Public sector crop breeding institutions are currently facing a dilemma. This concerns how they can provide broad access to the crop varieties that they develop. These institutions are often funded, at least in part, by local or regional governments, and hence are dedicated to a fundamental mission of serving the public interest. The same holds true with the CGIAR system, as it is also non-profit entity, and shares a similar fundamental mission of serving the general public welfare. Therefore, with the publicly funded crop varieties developed by these institutions, a fundamental issue is access, or to be more precise, how to provide the greatest possible access to these value-added crop varieties to those who most need and could most benefit, that is, resource poor farmers in developing countries. In this context, a series of questions are presented: Should such varieties be subject to plant variety protection (PVP) and licensing? If licensed, how so … exclusive or nonexclusive licenses? Or should other mechanisms for providing access be considered, such as direct ownership by plant breeders, or distribution via auctions, or possibly access via open-source licensing schemes, or simply general free access (absolute release into the public domain)? Whatever may be the mechanism in specific cases, many institutions have, and will continue to, pursue PVP protection and licensing; chapter 11.3 discusses this approach for facilitating access.
Plant variety licensing is a tool that plant breeding companies (in the private sector) or institutions (in the public sector) use to commercialize, or provide access to, their products (crop varieties). Licensing is also a tool facilitating technology transfer. This relates directly to the two aspects of seeds: (1) as a vehicle for technology transfer or (2) the seed itself as a commodity. Commercial seed varieties have technology embedded in the seed, developed by plant breeding and crop improvement programs. Such improvements can include insect, drought, pathogen or herbicide tolerance. These are valuable technological innovations, subject to licensing. In addition, seeds are also agricultural commodities, generating profits that are subsequently reinvested. This production side is also subject to licensing. Hence, the two are inter-related, one supporting the other. Innovation drives success, and success drives profits … reinvested to produce greater innovation. Licensing, therefore, can be an engine driving this dynamic process.
Chapter 11.3 provides valuable, practical guidance for in-licensing and out-licensing of crop varieties, with a special focus on developing countries, where, with decreased funding of public sector breeding, seed sectors are increasingly moving towards privatization. Because this has created increased demand for new varieties, seed companies are seeking to in-licence varieties while private sector breeders may desire to out-licence their varieties. Capacity in negotiating and executing license agreements, therefore, is becoming all the more critical. In an organized, detailed and understandable fashion, chapter 11.3 presents the fundamentals of seed licensing and how the licensee and the licensor should focus on the practical content of a licence agreement: exclusivity to plant material and territory, plant variety protection, variety trials, national registration, royalty payment and information transfer. Furthermore, since licensing is increasing international in scope, a entirely new set of challenges arise. Indeed, foreign investment by companies, making their varieties available through licensing, promotes local seed production and variety testing. However, as chapter 11.3 makes clear, access to new varieties requires intellectual property (IP) skills, pragmatically realized through establishment of variety licence agreements.
Licensing of Crop Varieties and Germplasm: The Nuts and Bolts
Licences can be divided in two parts: (1) clauses describing the key rights and obligations of the parties and conditions that are the framework of the licence. (2) “Boilerplate” clauses not specific to the agreement but legally relevant (arbitration, relevant law, legality, assignability, warranty, force majeur). The key elements of the license agreement discussed in chapter 11.3 primarily focus on the first category of rights and obligations:
- Exclusivity,
- Territory,
- Evaluation of the licensed material,
- Protection of germplasm,
- National registration and Plant Variety Protection,
- Royalties,
- fixed rate royalty,
- price of the seed royalty,
- minimum rate royalty,
- sold seed quantities royalty,
- end-point royalty,
- Effect of termination, and
- Reporting to licensor.
Crop variety in-licensing and out-licensing are two sides to the licensing equation, complimentary, yet each with its own objectives. In-licensing of plant varieties can increase market share, building a competitive advantage by providing for customer needs. In-licensing varieties also enhances or completes a company’s variety portfolio, both for in-house breeding programs (facilitating access to breeding materials) and for in-licensed varieties ready for commercial distribution. The most common reason for out-licensing varieties is for a company trying to maximize return on investment by allowing others to produce and sell the varieties in markets that cannot be reached satisfactorily through the current marketing set-up. Hence, out-licensing may be the only option to enter certain markets.
