SC stays the order of the Delhi High Court declaring Section 24(5) of Plant Variety Act void

The Supreme Court (SC) of India has stayed the order of the Delhi High Court  declaring Section 24(5) of the Protection of Plant Varieties and Farmers’ Rights Act, 2001 void.

Stay tuned for a detailed post!

Access Benefit Sharing

Justice U.C. Dhyani of Uttarakhand High court passed a ruling deciding several writ petitions filed by various paper mill companies against notices issued against them by the Uttarakhand State Biodiversity Board (SBB).

The impugned notices were sent by SBB as it considered that the petitioners failed to provide prior intimation to SBB for obtaining biological resources for certain purposes as per sections 7 and 24 of the Biological Diversity Act, 2002.

Section 7 mandates prior intimation for obtaining biological resources for commercial utilization, bio-survey and bio-utilization for commercial utilization. Section 24 gives the SBB the power to restrict or prohibit any of the above activities should they be found to be detrimental. The Petitioners approached the writ court demanding several reliefs challenging SBB’s demand for information on access for material from other states being unconstitutional. The other pleas taken included:

    1. non- applicability of the Guidelines on Access to Biological Resources and Associated Knowledge and Benefit Sharing Regulations, 2014 to transactions between Indian entities;
    2. interpretation of the term “commercial utilization” as per s.2(f)- Petitioners argued that they belonged to an industry, which would not fall under ‘commercial utilization’ as defined in Section 2(f).;
    3. interpretation of the term “‘biological resource’ – Petitioners argued that waste paper is not a ‘biological resource’ as defined u/s.2(c);
    4. no restrictions/actions can be taken by the Board u/s. 24(1) in the absence of rules being framed u/s 63 and s.2(k) of the Act;
    5. reliance of the Board, in the impugned notices, on the act and guidelines issued by the Central government being unconstitutional.

Findings in the order:-

Preliminary objection on the maintainability of the writ petition u/s. 52A of the Act were raised by the SBB arguing that Section 52A allowed for an appeal to the NGT from an SBB or NBA order, which is where the grievance should have been filed.

Section 52 deals with an appeal to National green tribunal (NGT). Section 52A states that any person aggrieved by any determination of benefit sharing or order of the National Biodiversity Authority or a State Biodiversity Board under this Act, on or after the commencement of the National Green Tribunal Act, 2010, may file an appeal to the National Green Tribunal established under section 3 of the National Green Tribunal Act, 2010, in accordance with the provisions of that Act.

Petitioners counter argued that since no order was passed by the SBB u/s. 24(2) of the Act the matter was not cognizable by the NGT and the writ was maintainable. The Court by agreeing with the Petitioners arguments upheld the maintainability of the writ petitions.

The Court refraining from giving any opinion on the issue of whether ‘waste paper’ would be considered as biological resource or not, has ordered that the Petitioner is under liability and is bound to give desired information of access, which is an admitted position, within the territorial boundary of Uttarakhand to the SBB.

Further, the Court dealt with the issue of liability of petitioners of giving information to the SBB in the absence of any rules and prescribed form. The Court ruled that the Petitioners are bound by section 7 of the Act to give prior intimation of any access of biological recourse even in the absence of any prescribed form. Furthermore dealing with the modality of said information, where the SBB has not made any rules and have not provided forms, the Court held that it should be left to the discretion of the Petitioners to supply desired information in whatever form they like but with due regard to the provisions of the act.

The writ petitions were dismissed with the following directions:

  1. the Petitioners to provide information to Uttarakhand SBB in respect of biological resource obtained from Uttarakhand within four weeks;
  2. that Uttarakhand SBB not to compel the Petitioners to submit information from outside the territorial boundaries of the state; and
  3. no penal action to be prosecuted provided the Petitioners comply with this order.

DHC reinstates the agreement between Monsanto Inc and Nuziveedu Seeds

Justice R. K. Gauba of the Delhi high court (DHC) by an order dated 28th March 2017 ruled that Monsanto Technology LLC’s termination of its sub- licence agreement with Nuziveedu Seeds Ltd was illegal and arbitrary.

