5. Implications for New Zealand of Extending the Rights Granted to Plant Breeders
51. The grant of a PVR, like other intellectual property rights, gives the right owner, for a limited time, a form of monopoly right. Monopolies can impose costs on society, in the form of higher prices and reduced choice, and are usually considered undesirable. The grant of intellectual property rights, however, can be justified on the grounds that the grant of such rights encourages innovation and creativity that might not otherwise occur. Provided the conditions for grant are met, the benefits to society of this increased innovation and creativity are considered to exceed the costs.
52. If New Zealand were to extend the rights granted to plant breeders, for example by amending the PVRA 87 to bring it into line with UPOV 91, there would be significant changes to the rights granted to PVR owners. This raises the question of whether the benefits (if any) to society by such changes would exceed the costs (if any). This question will be dealt with in the discussion that follows.
Ratification of UPOV 91
53. As discussed in Section 2, it may be desirable that any amendments to the PVRA 87 be consistent with the provisions of UPOV 91 so that New Zealand is in a position to ratify that Convention. If the government decides to ratify UPOV 91, then any amendments to the PVRA 87 would need to incorporate all the provisions of UPOV 91. If a decision is made not to ratify UPOV 91, any amendments to the PVRA 87 must be still be consistent with UPOV 78 as New Zealand has already ratified that Convention.
54. It would be possible to amend the PVRA 87 to incorporate only some of the provisions of UPOV 91. Another possibility would be to incorporate provisions that were not consistent with it, for example to address Māori concerns. In these cases, New Zealand would not be able to ratify UPOV 91. There are some disadvantages with this approach:
- there may be insufficient incentive for local plant breeders to increase their investment in the development of new varieties;
- foreign breeders may not have sufficient incentives to release their new varieties in New Zealand;
- any enhanced plant variety rights provided by an amended PVRA 87 would only apply within New Zealand.
55. Other members of UPOV 91 would not be obliged to provide the enhanced protection provided in that Convention to nationals of non-members. As a result New Zealand plant breeders may find that the level of protection available to them overseas is less than that available in New Zealand. Most of New Zealand's major trading partners, including Australia, Japan, the United States, and the United Kingdom have ratified UPOV 1991.
The Scope of the PVR
56. As discussed in section 3, the UPOV 91 provides the PVR owner a greater range of exclusive rights than is provided for in s17 of the PVRA 87. The rights provided for in Article 14 of UPOV 91 that are additional to those in the PVRA 87 are the right to authorise the production or reproduction, conditioning for the purpose of propagation, exporting, and stocking of the protected variety. What are the advantages and disadvantages of providing these greater rights?
Exclusive Right to Produce or Reproduce the Protected Variety
57. Under this provision, only the PVR owner or someone with the owner's permission could produce or reproduce the protected variety. Under the PVRA 87, the equivalent right is limited to production or reproduction for sale in the case of seed propagated varieties. In the case of vegetatively propagated fruit, vegetable or ornamental varieties, the rights of PVR owners are extended to cover propagation for the commercial production of fruit, flowers or other products of those varieties.
58. A disadvantage of granting PVR owners the exclusive right to authorise the production or reproduction of a protected variety is that it could increase costs to commercial users of protected varieties where there is no exemption for farm saved seed. The issue of farm saved seed is discussed later in this document. This could mean that some commercial users of protected varieties would not be able to freely use their saved seed, but would either have to pay a royalty for doing so, or buy fresh seeds each growing season. This could have the effect of increasing the prices paid by consumers for some agricultural products where these are produced from protected varieties.
59. The right to authorise the production or reproduction of their protected varieties could provide PVR owners with the opportunity to earn considerably more revenue than they are able to earn at present. By increasing the return from breeders' investment in the development of new varieties, this may give them a greater incentive to develop new varieties, or allow them to be marketed in New Zealand. Since many PVR owners are not New Zealand residents, however, some of the extra revenue that PVR owners may earn will flow overseas. This will offset some of the benefits to New Zealand of any increased investment in new varieties.