Successful licensing of crop varieties is contingent on the strength of PVP legislation. This supports the interests of the variety owner and the farmer, facilitates the transfer of technology, and provides incentives for further investments in the development of new plant varieties. In many countries the PVP Legislation is based on The International Union for the Protection of New Varieties of Plants (UPOV) Convention. As chapter 11.3 so lucidly points out, the beauty of UPOV is harmonization and documentation of PVP legislation, that facilitates licensing by foreign seed companies. On the other hand, when dealing with non-UPOV signatory nations, notably in developing countries, there is a greater challenge for potential licensors to conform to local PVP laws. In addition to PVP, protection of intellectual property in plants can be obtained through the use of hybrid technology. This may create possibilities for out-licensing production of hybrid seed. However, by keeping hybrid seed production within its own control, the licensor can obtain a certain protection of the hybrid components.
Consistent with PVP laws, a license agreement can provide for access to any, or all, of a bundle of IP rights granted, including:
- Production or reproduction (multiplication),
- Conditioning for the purpose of propagation,
- Offering for sale,
- Selling or marketing,
- Exporting,
- Importing,
- Stocking for any of the purposes mentioned above.
In terms of rights granted, licenses can be either exclusive or non-exclusive. However, exclusive licences are preferred because the mutual commitment will focus efforts and thereby be better for business. In addition, licences can be either: (1) distribution licences (rights to market and sell), and (2) production licences (market and sell as well as seed multiplication and production).
By clearly stating the principal goals of a license, the licensor and licensee can achieve their mutual objectives. This can be realized successfully by recognizing and implementing the fundamental principles outlined in chapter 11.3: the key elements of variety licensing and how they can be approached. The licence provides the framework for cooperation and success. Finally, it is important to recognize that a licence agreement is not static. There are certain provisions that, of course, should be adhered to, but there also needs to be flexibility. Changes in the market, seed legislation and PVP laws should be reflected in the agreement, as it is partly built upon such issues. Prospective licensors and licensees can then focus on the parts of a licence agreement that will have the largest impact on their respective endeavours.
CoGenCo: A Tool for International Licensing of Germplasm
Whereas the transfer of intellectual property (IP) or tangible property (constructs, germplasm) rights is always based on contractual agreements describing what understanding has been reached between two or more parties, there still remains uncertainty when negotiating licenses; this is exacerbated when parties are in developed and developing countries. Another problem is that there are hundreds of versions of licenses and inexperienced parties find it hard to know which type to use. In spite of these obstacles, nearly everyone agrees that access to advances in crop science should be improved in order to accelerate their transfer to developing countries. Although this could be possibly accomplished via a variety of alternative approaches, from a realistically practical perspective licensing stands out as among the most important mechanisms for transfer. However, all too often endless discussions have distracted everyone from the only focus that matters from a humanitarian perspective—the urgent need for resource poor farmers to access improved germplasm.
Unfortunately, partly due to numerous complexities in terms of geographical, cultural and paradigmatic distances, prospective licensors and licensees frequently spend a lot of time becoming acquainted and developing a certain level of trust in order to reach a mutual understanding leading to an agreement, in other words, reaching a point where they are in fact speaking the same “language” (the “language” of contracts and licenses). This lengthy process, however, can deter or derail licensing. Companies may not wish to proceed with the investment of time and energy, because even commercial licenses with entities in the developing world simply take up too much valuable management time and resources as they attempt to form some sort of relationship with developing country entities; the necessary funds for extended and repeated face-to-face meetings are simply often not available.
A complementary approach is therefore needed, that is, a way to bridge this communication gap and more rapidly arrive at a common “language”. Modern technology might provide an answer. A software decision tree linked to template contract language, so that individual customized contract documents can be generated, could ameliorate many of the aforementioned problems. Provided that some key players agree to the basic template (for example parameters and issues for inclusion) an appropriate software package could greatly provide opportunities for assembling a greater array of potential partners.
