 |
|
|
|
|
Plant Breeder’s Rights and Contract Growing
in the Pasture Seeds Industry
A Market in Transitionby Rocque Reynolds
September 2007
RIRDC Publication No 07/160 RIRDC Project No UTS-8A
This transformation has been shaped by the introduction into Australia of plant breeder’s rights (PBR) in 1987. The PBR Act allowed breeders to sell or licence their exclusive rights to deal with new plant varieties and encouraged the rise of specialist marketing companies to exploit these rights. In turn, the new specialist marketing companies have relied on specialist growers to grow seed under contract for their large modern distribution networks.
The report examines the relationship between contract growing and plant breeder’s rights; the attitude of growers to contract growing; and the legal status of the growing contracts.
Although the report notes that there are significant drafting problems with contracts in the pasture seeds industry, as well as problems with the enforcement of PBR, the report concludes that the relationship between pasture seed growers and seed companies today is a strong one, based on joint interests and trust. The report found no evidence of the types of oppressive and unfair conduct which has been associated with contract farming in some of the international literature.
Who is the report targeted
at?
The report is concerned
with growers’ experiences of contract growing in the pasture seeds industry
and the impact of PBR on them. However, the results of the research conducted
for this report will be valuable for all stakeholders in the pasture seeds
industry who wish to understand more fully how intellectual property rights
shape their industry and commercial relationships and the role of contract
growing in the management of intellectual property rights. The report will
provide guidance to industry bodies and government departments who are
grappling with issues of PBR enforcement, whether or not a standard growing
contract should be developed and whether protective legislation is needed
for contract production in the agricultural industries.
Background
The research grew out of
a paper presented at the 2003 Agribusiness Conference which looked at strategies
for managing PBR. It considered cascading royalties whereby breeders would
seek royalty payments not just from growers but also from seed conditioners,
retailers, exporters and storage facilities. It considered how end point
royalties were being introduced and urged conference participants to look
to the Copyright Act (Cth) 1968 as a possible template for the future management
of PBR. On the basis of this paper and the author’s past work in managing
intellectual property rights the Rural Industries Research and Development
Corporation provided funding to consider how intellectual property was
being managed in the pasture seeds industry.
Aims/Objectives
The aim of the report is
to examine the relationship between the introduction of plant breeder’s
rights and the growth of contract growing in the pasture seeds industry;
to consider the role of contract growing in managing intellectual property
in the pasture seeds industry and to assess growing contracts.
Methods used
The research was conducted
in four stages. In the first stage industry leaders, growers and breeders
were consulted and asked to identify the issues which they believed were
issues of concern for growers, seed breeders and seed companies in relation
to managing intellectual property in the pasture seeds industry. At this
stage it emerged that contract growing was a major concern for the industry.
A literature review of research
related to contract farming constituted the second stage of the research
program. It emerged that there had been considerable economic and legal
research into contract farming at an international level and some economic
analysis of contract farming in Australia, including a little in relation
to pasture seed growing. No matter what industry was being researched in
relation to contract farming, the issues identified as issues of concern
were very similar.
In the third stage of the
research an attitudinal survey of pasture seed growers in Australia was
conducted which investigated grower attitudes to identified issues of concern
and asked them to identify any new issues. It was at this stage that growers
identified marketing and access to varieties as the most important issues
related to the introduction of PBR. These issues had not been identified
previously in the literature.
In the fourth stage the legal structure of the Plant Breeder’s Rights Act (Cth) 1994 (PBR Act) and the history of PBR both in Australia and overseas was analysed in the light of the new issues raised by pasture seed growers. It was concluded that growers had identified a significant feature of the impact of PBR in Australia which had previously not been fully investigated, although it had been hinted at.
Finally, a legal analysis of twenty growing contracts used in the pasture seeds industry was conducted to assess them against the concerns raised in relation to contact growing which had been identified in the first stage of the research.
Results/Key findings
Relationship between introduction
of plant breeder’s rights and the growth of contract growing
in the pasture seeds industry
When the Plant Breeder’s Rights Act (Cth) came into effect in 1987 it created out of nothing a brand new commodity, which was the exclusive right to deal with a new plant variety.
