Posted: Thursday, September 23, 2010 9:00 AM
Mitch Lies/Capital Press
Pioneer Hi-Bred president Paul Schickler stands outside the company's new facility in Hermiston, Ore.
Schickler expects to see competition, cooperation in biotech industry's future
By MITCH LIES
HERMISTON, Ore. -- Paul Schickler, president of Pioneer Hi-Bred, was in Hermiston earlier this month as part of the grand opening of the company's first Oregon parent seed plant.
Schickler has been president of Pioneer three years. Before that, he was vice president of Pioneer's international operations. He's been with Pioneer since 1974, when he started as an accountant.
Pioneer, purchased by DuPont in 1999, is the second biggest seed company in the United States after Monsanto.
On Sept. 10, Schickler sat down with the Capital Press. Schickler's responses have been edited for brevity.
Q: Why the recent expansion into Oregon with first a parent seed plant and now a research center?
A: The reason we put in the parent seed facility here is because in parent seed, you need first of all very good growing conditions, and we have those conditions here in Oregon. You need to have good farmers, which is another attribute of this area. And you've got to have small areas (available for growing seed) and isolation around those areas. For example, we have 400 individual isolations that we grow at this facility and that only covers 2,500 acres.
When we found this was a great location for parent seed, and then we needed a research facility in this area, it was logical to put them on the same land so that we can leverage location, so we can utilize people between research and parent seed.
Q: The USDA and U.S. Department of Justice are conducting an investigation into competitiveness in the seed industry. Do you believe there is adequate competition?
A: Our position is we want aggressive competition. We want the incentive for companies to invest in research. And we want innovation that then drives choices for farmers.
So we support what the USDA and the DOJ are doing. We've contributed information. We've attended the meetings they've had. We think it is a healthy examination of the industry to make sure there is adequate competition, adequate incentive for research that farmers will benefit from.
Q: Do we need to change U.S. patent laws, given the way biotech has come on the scene and given the dispute between you and Monsanto?
A: I don't think so. If you think of the purpose of patent law -- it provides an incentive for research because if you invent something, you're assured that you've got protection for that for a period of years.
Let's use Roundup Ready 1 as an example.
Monsanto invented the technology. They were granted patent rights. As part of those rights they were given 16 years of basically a monopoly in which to practice that innovation. What that enables them to do is to make sure that during that 16-year period they get the appropriate return on the investment that they had for that innovation.
Then in exchange for that, once that patent expires, then that invention is turned over to the public good, and then others can use it in their research or product-development activities.
That system works well and we support it.
The challenge we have with Monsanto's approach is that there are a number of things that they have done that extends the patent life beyond the 16-year period.
They have prohibited through arrangements that they have with other providers to combine anything with that trait. So that means if somebody wants to utilize Roundup Ready after the patent expires, which they have the right to do, then they need to start from scratch and then go through product development and combine the Roundup Ready trait with another trait. And that might be three, four, five or six years (after the patent expiration) before you are able to use the invention in a new product.
Our position is it is appropriate to protect that patent for that period of time, but you need to enable product development to occur prior to patent expiration, so by the time the patent expires, you have a product that can be introduced in that first year after patent expiration.
Now the other factor that needs to be conducted prior to patent expiration is there needs to be assurance not only that Roundup Ready 1 can continue to be cultivated in the United States, but that the grain that is produced from it also is approved for all the markets that U.S. farmers grow grain and oilseeds for: Europe, Japan, Taiwan, Korea.
It needs to be approved for export into all those markets.
Companies need to be enabled to create the data regulatory package so that all of those export markets are preserved.
Q: What are you doing to secure the right to stack traits in advance of the patent expiration and put together data packages for the export market?
A: They sued us for violating their patents. We have challenged we are not in violation of that patent. We have a license agreement with Monsanto that we believe gives us right to do what we are doing. But then we've gone back and sued them for patent fraud and antitrust violations, as well.
So these things -- the contract between Pioneer and Monsanto, and our claims on patent fraud and antitrust -- are currently in litigation.
We continue to move forward with our research program and our ... technology, but we've got to get this settled as soon as possible. ...
Q: It is evident that both you and Monsanto are purchasing seed companies. Do you see more consolidation in the seed industry? And, if so, how does that affect the industry?
A: Consolidation has occurred naturally. It always has been part of not only the agricultural industry or the seed industry, but industry in general.
One thing that always happens -- even as consolidation occurs -- is other companies come along and enter into the competitive environment.
Right now, from a seed genetic and technology standpoint in the United States, there is a pretty strong competitive environment. We want to maintain that competition and provide incentive for research, because that is a good thing for American farmers.
Q: How do you think biotech has impacted competition in agriculture, and how will it shape future competition?
A: It has been great for agriculture. You're now seeing a lot of other types of companies come in that previously had not been in the seed business, but are now inventing or investing in biotechnology: BASF and Bayer, certainly Syngenta and Dow, and then you have DuPont and Pioneer and Monsanto, and there are a lot of small biotechnology firms that are innovating a lot of very creative approaches to agricultural issues. And all of us then go and work with those small companies and use their technology that they have invented, and bring it into our programs. We take it into a different level of development, and then integrate that technology into the seed genetics.
The biotechnology era that we are in not only has created an incentive for the multinational companies to invest in biotechnology, but also a lot of biotechnology boutiques, or smaller companies, are doing so.
It has provided another way to invest in agriculture to improve productivity.
Q: Given the dispute between you and Monsanto, is there a danger you will stop working with one another?
A: I don't think so. It takes a lot of money to invest in biotechnology research, and no one company is going to be so good that they invent everything. So you need to partner. You need to collaborate. And while Pioneer is going to make aggressive investments into research and biotechnology, clearly we are not going to solve all the problems or invent all the solutions. And I don't think Monsanto will. I don't think Dow will. And I don't think all the small companies will.
You need to collaborate, partner and license from a very broad number of companies, so that you are accessible to all the technology innovation that is available to the industry.
Q: Farmers are paying more and more for seed these days. Is there a tipping point where biotech seed is going to be too expensive?
A: Farmers are some of the greatest adopters of new technology. You go back to the 1920s, the 1950s, the 1980s, they are very quick to adopt new technology.
Also, farmers are willing to pay for things that add to their productivity, whether it is new equipment, whether it is fertilizer, whether it is chemistry or whether it is seed. If you can demonstrate that something you are offering a farmer is going to improve their productivity, they are willing to pay for it.
So if we can continue through both classical plant breeding, as well as through biotechnology to improve productivity -- either by increasing their production, reducing their costs, providing them greater convenience -- if we can do those things, then I believe that they will continue to pay for the value that we deliver to them.
And what we are seeing over the last 10 years, as biotechnology has been a part of American agriculture, is that productivity is continuing to improve at now a faster rate than it has before, and as a result farmers are willing to pay for that productivity.
Farmers also are the greatest final judge of whether or not what they pay for is worth the investment. If we can demonstrate that value is there, they'll be the judge and pay for that productivity.