Exclusive Right to Export the Propagating Material of the Protected Variety
60. At present, the permission of the PVR owner is not required before propagating material of a protected variety is exported. Under the provisions of UPOV 91, the PVR owner's permission would be required for export of the propagating material of a protected variety. Consent would only be required if the propagating material is to be used for further propagation of the variety. For example, the export of seeds of a protected variety for human consumption would not require the PVR owner's consent.
61. The major advantage of providing PVR owners with this right is that PVR owners would be able to take action in New Zealand where propagating material of their protected varieties had been exported without their consent. They might also be able to prevent the propagating material being taken out of the country in the first place. It would be up to PVR owners to take action to enforce their rights to prevent unauthorised export of propagating material. Without this right, PVR owners would have to take action in the country to which the propagating material of the variety had been exported. This latter course of action would only be possible if the variety was also protected in that country.
62. The provision of an exclusive right to authorise export of propagating material may make it more difficult for foreign growers to "pirate" new plant varieties developed in New Zealand. Recent incidents such as the discovery of Pacific Rose apples being illegally grown in Chile, or an attempt by a visiting scientist to take cuttings from apple trees, suggest that PVR owners need to be able to control the export of their protected varieties.
Conditioning for the Purposes of Propagation
63. It is common for the propagating material of some plants to be "conditioned" before being used for propagating purposes. This conditioning can include drying, cleaning and treating the material with fungicide.
64. The right to authorise the conditioning, for the purposes of propagation, of the propagating material of their protected varieties would enable PVR owners to more effectively control the use of their varieties. This right is currently not provided for in the PVRA 87. Persons or firms offering conditioning services, such as seed dressers or conditioners, could be held to be infringing a PVR if they condition the propagating material of a protected variety without the PVR owner's consent. This might make it easier for PVR owners to detect the unauthorised use of their protected varieties.
65. If this right was provided to PVR owners, there may be an increase in costs for those engaged in the conditioning of propagating material. They may face increased costs due to the need to obtain licenses from PVR owners to condition the propagating material of protected varieties. Provision may also have to be made for the costs of PVR infringement litigation. It is possible that such increased costs could be passed on to users of the propagating material, such as farmers.
66. If PVR owners were given the right to authorise conditioning for the purposes of propagation, they could decide to give this authorisation to only a few of those providing conditioning services. This may reduce competition in the industry, which could increase costs to users of conditioned propagating material, such as farmers.
Stocking of the Protected Variety
67. Article 14 of UPOV 91 provides that plant breeders be given the right to authorise the stocking of propagating material for any of the purposes specified in Article 14(1) over which the plant breeder has an exclusive right. The PVRA 87 does not, at present, provide plant breeders with a right to authorise the stocking of their varieties.
68. If PVR owners were given the right to authorise the stocking of propagating material, then they would be able to ensure that only competent persons were able to store and keep propagating material. PVR owners would be able to ensure that persons stocking propagating material had adequate quality assurance systems, to ensure that material was properly stored, and not mixed with material from other varieties. The provision of this right would also make it easier for PVR owners to obtain evidence of infringement.
69. The provision of this right would enable PVR owners to take action against people who are storing propagating material without the PVR owner's consent for later commercial use after the PVR has expired or lapsed. At present such people could start selling, or propagating the variety as soon as the PVR expires or lapses. If people cannot stock propagating material of the protected variety until the PVR expires, they will have to build up stocks after it expires. This will take time, and will effectively give the PVR owner a de facto extension of the PVR term. This effective increase in term may increase the costs to society of granting the PVR.
70. Where a variety of a basic food plant, such as wheat is covered by a PVR, then any measure that may increase the period during which the PVR owner has a monopoly may not be in the public interest. One possible solution would be for the right to authorise stocking of the propagating material to be restricted, in the public interest, for certain plant varieties that were considered to be basic food plants. Such a restriction is permitted by Article 17(1) of UPOV 91 if such a restriction is in the public interest.