DHC has reinstated the agreement, however, the trait fee to be paid to the plaintiffs, for the use of the suit patent and trademarks have been directed by the Court, to be in accord with the prevalent local laws, as in force. The court also directed the agreement to be modified according to the format of the GM Technology Agreement Guidelines, 2016 issued by the government.

The facts of the case are as follows:-

  1. Suit for infringement and passing off was filed by Monsanto Technology LLC, Monsanto Holdings Private Limited and Mahyco Monsanto Biotech (India) Pvt. Ltd. impleading three defendants, namely Nuziveedu Seeds Limited, Prabhat Agri Biotech Limited and Pravardhan Seeds Private Ltd., on the groubds that the defendants were continuing to “market and sell” Genetically Modified Hybrid Cotton Planting Seeds inspite of termination of the sub-license agreements between the parties, alleging violation of their intellectual property rights covered by the registered patent (214436), and trademarks BOLLGARD and BOLLGARD II.

  1. The defendant submitted two counter claims. One counter claim prayed for a declaration that the sub-licensing agreements (of 2015) is “valid, binding and in force” and consequently, the defendants being entitled to “all the rights and benefits” thereunder. The other counter claim prayed for revocation of the plaintiffs‟ patent 214436.

  1. The Plaintiffs patent 214436 claims a method for producing a transgenic plant comprising incorporating into its genome a nucleic acid sequence comprising a plant functional promoter sequence operably linked to a first polynucleotide sequence encoding a plastid transit peptide, which is linked in frame to a second polynucleotide sequence encoding a Cry2Ab Bacillus thuringiensis ᴕ- endotoxin protein, wherein said plastid transit peptide functions to localize said ᴕ- endotoxin protein to a subcellular organelle or compartment” (claims 1 to 24) and a nucleic acid sequence comprising a promoter operably linked to a first polynucleotide sequence encoding a plastid transit peptide, which is linked in frame to a second polynucleotide sequence encoding a Cry2Ab Bacillus thuringiensis 8-endotoxin protein, wherein expression of said nucleic acid sequence by a plant cell produces a fusion protein comprising an amino-terminal plastid transit peptide covalently linked to said 5-endotoxin protein, and wherein said fusion protein functions to localize said 5-endotoxin protein to a subcellular organelle or compartment” (claims 25 to 27).

  1. The marks “BOLLGARD” and “BOLLGARD-II” having been registered, in India, under the Trademarks Act, 1999.

  1. Mahyco Monsanto Biotech (India) Pvt. Ltd. entered into sub-license agreements with defendants (2004), and under such sub-license agreements, the defendants received 50 grams of Transgenic Bt. Cotton seeds in consideration of Rupees Fifty Lakhs. The said sublicense agreement also contained an obligation on the defendants to pay a “trait value”.

  1. During the currency of the sub-license agreements of 2004, some dispute arose with regard to the “trait value” and the 2004 sub-license agreements were replaced by new sublicense agreements executed separately in favor of each of the three defendants (sub-license agreements of 2015).

  1. In the meantime, the Central Government in terms of Cotton Seeds Price (Control) Order, 2015, issued a notification via which the maximum selling price of Bt. Cotton Seeds packets were fixed. The MSP for BG I being Rs. 635 per packet, with zero trait value being payable, while the MSP for BG II version being Rs. 800 per packet inclusive of Rs.751 towards seed value and Rs. 49 on account of trait value.(The  intervention of the Central Government by above noted Cotton Seeds Price (Control) Order, 2015, was challenged and such challenges by and large being still sub-judice.)

  1. Licensing and Formats for GM Technology Agreement Guidelines, 2016, were also notified and published by the Government of India. These Guidelines primarily made to ensure non-discriminative licensing to encourage competition and availability of GM cotton seeds to cotton farmers at fair and reasonable prices.

  1. The defendants by their communication informed Mahyco Monsanto Biotech (India) Pvt. Ltd. that the trait value payable under the 2015 Sub-License Agreements stood statutorily modified and that Mahyco Monsanto Biotech (India) Pvt. Ltd. should charge the trait value. This request was turned down and this took the matter to the High Court of Judicature at Bombay.

