these first generation property rights. The biotechnology revolution offered economic reward to those who could isolate genetic sequences and create bioengineered innovations.

These theories do not, however, adequately explain nor even usually anticipate the second wave of propertization: the emergence of exclusive ownership rights over raw biological material. Granting property rights in naturally-occurring genetic material does not encourage innovation. This material already exists. While a desire to profit from biological samples plays some role in demands both by developing countries and by patients for a property interest in their raw biological samples, it leaves much unexplained.

Instead, I believe these second generation property rights arose in response to the first generation patent rights. A tit-for-tat dynamic, rather than a cost-benefit analysis designed to capture the actual or potential economic value of raw genetic material, animates the emergence of these responsive property rights. Patients and developing countries felt that if researchers and corporations obtain property rights by patenting cell lines and genetic sequences isolated from tissue samples, than they too should claim a property interest in the raw tissue samples from which those patents sprung.

As John Dawson observed three decades ago, "Uncompensated gains are pervasive and universal; our well-being and survival depend on them…" And so we share. Indeed, experiments show that people cooperate and forgo free riding much more often then economists predict. In fact, as Cass Sunstein notes, if most people cooperate and share "the social meaning of non-cooperation is greed."

However, if some stop sharing and cooperating, preferring instead to claim certain property or knowledge as exclusively their own, continuing to share under such circumstances transforms the good public citizen into a public patsy. Game theorists have shown that in a repeated game, players will cooperate in the first period but will defect in subsequent periods if the other player defected in the immediately preceding period. Absent such defection, they will continue to cooperate.

Underlying the creation of property rights over raw genetic and biological material lays a desire by those demanding such rights that others not exploit them. When individuals and corporations began to patent isolated and purified genetic sequences, cell lines and living organisms, those from whom the raw biological material came felt exploited. They no longer viewed the sharing of raw biological material as international collaboration but rather as "biocolonialism." As the president of Tanzania said, "[M]ost of us in developing countries find it difficult to accept the notion that biodiversity should [flow freely to industrial countries] while the flow of biological products from the industrial countries is patented, expensive and considered the private property of the firms that produce them. This asymmetry … is unjust." Developing countries created property rights over material that they had previously shared to prevent others from taking advantage of them.

A similar sentiment animates patient property claims to biological specimens. Patients willing donated biological specimens when they believed they were contributing to a greater social good. The obtainment of patent rights by researchers and institutions over cell lines and genetic sequences fractured this cooperative spirit. Contributors, like those who joined the effort to find the gene responsible for Canavan disease and then sued the researchers who patented the gene as well as John Moore who sued those who patented a cell line isolated from his spleen, felt taken advantage of.

Their fury and sense of violation do not stem from concern over lost potential economic opportunities but rather from being used. As John Moore exclaimed: "What the doctors had done was to claim that … my genetic essence was their invention and their property." The furious Canavan donors did not seek a share of future royalties. Rather, in their complaint, they sought to prevent the patent holders from restricting access to the Canavan gene and from limiting genetic screening tests.