Essentially Derived Varieties
71. As discussed in section 2, under the PVRA 87, the grant of a PVR does not give the PVR owner any rights over varieties which are "essentially derived" from the protected variety. There is no requirement for breeders of "essentially derived" varieties to pay a royalty to the PVR owner if the new varieties are commercially exploited. As also discussed in section 2, the marketing of such essentially derived varieties may damage the market for the original variety.
72. Because the PVR owners have no rights over varieties essentially derived from their protected varieties, developers of essentially derived varieties can "free ride" on the investment made by plant breeders in developing new varieties. If New Zealand was to extend PVR owners' rights to include essentially derived varieties, PVR owners would be able to control the marketing of essentially derived varieties, and derive some revenue from them. This may increase the incentive to develop new plant varieties.
73. If PVR owners were to be given rights over essentially derived varieties, as required by Article 14(5) of UPOV 91, then this would not prevent others from developing new varieties, or from using a protected variety for experimental purposes. Article 15(1) of UPOV 91 gives others the unrestricted right to develop new varieties derived from protected varieties, and to use the protected variety for experimental purposes.
74. The provisions of Article 14 of UPOV 91 would mean that the PVR owner's consent would be required before essentially derived varieties could be commercially exploited. This may discourage some plant breeders from developing new derived varieties because they would have to pay some of their revenue to PVR holders as royalties.
Exceptions to the PVR: Farm Saved Seed
75. It has long been traditional for farmers to save seed from their harvests for sowing future crops. This saved seed is often known as "farm saved seed", and farmers' entitlement to save this seed is often known as the "farmer's privilege". Farmers, in the past, have also exchanged their saved seed with, or sold it to, other farmers. Under the PVRA 87, farmers in New Zealand may save seed of protected varieties for their own use, but they cannot sell it for the purposes of sowing another crop.
76. The increased rights provided under Article 14 of UPOV 91 would not allow farmers to save seed of a protected variety without the plant breeder's consent. For example, Article 14(1)(i) of UPOV 91 gives the plant breeder the exclusive right to propagate the protected variety. Article 15(2), however, does allow countries that have ratified UPOV 91 to make an exception to the plant breeders' rights for farm saved seed. The effect of the exception would be to allow farmers to use saved seed of protected varieties without being required to seek the permission of the PVR owner.
77. The issue of the "farmer's privilege" is a highly contentious one. Those who support the unrestricted right of farmers to use their saved seed point out that the plant varieties grown today have their origins in selective breeding by farmers over thousands of years, long before the concept of breeders' rights arose. By selecting which of their harvested seeds to re-sow, farmers have been able to continuously improve the varieties that they grow. If farmers sell or exchange their seed, then society as whole gains the benefits from the improved varieties. This may also encourage biodiversity, whereas the granting and enforcement of plant breeders' rights may result in farmers growing only a few protected varieties.
78. Another justification for retaining the farmer's privilege is that plant breeders do not develop new varieties from scratch, but use existing varieties as their starting point. Allowing farmers to use farm saved seed is one way of recognising farmers' contribution to the development of existing plant varieties.
79. If the PVRA 87 is amended to remove the farmers' privilege, then farmers may face higher costs, either because they would have to buy new seed for each years' crop, or would have to pay royalties for using their own saved seed.
80. Plant breeders argue that farmers should not be free to save and re-sow their saved seed of protected varieties, as plant breeders do not collect royalties on this seed. This reduces the return that the breeders can earn from their investment in developing new varieties. This may mean that breeders have less incentive to develop new varieties, and that fewer new varieties are developed. On the other hand, it may increase the incentive for breeders to develop more new varieties, as they will be able to collect royalties from sales of the seed of the nee varieties.
How Should New Zealand Deal with the Issue of Farm Saved Seed?
