MAY 30, 2016

By Sudipto Banerjee, Senior Legal Editor

FARMERS right to seeds is equivalent to his right to life. Unfortunately, this is not the case in India. The case of Monsanto stands testimony to this uncomfortable truth.

On May 18, 2016 the Department of Agriculture came out with "Licensing Guidelines and Formats for GM Technology Agreements, 2016" (Licensing Guidelines) which required the genetically modified (GM) crop technology developers to license their proprietary traits on demand and not charge any royalty exceeding 10% of the maximum sale price of seeds. Soon followed a huge hue and cry and the Guidelines were labeled as a direct encroachment into the contractual freedom of the parties. The Govt. came under heavy attack from the GM technology lobby and it seems that the Govt. has finally succumbed to this pressure. The Govt. has  withdrawn the Licensing Guidelines and put them in a draft form on the site of Department of Agriculture for soliciting public opinion for a duration of ninety days.

The rising Govt. intervention in this ever growing complex Bt cotton dispute is more than evident. The ongoing face off between the Indian seed companies and their technology provider Monsanto is being constantly observed and reported globally. The Indian seed companies have been repeatedly crying foul play by Monsanto with respect to its licensing practices for Bt Cotton. The argument is that Monsanto is arm twisting these companies and extracting unreasonable royalty. This is similar to the argument of the Indian mobile handset manufacturers like Micromax, Xioami fighting against Ericsson for obtaining license of Standard Essential Patents (SEPs) on Fair, Reasonable and Non Discriminatory (FRAND) basis.

Last year, the Govt. came out with the Cotton Seeds Price (Control) Order, 2015 (CSPCO) under Section 3 of the Essential Commodities Act, 1955. The objective of CSPCO is regulation of sale of cottonseeds at notified Maximum Sale Price (MSP), to prescribe licensing guidelines and format for the GM technology licensing agreements. The effect of CSPCO is that it has slashed the royalty rate by 74%. While the MSP and the trait value (license fees paid by seed companies to patent holder) have been regulated through price notifications issued under respective State Cotton Seeds Act (cotton growing states like Gujarat, Andhra Pradesh, Maharashtra have legislated such laws), yet the technology providers have exploited their dominant position and managed to obtain maximum royalty beyond the cap on MSP and trait value. It is speculated that CSPCO was brought in at the behest of the National Seed Association of India who represents the interests of the Indian seed companies. The CSPCO was challenged before the Delhi High Court which refused to stay the price control order. The Karnataka High Court while observing that Govt. cannot determine the royalty rate upheld the power of the Govt. in determination of the MSP.

The battle between the technology provider Monsanto and the seed companies has a long history. Indian cotton crop are not resistant towards the pest called bollworm which has caused damaged in the past. Monsanto claimed that it has managed to develop a technology whereby it has injected the genes of a bacteria BT - Bacillus Thurgingiensis, commonly found in soil having insecticidal properties into the cotton crop. Once this gene is transported into these crops by a process called introgression , the crops develop the required immunity to fight against the pest bollworm. The Govt. intervention began primarily because of two reasons. First, once Monsanto started selling Bt cotton, prices of cotton seeds saw a huge upsurge (rise of 80,000% since 1998 when Monsanto entered India:, See Monsanto v Indian Farmers, Dr. Vandana Shiva) which directly affected the livelihood of the farmers. Secondly, seed companies and Monsanto have been locking their horns at several forums which includes arbitration proceedings, infringement suits and the recent investigation directed by the Competition Commission of India (CCI).

The patent claim of Monsanto over Bt gene comes with its own share of complications and questions. Gene is different from technology and once the gene is introduced into the body of the seed, it becomes an inseparable part of the seed. In other words, what Monsanto calls as "technology trait" and "trait value" are an intrinsic part of the Bt cotton crop further developed by the breeder or the seed company as transgenic variety. In India, transgenic varieties are covered under the Protection of Plant varieties and Farmer's Rights Act, 2001 and not a subject matter of patents. Eminent environmentalist Dr. Vandana Shiva has opined that Bt cotton is a gene and not a technology and , therefore, its patent is in violation of Section 3(j) of the Patents Act, 1970 which prohibits patentability of plants, seeds and essential biological processes. Dr. Shiva has also argued that Monsanto is not licensing the tools of genetic engineering but the Bt cottonseed and thereby eternalizing its monopoly. ( See, Monsanto v Indian Farmers, Dr. Vandana Shiva ). Moreover, there is still no clarity whether Monsanto holds patent over "cry1acMon531" . The Central Institute of Cotton Research in a recent RTI reply stated that Monsanto does not hold any patent over the said gene, whereas the Ministry of Environment and Forests holds the position that Bt seed developed by University of Agricultural Science (Dharwad) which contains Mon 531 strain cannot be allowed commercial production because it would violate the patent rights of Monsanto ( See, Times of India, Seeds of doubt: Monsanto never had Bt cotton patent ) . Why would two arms of the Central Govt. assume poles apart position on the same issue? The reluctance shown by the Govt. in doing away with this ambiguity only raises more suspicion. Further, detailed research is required into Monsanto's assertion that Bt cotton is effective against the bollworm pest because there is strong evidence to suggest that the pests soon develops resistance because of the inherent nature of Bt cotton. In that case, it justifies the revocation of Monsanto's patents, if any.

Presently, the CCI has already directed a detailed investigation into the affairs of Monsanto for having abusive and one-sided termination clauses in the sub-licensing agreements. This is a positive development because interface between IP and competition laws is inevitable and cannot be expected to operate in silos. Moreover, the concept of dominance is an organic concept and it will be interesting to observe how it is interpreted in the domain of GM technology. The Licensing Guidelines (presently stands withdrawn) had introduced the concept of FRAND into the domain of agricultural sector thereby putting the FRAND obligation on the technology providers. The application of FRAND into Bt gene technology remains a grey area. However, if the Licensing Guidelines are reintroduced in its present shape, this would go a long way in curtailing the practice of one sided licensing negotiation. Lastly, India needs to adopt a clear position and end the confusion regarding grant of patent in the domain of GM technology.

Indian companies are up in arms against technology providers, be it agricultural sector, pharmaceutical sector or the telecommunication sector. The common thread running through all these disputes is that Indian companies have alleged their foreign counterparts for abusing their dominant position while granting licenses. While this is true, the other side of the problem cannot be ignore d that Indian companies have nothing to offer other than raising claims of foul play. In this competitive world of technology and innovation, we cannot survive long by staying only at the receiving end of technology and expecting fair treatment during commercial negotiation. Unfortunately, measures like Universities for Research and Innovation Bill, 2012 which aimed at creating special category of Universities for research and innovation stands lapsed since years. The objective of Make in India will remain incomplete unless Indians innovate and come on the other side of the negotiation table.