Seed patent growth prompts litigation and licensing fears

European seed companies prepare for licensing and litigation difficulties as technology allows them to patent more inventions and threatens to stifle the industry’s strong sharing culture

European seed companies are worried about licensing and litigation problems rising from their growing patent portfolios.

"Seed companies are all preparing for litigation," says the IP research manager at a Netherlands-based seeds company. "I suspect the sector will increasingly be forced to turn their attention to these kinds of matters, especially those companies that have something to offer."

According to in-house sources, technological advancements in agriculture are leading seed companies to shift business models and become more like biotech companies, which is making it easier for them to register patents.

That development has led to a patent boom in the industry because companies want the commercial opportunities that come from better protecting more inventions. But they are also afraid that more patents will lead to companies blocking competitor access to plant variety innovations and increased oppositions will emerge as a result.

That would erode the sharing culture that the industry relies on to innovate and survive. As the head of industrial property at a global seeds company points out, plant variety developments can only be made if companies work together to improve on one another’s achievements.

"Plant breeding cannot be done from scratch," he says. "Seed companies must work on material that already exists, which means that they are always standing on the shoulders of the previous generation."

The question in-house counsel are asking themselves then is: "How do we have our carrot cake and eat it too?"

European seed companies traditionally did not own many patents. The European Patent Convention and the EU Biotech Directive (98/44) sets out that plant varieties and essentially biological processes for plant production are excluded from patent protection – in stark contrast to other jurisdictions, such as the US.

The laws do not rule out patent protection on plant varieties altogether, but they did have the effect of severely limiting how many inventions seed companies could register in Europe.

These companies have instead relied on plant breeders’ rights (PBRs) for a long time to protect their inventions on the continent. Those rights grants them exclusive control over the propagating and harvesting material of a new plant variety so long as it is new, distinct, uniform and stable, and allow competitors to request and buy protected varieties to further breed and develop them.

But over the past five years, agritech has taken a massive leap forward and new tools have allowed businesses to more easily discover and replicate specific plant traits that may encompass several varieties. These traits and the technology used to find them can be patent protected in Europe.

"The key is that competitors cannot just take commercial material or patented inventions and mix it with their own products," explains a European patent attorney for a Dutch food-tech company.

Nip blocking in the bud

An obvious solution to this problem is for seed companies to implement good licensing mechanisms. But that is trickier than it sounds for smaller Europe-based firms, although less so for larger seeds companies that are used to patenting seeds in places such as the US.

"That’s a new and challenging development because we do not have licensing businesses – we sell seeds," the IP research manager of a Dutch seeds company sells Managing IP.

He says that as well as selling traits, seed companies are looking to commercialise the underlying tech, which is driving them to create new business models – but it is a slow process. His company, by example, started a spin-off company focused on leveraging the technology used to develop vegetables.

"The change has forced seeds companies to enter into negotiations or discussions with different players in a way we have never had to before," adds the head of industrial property at the global seeds company.

The challenge for seed companies then is to ensure that the industry voluntarily follows a system similar to the one that governs standard essential patents in the telecommunications sector, which must be licensed under fair, reasonable and non-discriminatory terms. But we know that implementing an FRAND SEP licensing system has not been exactly been easy for them.

Creating such a system could be much easier for an industry that is long used to sharing inventions – but as the recent Monsanto litigation indicates, that culture is not necessarily shared by every seed company.

One solution that the sector has started to develop is an international licensing platform (ILP), which can be used by breeders to buy trait licences for a fair and reasonable cost so that they can bring new and improved products to the market.

"ILP members want to continue breeding and believe that limitation on access to bio material is not a good thing," says the research manager. "The only major player that has not joined up is Monsanto, but it has been acquired by Bayer, which is a member of the ILP, and so it may join soon."

Growing litigation?

Inevitably, the rise of patent protection has also led to more oppositions emerging in the industry. European plant breeders did not need to oppose their competitors’ rights when they had easy access to all or at least most of their competitors’ innovations under PBR terms.

The head of industrial property says around 10% of his company’s filings have been opposed by competitors at the patent office, but that represents a considerable increase in oppositions for his company.

The IP research manager at a Dutch seeds company tells Managing IP that all of his firm’s patents has been challenged, and the firm is much more actively consulting external counsel as a result, adding that this trend is likely to spur a considerable increase of litigation actions.

He says that the sector will likely see a lot more opposition activity from companies that are less technologically driven and have yet to come to terms with how those solutions are changing the seeds business.

But the head of industrial property argues that most legal challenges in Europe are likely to be settled because of the sharing culture of the seeds industry. He adds that many companies in the seeds sector are small and their legal strategies are not particularly developed.

"In the end, if one company wants to acquire the rights from another, they’re more likely to try and get a good deal through the ILP rather than jumping straight into an opposition or litigation battle."

He points out that the creation of the PINTO database is one step seeds companies have already made to reduce the likelihood of bitter oppositions. The database enables various companies to voluntarily disclose varieties that are patent protected, allowing peers to know if a given variety is under any patent right so that they can chose to get rid of the patented invention when breeding with it or simply request a license if the invention is worth it.

"This is another move from the industry to ensure that efforts in breeding are protected, therefore allowing the funding of the next generation of products, but in the same time, providing transparency to the sector."

But the threat of increased litigation varies depending on how a company works with seeds. For very niche companies, such as those that have used technology to better identify proteins in seeds, the risk of challenges and litigation of reportedly very low.

"We have never had a patent opposed – there does not seem to be an interest in our specific processing methods," explains the head of IP at a France-based food technology company. He adds that the lack of opposition may be because the seeds industry is very broad and his company’s particular field is very new.

The head of industrial property also argues that litigation will likely become more common in the European seeds industry, but more so against pirates than competitors. The commercial opportunities in seed traits, he says, will be identified by counterfeiters more and more, who will increasingly infringe patents to the detriment of the owner and the industry.

"More people will begin to multiply bio material and try to sell it under cover without the right name of the plant varieties and so on. Patents are often seen mainly as a way for companies to oppose one another, but that is just the tip of the iceberg."

Patents portfolios are growing in the seeds industry. The change is good because it funds further innovation but it also has the potential to create bitter divisions between companies that could ultimately stifle innovation. Steps have been taken to secure transparency and access to patented traits and technology, but it is early days and time will tell if these projects are sustainable.