81. The issue of farm saved seed involves a consideration of the competing rights and interests of farmers, consumers, and of plant breeders. This consideration of competing interests can be approached in several ways. Four possible options are discussed below, although there may well be other ways of dealing with the issue:
- Make no exception at all for farm saved seed;
- Allow farmers to use their saved seed, but require them to pay a lower royalty to the PVR owner than would normally be required;
- Allow farmers a limited right to use saved seed of some protected varieties, and require them to pay royalties for the use of saved seed from other varieties;
- Allow farmers the unrestricted right to use their saved seed.
Option i: Farmers Pay Full Royalty on Farm Saved Seed
82. If this option were to be adopted, farmers would have to pay normal royalties to PVR owners if they wished to save seed of protected varieties for future use. This would provide extra revenue for PVR owners, but could increase costs for farmers and consumers. If, as a result of their increased revenue, plant breeders increased their investment in the development of new varieties, the benefits of these new varieties may outweigh the costs.
Option ii: Allow Farmers to Use Their Saved Seed Subject to Reduced Royalty Payment
83. Under such a provision, farmers would be allowed to use their saved seed from protected varieties, but would be required to pay a royalty to the PVR owner. This royalty would be lower than the royalty that would normally be charged by the PVR owner. PVR owners would get some revenue, however, the revenue to PVR owners, and costs to farmers and consumers, would be lower than those for option i. One problem with this approach might be in the determination of a suitable royalty.
Option iii: Allow Farmers a Limited Right to Use Saved Seed
84. If this option was adopted, then farmers would be able to freely use saved seed from some protected varieties, while paying a royalty for the use of saved seed from other protected varieties. The varieties for which a royalty is paid may be varieties where the free use of saved seed would severely discourage investment by plant breeders in improving those varieties. This option could result in lower revenues for some PVR holders, and lower costs to some farmers and consumers, than for option ii.
85. Again, there may be some problems in determining the appropriate royalty payments if it is decided that the royalties should be lower than normal. There may also be difficulties in determining which protected varieties should be subject to a royalty payment for their use, and which should not.
86. In the European Community, all farmers except defined "small farmers" must pay a royalty that is "sensibly lower" than the royalty normally paid11 if they wish to use saved seed of protected varieties of certain specified crops. For all other crops farmers have no rights to use farm saved seed. The European Community's Plant Variety Rights Regulations are consistent with UPOV 91.
87. In Australia, s17(1)(d) and (e) of the Plant Breeder's Rights Act 1994 state that the conditioning and use of farm saved seed of a protected variety does not infringe Plant Breeder's Rights. S17(2) provides that regulations may declare that s17(1) does not apply to particular varieties. Australia has ratified UPOV 91.
Option iv: Allow Farmers the Unrestricted Right to Use Farm Saved Seed
88. Under this provision, farmers would have the right to freely use saved seed of protected varieties, without any requirement to pay a royalty. This is essentially the approach followed in the United States12, which has ratified UPOV 91. Option iv would essentially preserve the current situation in New Zealand. At present New Zealand farmers may freely use their saved seed. As discussed earlier, plant breeders argue that this reduces their revenue, and reduces their incentive to invest in the development of new varieties.
Exceptions to the PVR: Private and Non-Commercial Use
89. Under s 18 of the PVRA 87 any person may propagate, grow, or use a protected variety for non-commercial purposes without infringing a PVR. Under Article 15(1) of UPOV 91, this right is limited to private non-commercial use. This would mean, for example, that the propagation of protected rose varieties in a municipal nursery to produce bushes for planting in municipal parks and gardens without the permission of the PVR owner would infringe the PVR. Such use of a protected variety would be considered public non-commercial use. As a consequence, local bodies may be required to pay royalties for the use of protected varieties in their parks and gardens. This would increase their costs if they continued to use protected varieties.
90. The extension of PVRs to public non-commercial uses could provide a significant extra source of revenue to PVR owners. For example, as suggested in the previous paragraph, local bodies are not required to pay a royalty to propagate protected varieties in public parks and gardens. This may deprive PVR owners of substantial revenue, and discourage them from developing new varieties.
