Royalty collection systems


the canadian science and Policy Conference in Calgary brought together public officials and industry members to discuss and evaluate the state of agricultural research in Canada. One notable presentation was made by Frank Curtis, the former chairman of the Working Group for the Field Crops Section at the International Seed Federation and current chief operating officer at Limagrain Cereal Seeds.

Curtis discussed the publication ‘Collection Systems for Royalties in Soft Wheat: An International Study’; which was edited with Malin Nilsson, current chairperson of the Working Group. The purpose of the study is to analyse the effectiveness of royalty collection systems in fourteen member countries of the Union for the Protection of New Varieties (UPOV), including Canada. The study, summarized here, examines the effectiveness of six mechanisms for enforcing intellectual property rights. It also explores Canada’s performance under each mechanism.

Plant Breeders’ Rights (PBR) also known as Plant Variety Protection (PVP)
Plant variety protection is considered the standard method of practice in the 70 member countries of UPOV. Member countries join after a thorough inspection of seed laws by UPOV, making the law platform fairly uniform across member countries. Normally PBR grants 20 years of protection to the rights holder for the sole and exclusive right to commercialize the variety. According to Curtis, this helps the breeder recover the R&D costs associated with breeding and introducing the variety thereby providing an incentive for companies to invest in  plant breeding.

Patents on Novel Genes, Traits, Processes or Plant Varieties
In most countries, plant varieties (and seeds in particular) are not granted patent rights. However, in some countries, including the US, Australia and Japan, the law provides protection for plant varieties to their inventors with patents. In Europe, plant varieties are not patentable per say; however, if a plant variety carries a trait that is characterised by a single novel gene, invention, or transgenic event, then the gene or event is no longer considered to be a variety and is therefore patentable under the European Patent Convention. Canadian patent laws are very similar to Europe. It’s interesting to note that in the US, plant Utility Patents are granted approximately 95% of the time. The study explains this success rate differs markedly from that in Australia and Japan because the criteria for the award of patent rights are different in the three countries. From the date a patent (or utility patent) is granted, until its expiry, the patent holder has exclusive rights to exploit the invention or to license others to do so.

contract law
Contracts are commonly used to support other forms of PVP. The international study showed the most enforceable contracts are those that are supported by PBR. It binds many aspects of the process, including the re-sale of an entire protected crop to a PBR agent. The study also finds that in territories where they are used routinely, the   seed-based royalty income is much higher than in regions where these control measures are not implemented.

Biological Mechanisms, including Hybrid Crops
Hybridisation is a common method applied to achieve superior varieties. In the seed market, hybrid varieties are also well protected from illegal exploitation, as the grower can only reliably access the benefits of the hybrid variety for one generation and only from purchased seed. Purchasing new seed from the breeder is therefore required for each cropping cycle.

trade secrets
Trade secrets are regarded as a method for protecting plant breeding processes, or the knowledge or expertise that cannot be registered through Patent or PVP systems. A common example is maintaining confidentiality regarding the precise nature of a marker. Curtis and Nilsson noted the owner of a specific marker tends to maintain secrecy, as proceeding to patent protection would reveal the existence of this specific technological invention. The success of the method is dependent on the confidentiality of the parties involved.

registered trademarks
The study showed that although not as common as the other mechanisms, registered trademarks are used on some level. The fruit and ornamental plants industries is an example where fruits or cut flowers of a particular shape, size, colour, or flavour may only be distributed and sold in conjunction with a registered trademark. This may be of considerable value given the large distribution of some of the products.

Individual members of the Working Group presented the data collected from the 14 seed markets investigated for the study. Canada’s results were prepared by Patty Townsend, Executive Director, Canadian Seed Trade Association. She found Canada is a world leader in the development, production and marketing of corn, canola, lentils, beans and other pulses, but we are falling behind in wheat. Since the 1970s, the variety trial yield index for peas and canola have increased by 40% and 80% respectively, while wheat only managed to increase by 10%. Canada’s wheat development has been heavily dependent on public funding, which in turn has been declining for years. Townsend notes private sector contributions to cereals development accounted for roughly 2% of the total private sector expenditure in 2012. Townsend also noted several contributing factors for Canada’s decline.

farm saved seed (fss)
Nearly 80% of the seed used in Western Canada is saved from the previous year’s crop, making it difficult for the plant breeding industry to recoup funds for investment through the sale of seed.

poor intellectual property protection tools
Canada subscribes to the UPOV agreements of 1978, but PBR legislation has yet to be amended to conform to UPOV 1991. Townsend reports efforts to bring new internationally developed wheat varieties to Canada are threatened by the inability to properly protect intellectual property.

government regulation
The Canadian Wheat Board (CWB) held a monopoly for more than three decades on most aspects of wheat transactions in western Canada. Townsend describes that it also played a major role in the selection of new varieties, holding a de-facto veto on the quality committee of the wheat variety recommending system. Until 2008, new wheat variety kernels were required to be “visually distinguishable” (KVD) from each other in order to be eligible for variety registration. The study showed that because the requirement for KVD and the monopoly held by the Ontario Wheat Board ended before 2000, Ontario wheat productivity gains have been more significant than in the west. FSS use is still relatively high, but its use is much lower than in Western Canada.

efficiency of royalty collection
The majority of the Canadian wheat crop is grown in the prairie provinces (94%) where the collected data shows certified seed usage is estimated to range between 12 and 20 percent of the total seed planted. Ontario and Quebec combined make up, at most, six percent of Canada’s wheat production, but with a certified seed usage of 40-60%. Townsend explains this drops the overall measure for national efficiency to the lowest among other countries evaluated in the study, with an estimate of 20%, at best, according to the study’s findings.

The results indicate that a country with a unique intellectual property rights protection system for plant varieties is not enough to assure efficient collection of royalties. Many countries with such legislation in place do not demonstrate efficient collection procedures; Canada was ranked the lowest in the study. In the most efficient territories (as found in Sweden and the United Kingdom), PVP is supported by enforcement tools including mandatory certification procedures and strong government support. The highest efficiency of royalty collection occurs in territories where FSS remuneration is collected in addition to certified seed royalties. In addition, the results of the study have shown that contractual collection systems as found in Argentina and Uruguay can be just as effective as mandatory reporting systems. •