The CJEU Nadorcott Decision (C-176/18) Exposes Loopholes in UPOV System
This analysis has been drafted exclusively for CIOPORA members and is not meant for wider distribution. It summarizes the main facts of the case and analyses its implications for breeders.
1. The Case
On 22 August 1995, Club de Variedades Vegetales Protegidas (CVVP) applied for a Community Plant Variety Right (CPVR) in respect of the Mandarin tree variety “Nadorcott”. The CPVR was originally granted by the CPVO on 4 October 2004. The decision on the grant was then appealed with suspensive effect, but this was later dismissed by a decision published on 15 February 2006, so that the final date of grant was 15 February 2006.
Between the application date and the grant date, Mr Martinez Sanchís, a Spanish farmer, purchased from a public nursery [1] plants of the Nadorcott variety and planted them on his premises. In the following years he harvested and sold their fruits. The trees have been propagated by the registered nursery, although it had never been licensed for those activities. However, the origin of the starting material for the propagation is yet unknown [2].
CPVV sued Mr Martinez Sanchís, claiming that he had infringed its rights, i.e. for the acts undertaken during the provisional protection and those after the grant in respect of the harvested material. It is disputed whether Mr. Sanchis propagated new trees, but the Spanish court, in its presentation of the relevant facts, only stated that he planted the plants he had purchased in the nursery (and thus just “used” the ones he bought from the nursery to produce fruits).
CPVV sought cessation of all those acts, including marketing of the fruit obtained from the trees of that variety, and compensation for the damage allegedly suffered as a result of the acts undertaken by Mr Martinez Sanchís both during and after the provisional protection period.
The case went up to the highest instance at the Supreme Court of Spain. The Spanish Court referred three questions to the European Court of Justice (CJEU) regarding the extent of the scope of protection under the Community Plant Variety Regulation 2100/94 (Basic Regulation) in respect of infringing acts relating to the harvested material and acts undertaken during the provisional protection.
On 19 December 2020, the CJEU ruled in the case [3].
Picture credit: Club de Variedades Vegetales Protegidas
2. The Analysis
No authorization required – no unauthorized use. The CJEU – in line with the Advocate General and the EU Commission - concluded that, because during provisional protection there is no authorization required by a third person to propagate and commercialize the applied-for variety, the post-grant requirement of the “unauthorized use of variety constituents” for exercising the breeders right on the harvested material is not fulfilled. This is a restrictive interpretation by the CJEU [4], but not fully surprising.
While the CJEU in the Nadorcott case only decided about the interplay between provisional protection and the exercise of the right on harvested material, the decision might have consequences for other situations and cases, too.
2.1. Doing business in countries with no PVR protection
What if the breeder/title-holder of a CPVR protected variety authorises (or organizes himself) an export of 10,000 trees (variety constituents) from the EU to a territory where his variety is not protected (because no PBR law exists, the species is not protectable, or he has not sought to protect his variety), and the variety is subsequently propagated in this territory without the breeder’s consent, and fruits (harvested material) are shipped into the EU? Can the fruits be stopped at the EU boarder, as illegal import of harvested material? The export of the variety constituents was authorized, so can be no “unauthorized use of variety constituents” for this act in the EU[5]. For the propagation of the variety in the other territory no authorization of the breeder is required, because there is no protection. Would it make a difference if the sales contract would specifically prohibit a further propagation of the variety [6]?
2.2. Doing business in countries with full Farmers´ Exemption
What if the breeder/title-holder of a CPVR protected variety authorizes (or organizes himself) an export of 10,000 trees from the EU to a territory where his variety is indeed protected, but where the Farmers´ Exemption is applicable to the respective species [7]. If the buyer of the trees self-propagates/produces another 100,000 trees, referring to his right to do so under the farmers´ exemption, can the fruits harvested from these trees be stopped at the EU border? [8]
2.3. Compulsory License
What happens in case a compulsory license is granted to a grower for the propagation of trees in a foreign country. Can the title-holder of a CPVR stop the import into the EU of the harvested material produced under this compulsory license?
2.4. Risk of the title-holder
The European Court of Justice was quite unemotional when assessing the application of the law and the negative consequences for title-holders. In the case “Merck vs Stephar and Exler” (case 187/80 of 14.07.1981) the Court wrote:
It is for the proprietor of the patent to decide, in the light of all the circumstances, under what conditions he will market his product, including the possibility of marketing it in a Member State where the law does not provide patent protection for the product in question. If he decides to do so he must then accept the consequences of his choice as regards the free movement of the product within the Common Market, which is a fundamental principle forming part of the legal and economic circumstances which must be taken into account by the proprietor of the patent in determining the manner in which his exclusive right will be exercised.