  1. For the kharif 2015-16 season, Mahyco by further communications called upon the defendants to pay the trait value in terms of 2015 Sub-License Agreements, but such demand was not being complied with. Instead, by their similar communications, the first and second defendant requested the plaintiff to refund the trait fee statedly paid “in excess”, referring to the Government of India price control orders. This demand did not find favour with Mahyco and Plaintiffs alleging breach terminated the agreement. Hence the present suit.

Arguments and finding

 

  • Validity of suit patent:-

Validity of the suit patent was challenged under various provisions of the law like Section 3(f), 3(h) and (j), Section 8, Section 10 (4) and Section 59 (1) etc.

The court held that, whether or not the suit patent is liable to be revoked is a question which would need to be addressed at an appropriate stage only after pleadings in that regard are complete and evidence is adduced on issues thereby raised. No comments were made on such aspect of the dispute.

The court however made a prima-facie finding regarding patentability under section 3(j). The Court agreed with the submissions of the plaintiffs that Section 3(j) of the Patents Act, cannot deprive the patentee of due reward of human skill and ingenuity resulting in human intervention and innovations over and above what occurs in nature. Suit patent involve laboratory processes and are not naturally occurring substances which only are to be excluded from the purview of what is an invention by virtue of the provision contained in Section 3(j). These claims being products or processes of biotechnology are rightly entertained by the Indian Patent office.

  • Protected by the Plant Varieties Act

 It was also submitted by the defendants that impugned acts on the part of defendants are protected by the provisions of the Protection of Plant Varieties and Farmers Rights Act, 2001, by virtue of Section 92, overriding the Patents Act, 1970. The use of any variety as an initial source for the purpose of growing other varieties as is the activity undertaken by the defendants, the limited right of the person claiming ownership of the intellectual property right of such variety is to claim “benefit sharing” under Section 26.

The Court however did not agree with the Defendant and held that the invention which is the subject matter of suit patent is not same as development of a variety within the meaning of Plant Varieties Act. The right to use the genetic material is the subject matter of a patent granted and protected by the Patents Act, in general, and Section 48 thereof, in particular. Section 30 of the Plant Varieties Act is a provision meant only for “researchers” and not for entities such as defendants out to make commercial exploitation and further that it gives, at the most, right to use a “variety” to develop other varieties but not so as to confer the right to use DNA or genetic material.

The contentions of the defendants based on the provisions of the Plant Varieties Act or the import of possible remedy of “benefit sharing” available to the plaintiffs thereunder, or the question as to whether the same would be more efficacious, or extinguishes or erodes the rights conferred by Section 48 of the Patents Act, 1970 has however been left to be addressed at the time of final adjudication

  • Infringement:-

It was also contended that the fact that the defendants’ product comprises of components or genetic material conferring other traits in addition to the DNA construct or nucleotide sequences of the suit patent therefore there is no infringement. However this was considered to be irrelevant, as the presence of other components is immaterial so long as the patented invention is contained within the defendants’ product, this itself being sufficient to constitute infringement.

It was also argued by the Defendants that the claims are directed to a method performed in lab, the biological process adopted by the defendants however is essentially based on the other claims which though submitted with the application under PCT (Patent Corporation Treaty), were withdrawn, the same not being not patentable under section 3(j) and 3(h). The claims were therefore argued to be not infringed.

The court disagreed with the Defendants and accepted the argument of the Plaintiff that infringement by “use” of the patented invention in claims 25 to 27 stands made out because the defendants have admitted that their cotton varieties and hybrid exhibit Bt. trait which would have been triggered only on account of DNA construct or nucleotide sequence on claim nos.25 to 27. The use of the claimed construct was therefore held to be infringement. Court in this respect also relied upon the view taken by the Supreme Court of Canada in Percy Schmeiser vs. Monsanto, (2004) 1 SCR 902, wherein it was argued that ultimately what matters is whether the defendants are taking advantage (in whole or in part – directly or indirectly) of the technical contribution or patented invention of the plaintiffs.