Term of the PVR
91. If New Zealand were to ratify UPOV 91, then the only change to the term of a PVR that is required by UPOV 91 is to increase the term for trees and vines from a minimum of 23 years to a minimum of 25 years. The minimum term for all other plant varieties would remain at 20 years. The small increase in term would add slightly to the costs to society of granting the PVR. Most PVRs, however, do not run their full term, as most protected varieties are superseded by more recently developed varieties long before the full term of the PVR has expired.
92. The terms set out in UPOV 91 (and in the PVRA 87) are minimum terms. It would be open to New Zealand to increase the length of these terms. This, however, would increase the costs to society of granting PVRs. To justify any increase in the PVR term over the minima prescribed in UPOV 91 or the PVRA 87 it would be necessary to show that the benefits to New Zealand of any increase in the term exceeded the costs.
Compulsory Licenses
93. As discussed in section 2 plant breeders have expressed concern about the compulsory license provisions in the PVRA 87. Under s21 of the PVRA 87, any person, may, once three years or more have passed from the date a PVR was granted apply to the Commissioner of Plant Variety Rights for a compulsory license. Such a license may be granted if the Commissioner considers that the PVR owner has not made reasonable quantities of reproductive material of a reasonable quality of the protected variety available for purchase by the public at a reasonable price.13
94. Particular concern has been expressed regarding s21(3) of the PVRA 87. Under this provision, the Commissioner, in considering availability of material under s21(1), must not take into account any reproductive material that is made available only under certain restrictive conditions. An example of such a restrictive condition would be the situation where seed was supplied to a farmer under a contract that required that the entire resultant crop be sold to the seed seller or some other specified person.
95. Plant breeders have argued that the compulsory license provisions, in particular s21(3) provide no incentive for those involved in the processing of harvested produce to invest in the development of new varieties. For example, a flour miller might want to invest in the development of a new wheat variety with superior milling qualities and obtain a PVR for it. In such a case, the miller may wish to prevent farmers who are growing the new wheat variety from selling the wheat to competing millers. The provisions of s21(3) of the PVRA 87 would effectively make it impossible for the miller to prevent competing millers from gaining access to the new variety.
96. On this basis, plant breeders have suggested that s21 be amended to remove s21(3). While this might encourage the development of new plant varieties, the repeal of s21(3) would effectively enable PVR owners to exercise rights over the produce of their protected varieties if they so wished. Section 21(3), however, was inserted into the PVRA 87 because it was felt at the time that the grant of a PVR should not allow the PVR owner to control the marketing of the produce of the protected variety.
97. At present, the PVRA 87 does not allow PVR owners to control the marketing of the produce of their protected varieties. Article 16 (1) of UPOV 91 makes it clear that the breeder's rights do not extend to the produce of a protected variety if the produce was obtained from propagating material placed on the market with the breeder's consent. That is, if New Zealand were to amend the PVRA 87 to bring it into line with UPOV 91, then PVR owners would not have any general rights over the produce of their protected varieties.
98. If the Plant Variety Rights Act does not give PVR owners an explicit right to control the use of the produce of their protected varieties, then any attempt by PVR owners to exercise such control may be inconsistent with the Commerce Act 1986. Such attempts may be seen as reducing competition, or taking advantage of market power. The lack of an explicit right over produce would mean that the exceptions contained in the Commerce Act 1986 regarding the enforcement of intellectual property rights would probably not apply.
Questions
- If New Zealand were to increase the rights available to plant breeders, would there be any disadvantages to New Zealand. If so, what would they be?
- Would there be any benefits to New Zealand in increasing the rights available to plant breeders? If so, what would they be?
- Should New Zealand continue to allow the unrestricted use of farm saved seed? If not, why not?
- If New Zealand continues to allow the use of farm saved seed, which of the options ii - iv should be adopted? Why?
- If either of options ii or iii were adopted, which crops should be subject to the requirement to pay a royalty? Why?
- Should the compulsory license provisions be amended to enable PVR owners to exercise rights over the produce of their protected varieties? If so, why? If not, why not?
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