It has been a long time since M. Prabhakara Rao, the chairman of Nuziveedu Seeds, was trying to knock down the world’s largest seed company “Monsanto Co”, in a high-profile conflict over licensing and royalty of patented seed technology–Bollgard II. Finally, in a decision taken on 29th of March, M. Prabhakara Rao won the long-fought legal battle and Monsanto was ordered to restore the licensing agreement with Nuziveedu Seeds and slash royalty charges by about 70%.
The battle between the two parties gathered pace, back in 2015 when MMBL (Mahyco Monsanto Biotech Ltd), a joint venture through which Monsanto sells cotton seeds in India and has sub-licensed Bt cotton seed technology since 2002 to various domestic seed companies, took Hyderabad-based Nuziveedu Seeds Ltd to court claiming patent infringements and accusing this Indian company of continuing to use Monsanto‘s technology even after MMBL had cancelled its licensing contract.
Monsanto and Nuziveedu seeds had been locked in a long-term licensing agreement whereby Nuziveedu Seeds was entitled to use Monsanto’s patented seed technology – Bollgard II, for which Monsanto received a patent in 2009 (Patent Number- 232681, granted on 20th March 2009) in India for its ability to modify cotton seeds to include a microbe- Bacillus thuringiensis, which fortifies cotton plants against Lepidopteran insect damage. In lieu of making use of this technology, Nuziveedu Seeds was required to pay royalty charges to Monsanto.
However, in June 2015, only about three months after renewing his contract, one of his executives was sent by Mr. Rao to Monsanto’s Mumbai office to demand 10% cut in royalties to which Monsanto bluntly refused. A month later, a similar issue was raised by a group of nine seed companies of which Nuziveedu seeds was a part, and wrote to MMBL to reduce the royalty charges paid by them on account of changes made by some state courts for amounts that can be charged for seeds. A similar argument was presented to MMBL by National Seed Association of India, a government body of which Mr. Rao was the President. However, Monsanto dismissed the demands and suggested the companies to keep the matter “bilateral”.
With the burgeoning strains, MMBL terminated the license agreements of Nuziveedu and its group companies on account of what it said continued refusal to pay contractually agreed trait fees amounting to more than $20 million despite having collected the full retail price from farmers.
Driven by the need to serve the interests of all Indian farmers, India’s agriculture ministry intervened and announced a cotton seed price regime to fix the price of genetically modified cotton seeds and the royalties Monsanto was allowed to collect. Later,ministry also launched an antitrust investigation to ascertain whether Monsanto abused its dominance in the marketplace. Monsanto’s monopoly was touted as not being good for India’s farming practices.
Given that plants, parts of plants, seeds, plant varieties all stand excluded from patent protection by virtue of section 3(j) of the Indian Patent Act, 1970, it was further argued by Mr. Rao that Monsanto should never have been allowed to collect royalties after an initial payment to use its technology. Or, at the very least, prices should have been set by the government.
As an impact of the whole fiasco, Monsanto’s Sales of seeds and genetic traits for cotton dropped 16 per cent, or $83 million, in the fiscal year ending August 2016.
Finally, the Delhi High court ruled the infringement dispute by Monsanto in favor of Nuziveedu Seeds Ltd holding that the termination was invalid and illegal, and has also given a direction that the agreement of 2015 shall prevail. It has also said that the trait (technology) value as fixed by the central government from 2015-16 shall be applicable, and that the agreement should be modified accordingly.
About the author: TanuGoyal, Patent Associate at IIPRD and can be reached at: email@example.com