  • Agreement

 The court held that the plaintiffs were duty bound to consider the request of the defendants as made by the communications beginning July 2015, for modification of the terms as to the rate of trait fee payable under the 2015 sub-license agreements for which the mechanism had been agreed upon in the agreement. Since the plaintiffs did not adhere to their obligation under the contract, the demand of payment under the contract terms being not lawful, it apparently being higher than the trait fee permitted by the law in force, the defendants could not have been found to be in default or to have breached their obligations. The termination of the sub-license agreements was therefore held to be prima facie illegal and arbitrary. The parties remain bound by their obligations under the terms and conditions of the 2015 Sub-License Agreements for the period(s) stipulated therein, or till the same are lawfully terminated.

The court also directed that the plaintiffs would be entitled to all the rights under the 2015 Sub License Agreements except as to the rate of trait value payable thereunder and the same has to be in accord with the prevalent local laws prescribed by Cotton Seeds Price (Control) Order, 2015 as indeed of the Licensing and Formats for GM Technology Agreement Guidelines, 2016, both promulgated by the Government of India.

DHC reinstates the agreement between Monsanto Inc and Nuziveedu Seeds

Monsanto Inc, sued Nuziveedu Seeds and its subsidiaries for continuing to sell cotton seeds using its patented technology despite termination of its sub-licence agreement in December 2015.

Justice R. K. Gauba of the Delhi high court (DHC) by an order dated 28th March 2017 ruled that Monsanto Technology LLC’s termination of its sub- licence agreement with Nuziveedu Seeds Ltd was illegal and arbitrary.

DHC has reinstated the agreement, however, the trait fee to  be paid to the plaintiffs, for the use of the suit patent and trademarks, have been directed by the Court, to be in accord with the prevalent local laws, as in force.

The court also directed the  agreement to be modified according to the format of the GM Technology Agreement Guidelines, 2016 issued by the government.

 

Stay tuned for a detailed report of the 96 page order!

Section 24(5) declared void

Section 24(5) of the Protection of Plant Varieties and Farmers’ Rights Act, 2001, has been declared void by the Delhi High Court. Prabhat Agri Biotech Ltd, Nuziveedu Seeds (P) Ltd and Kaveri Seed Company Ltd. challenged the vires of Section 24(5) of the Protection of Plant Varieties & Farmers’ Rights Act in a writ before the Delhi High Court. The writ has recently been allowed.

Section 24(5) empower the Registrar to issue “such directions to protect the interests of a breeder against any abusive act” during the period between filing of application for registration and decision taken by the Authority on such application. The said impugned provision reads as follows: “(5) The Registrar shall have power to issue such directions to protect the interests of a breeder against any abusive act committed by any third party during the period between filing of application for registration and decision taken by the Authority on such application.”

 The petitioner’s challenged this section on various grounds like:-

  • the provision does not  envisage any compliance with principles of natural justice when such orders are issued;
  • the provision gives the power to issue interim directions even before the concerned breeder’s application for registration has been accepted and any rights have accrued,
  • The provision does not provide any details of the orders that can be issued by the Registrar, such as, the conditions subject to which they can be issued, or the duration of their operation etc.
  • the Act does not provide for any appeal against the issuance of an order under the impugned provision, and therefore any error in the order is difficult to be corrected
  • the Act does not prescribe any qualifications for the Registrar who is empowered to issue such orders, and it is a well settled principle that substantial questions of law can only be decided by tribunals consisting of an adequate number of judicial members with legal qualifications

The Court agreed with the Petitioner and held that, “although the provision envisages the issuance of orders to injunct the commission of abusive acts, it does not explain what acts are to be considered abusive. This further fortifies the argument that the Registrar has been vested with unbridled power under the Act”. The Court further went on to state that, “The term “abusive act” is not defined; likewise, the question of decision taken by the authority on such application. More importantly the decision – final – taken upon an application for registration according to the provision is “by the Authority””.

Further, the Court held the provisions to be arbitrary and void, as infringement is a matter to be determined by regular courts, as the orders made under the impugned provision can have lasting adverse consequences, and there is no statutory provision ensuring that Registrars have minimum experience as quasi-judicial officials.

Whilst the qualification of Registrars as technical experts allows them  to be capable of deciding whether the DUs test (to determine infringement) is satisfied; it does not fully dispose to handle issue of the moment especially concerning interim measures. This is of particular significance given that there is no appellate remedy against such orders which makes  outcome fraught, undermining the rule of law and injecting arbitrariness to the entire exercise.