In the aftermath of the Nadorcott case one might say:
It is for the applicant of the PVR to decide, in the light of all the circumstances, under what conditions he will market his variety, including the possibility of marketing it if only provisional protection is provided for the variety, or in a country outside the EU, where no protection at all is provided. If he decides to do so, he must then accept the consequences of his choice as regards the limited exercise of his right on harvested material in case of (re-) importation of such material into the EU or continued use of the variety after the right is granted.
The view of CIOPORA
CIOPORA anticipated these situations already years ago and, as a consequence, has requested the strengthening of the Provisional Protection and of the protection of Harvested Material in its Position Papers[9].
Also, in the discussions in UPOV about the Explanatory Notes on Harvested Material, CIOPORA warned about such scenarios and the negative consequences for breeders. Unfortunately, CIOPORA’s warning has been so far ignored by the policymakers.
Finally, during the discussions about the Community Plant Variety Right acquis in 2010-2012, CIOPORA warned about significant loopholes in the protection of harvested material, particularly when it comes from outside the EU. Unfortunately, the EU Commission has not since made any progress in the improvement of the CPVR.
CIOPORA will continue to lobby for an effective protection of plant varieties.
In UPOV, a discussion started about the EXN on Harvested Material. On the suggestion of Japan, UPOV will discuss about the term “unauthorized use of propagating material”, in relation to trees, in Article 14(2) of the UPOV 1991 Act. CIOPORA will contribute to the discussion. The minimum goal is to open the EXN on Harvested Material for revision and then change the notion of “unauthorized use”. Currently, an act is only ‘unauthorized’ if the title-holder did not grant an authorization for it, whereas it was in fact required (because a PBR title was granted). In a new EXN, the requirement “unauthorized use“ should be described purely as a matter of fact: no authorization has been granted, no matter whether such authorization is or was required. In parallel, CIOPORA has started a campaign in the EU (supported by Euroseeds, Plantum and AIPH) for the review the CPVR regulation 2100/94.
Conclusion:
CIOPORA members should be very careful when considering to exporting or licensing to export propagating material from the EU or elsewhere into countries, where no authorization is required for the further propagation of the variety. It might end up in a complete loss of control over the import of the harvested material coming from these countries.
Footnotes:
[1] The term “public nursery” must be understood as “registered nursery”, meaning a nursery which acts in compliance with applicable regulations on production and marketing of nursery plants and which is registered in a public registry under the control of the regional government. [2] This is not mentioned in the decision of the CJEU, the information has been received by a third party. [3] On 11 June, the Spanish Supreme Court, which referred the questions to the CJEU, has rendered its judgement in the case (EDJ 2020/575524 STS (Civil) de 11 Junio de 2020) [4] A broader interpretation might have been possible, too, because the propagation of the Nadorcott trees took place without the consent of the breeder / applicant of Nadorcott. [5] In its examples in the Explanatory Notes on Harvested Material (EXN HRV) to illustrate the protection of harvested material, UPOV did never include a case involving a third country where the title holder had authorized the export of propagating material into this country, ignoring that still multiple countries exist in which breeders do business, although no protection exists. [6] The KANZI decision of the CJEU (C-140/10) of 20.10.2011 puts some weight on a license contract for the question of Exhaustion. However, the license contract in the Kanzi case was concluded during the period of Provisional Protection. The CJEU didn´t discuss this and obviously saw no problem here, although Article 27 (1) of Regulation 2100/94 says that community plant variety rights – as opposed to applications - may form in full or in part the subject of contractually granted exploitation rights. [7] Farmers´ Exemption means the right of the farmer to use his own harvest as propagating material in the next season. The harvest of this next season can be sold without restrictions. Some PBR laws limit the farmers´ exemption to small farmers, however, small in agriculture is not small in horticulture. In the EU, a small potato farmer can farm ca. 4 - 5 ha and still is considered small. [8] Obviously, no authorization is required for the grower to self-propagate under the farmers´ exemption, and usually it is not possible to contract-out the applicability of the farmers´ exemption. In its EXN on Harvested Material UPOV explicitly mentions in paragraph 9 that “unauthorized use” would not refer to compulsory exemptions to the breeders right, such as the farmers´ exemption. [9] See CIOPORA Position Papers on PBR and on Patents, pages 38 and 39 (General PBR Matters)