A Computer Generated Contract Template (CoGenCo) System (CoGenCo) could represent a pragmatic step in facilitating increased licensing of proprietary and finished varieties that may or may not incorporate proprietary technologies such as genes for input or output traits. The CoGenCo system, therefore, is aimed at establishing a certain international standard license, that is, a standard that all understand and agree on. In this way, a “meeting of the minds” is facilitated and accelerated.
Essentially and operationally, the approach through CoGenCo is to facilitate the awarding of out-licences to developing country institutions, including the CGIAR, of germplasm. Under the legally binding terms of the CoGenCo-generated license agreements, several entities in a given country could compete against one another on price in poor countries, but would not be allowed to compete against the patent holder in developed countries, where revenues and the incentives for developing new varieties and new technologies would be undiminished. And under appropriate circumstances, the germplasm and/or traits could also be licensed royalty free. Use of out-licensing in this way separates these fundamentally different markets and promotes access to improved germplasm and technologies, all by reaffirming various statutory protections as indispensable for successful agricultural research and development.
Key Implications and Best Practices
Given that IP management is heavily context specific, these Key Implications and Best Practices are intended as starting points to be adapted to specific needs and circumstances.
For Government Policymakers
- Government have tremendous opportunities in assisting farmers obtain improved germplasm by promulgating legislation that encourages the development of the seed market. Such legislation would include plant variety protection (PVP) and seed trade legislation, among others.
- The legal support for introduction and sales of new plant varieties would be an incentive for further investments in variety development and would contribute to economic and social progress.
- By joining the UPOV Convention, the transfer of new and improved plant varieties among countries and regions can be facilitated significantly, leading to the earlier availability if improved varieties for farmers. Membership in such international conventions has also been shown to attract additional investments in plant breeding and crop improvement.
- Publicly financed breeding and private breeding and seed companies should be allowed to compete on equal terms. The publicly developed varieties should be offered to the market on market conditions and thus not subsidized in terms of lower or no costs for propagating material.
For Senior Management (university president, R&D manager, etc)
- Work with out-licensing of the plant varieties resulting from the institute/university breeding. Focus on cooperation with small and medium size private companies in the sales and marketing of new varieties in order to reach large geographic coverage on the national/local market.
- Conduct research and trials on best-practices in farming to support the use of improved plant varieties.
- Perform local demonstration and comparative variety trials for the benefit of the farmers and other end-users such as the processing industry.
- Focus more on long-term breeding targets such as improved disease and pest resistance. The results of such development work could also be subject to out-licensing or breeding cooperation with other institutions or private breeding companies.
For Scientists
- Requirements to make all varieties and testing results resulting from collaboration publicly available (non-exclusivity) could be a disadvantage for a private company when entering into collaboration with a public institution. These conditions have to be clarified in the initial discussions around collaboration.
- Depending to which extent collaboration is wanted there would be different approaches:
- For access to single plant varieties for crossing purposes, there might be no requirement for any agreement, apart from perhaps a basic Material Transfer Agreement.
- Long-term breeding collaboration with common variety selection and mutual exchange of breeding material might require a management or board decision and would probably only be accepted if it was of strategic interest and value.
- Any transfer of plant material aimed for selection of commercial candidates would be preceded by a variety license agreement.
For Technology Transfer Officers
- Make sure that both parties fully understand the provisions of the agreement, and be clear in the agreement, as this will increase the chances for a successful cooperation. (If the establishment of a license agreement needs much time before it is signed, don’t try to rush it!)
- Acquire substantial knowledge of the market conditions before entering into any licensing agreement.
- Complete the practical part of the agreement before entering into possible discussions about the “boilerplate” clauses.
- Be thorough in reporting of results, etc. to the licensor or licensee in regard to the licensed material, as the exchange of information is yet another important prerequisite for a successful cooperation.
- A computer-generated contract template system can significantly facilitate the licensing of crop varieties. Such a system can accelerate capacity in licensing, and thereby foster increased access to new and improved germplasm, traits and crop varieties.
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