As the report shows, the effects of this change were immense. Firstly, it allowed public breeding institutions to commercialise their operations by selling or licensing the right to deal with their seed.
This led to the development of specialist marketing companies who were neither breeders nor growers and, in turn, to the transformation of the old grower /marketer in the pasture seeds industry into a specialist grower who produced seed under contract for the marketing company.
The growth of contract growing in the pasture seeds industry, therefore, is not a direct result of the introduction of plant breeder’s rights but is the tool used by the new specialist marketing companies to manage the supply and quality of seeds for their large, modern distribution networks.
If the separation of breeding from farming was the first stage of the development of the modern pasture seeds industry in Australia, the separation of marketing from growing marks the second, and still to be completed, step.
Finally, although it had been expected that the introduction of PBR would lead to the development of a private Australian plant breeding industry this has not happened in relation to pasture seeds. This report demonstrates that today most of the 200 PBR registered pasture seed varieties are owned by Australian public breeding institutions, followed by overseas privately owned breeding institutions and then, a long way behind are Australian private breeders and overseas public breeders.
The role of growing contracts
in managing IP in the pasture seeds industry
The growing contract serves
three main purposes in the modern pasture seeds industry. First, like all
commercial contracts the contract shares risk between the parties. Second,
the contract allows the seed marketing company to set standards to ensure
quality, consistency and market supply.
The report identifies another
important function of growing contracts between specialist seed marketing
companies and growers and that is to limit what the grower may do in relation
to seed where the seed company cannot rely on the PBR Act to do this. This
may happen because the variety is not registered or because there are problems
of enforcement under the PBR Act.
The report identifies a
number of enforcement problems including the cost of enforcement; the lack
of access to the Federal Magistrate’s Court; the lack of standing of PBR
licensees such as marketing companies and the difficulty of prosecuting
offences under the Act.
Attitudinal survey of
growers
The survey of grower attitudes
to contract growing made a number of significant findings.
There was a difference in attitude to contract growing between those who grow under contract and those who do not. Of the nine growers who had no contract growing experience each one expressed grave concerns as to the nature of contract growing. Of the ten growers who had experience of growing under contract there was a notable confidence in the nature of the bargain and the effectiveness of the industry.
Those with experience in contract growing rejected any suggestion that they might be victims of unfair contracts in their growing enterprise. They reported that they were equal partners in a growing venture with the seed companies, that they were in a position to negotiate terms with the companies and that companies who didn’t do the right thing by growers were unlikely to survive.
Contract growers reported that companies did not unduly interfere with grower decisions. In fact, some growers were concerned that companies lacked the necessary skills to give growing advice because they had become specialist marketers rather than breeders or growers.
The benefits of contract growing as perceived by contract growers were price stability, early payment and being released from the responsibility of marketing. The disadvantages were primarily related to the fact that contracts were for limited tonnage and the grower did not necessarily benefit from a good crop.
Growers rarely sought legal advice on the contracts. Despite this, the majority of contract growers were happy with the terms of their contracts because they had negotiated them individually or were able to negotiate a solution if a problem arose, especially in relation to excess and sub standard seed. The timeliness of deliveries (especially from New Zealand) and labelling were identified as two of the biggest problems in the contract relationship.
Legal analysis of contracts
This general grower satisfaction
with contract terms was in sharp contrast to the legal analysis of the
contract which found that the contracts, whilst not being oppressive, were
poorly drafted, varied greatly from company to company and were very confused
about the legal relationships established under the contract.
Variation is not a problem in itself, however, in an industry where growers (and sometimes even the seed companies) do not seek legal advice on contract drafting the lack of an industry standard is of concern.
The report does not believe that further education will solve these problems and instead asks whether protective legislation or the introduction of a standard contract would be a better way to address this problem.
Implications for relevant
stakeholders
The report has important
implications for relevant stakeholders insofar as it explains clearly the
relationship between contract growing and PBR and concludes that, at least
amongst the successful growers approached in the survey who have experience
of contact growing, there is some confidence in the effectiveness and fairness
of their contract growing arrangements and a rejection of the more extravagant
concerns about contract farming generally
|