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Editor-in-Chief, Anatole Krattiger

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CHAPTER NO. 17.26

Bennett AB and M Carriere. 2007. The University of California’s Strawberry Licensing Program. In Intellectual Property Management in Health and Agricultural Innovation: A Handbook of Best Practices (eds. A Krattiger, RT Mahoney, L Nelsen, et al.). MIHR: Oxford, U.K., and PIPRA: Davis, U.S.A. Available online at www.ipHandbook.org.

The University of California’s Strawberry Licensing Program

Alan B. Bennett, Associate Vice Chancellor, Office of Research, University of California, Davis; and Executive Director, PIPRA, U.S.A.

Michael Carriere, Business Development and IP Manager, Office of Technology Transfer, University of California, U.S.A.

Editor's Summary, Implications and Best Practices

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Abstract

The strawberry improvement program located at the University of California, Davis focuses on breeding cultivars for the strawberry industry in California, yet today it supports the majority of production of fresh-market strawberries globally. Around the world, UPOV-compliant Plant Breeders’ Rights (PBR) are the most common form of IP protections sought by University of California (UC) to protect its strawberry cultivars. Inside the U.S. and Canada, cultivars are licensed on a nonexclusive basis directly to nurseries. Outside of the U.S. and Canada, UC relies on business partners, referred to as “master licensees,” as intermediaries. A master licensee is provided with exclusive rights within a defined territory that includes the right to issue nonexclusive sublicenses to nurseries within that territory. Overall, a three-tier royalty structure is utilized, with growers inside California paying the least, growers in the U.S. outside of California and in Canada pay slightly more, and all other growers pay even more, a percentage of which is shared with the master licensee. The ultimate future of the UC strawberry breeding program is tied to the continued development of competitive cultivars, but the team is highly skilled and, partly due to the licensing program, funding is stable.

1. Introduction

The strawberry improvement program located at University of California, Davis ¹ focuses on breeding cultivars for the California strawberry industry. University of California (UC) strawberry cultivars are developed for the cool coastal Mediterranean and arid subtropical regions of California and have become the basis of a global fresh-market strawberry industry. UC cultivars represent 75%–80% of the production of the US$1.3 billion California strawberry industry and represent 50%–60% of worldwide production. The UC strawberry licensing program is active in the United States, Europe, Asia, Africa, South America, and Australia and generates an annual licensing revenue stream of US$4.5 million. This case study summarizes patent portfolio development, licensing strategy, and income trends for this successful university licensing endeavor.

2. IP Portfolio Development

Newly developed UC strawberry cultivars are protected in the United States under U.S. plant patents administered by the U.S. Patent and Trademark Office (PTO). A U.S. plant patent is available for asexually propagated plant species while plant variety protection certificates, administered by the U.S. Department of Agriculture (USDA), are reserved for the protection of sexually propagated species. Outside counsel is utilized by UC to secure U.S. plant patents for strawberry cultivars.

In ex-U.S. jurisdictions, U.S.-based patent counsel directs the prosecution of intellectual property in cooperation with ex-U.S. counsel. Counsel outside of the United States is often identified by the licensee in the respective territory. Worldwide, the process of obtaining IP for plant cultivars is a specialized area of IP prosecution and this reduces the pool of capable attorneys in a given territory. Additionally, plant-based IP is a new legal construct in some territories where UC seeks protection for strawberry cultivars. These factors complicate the process of identifying competent, cost-effective representation and emphasize the importance of in-country licensees in selecting legal representation. Ex-U.S. licensees are ultimately responsible for bearing the cost of IP prosecution in their territory. Since their business models depend on strong IP, they are motivated to aid in the search for capable legal representation. In some territories outside the United States, UC has identified non-attorney plant IP specialists, but in most cases it relies on the services of registered patent attorneys that also specialize in plant-based IP.

UPOV-compliant Plant Breeders’ Rights (PBR) is the most common form of IP sought for UC strawberry cultivars. (The Union for the Protection of New Varieties of Plants [UPOV] has set forth standards for licensing new plant varieties.) Although UC and its licensing partners worldwide seek UPOV-compliant PBR for UC strawberry cultivars, such protection is unavailable in some territories. As a result, the UC licensing program and its master licensees are active in expanding the scope of protection for plants in some countries worldwide. A successful approach has been to build grassroots support for plant IP by coupling access to cultivars with availability of IP for those cultivars. For example, in China a strawberry industry organization successfully lobbied governmental authorities to add strawberry to the list of protectable species. This action was encouraged by UC’s licensee for China. With PBR now available for UC strawberry cultivars in China, the Chinese strawberry industry gains access to UC cultivars, which leads to rural economic development in China, and UC licensing expands into the Chinese market. In Egypt, UC strawberry cultivars represent Egypt Plant Patent Nos. 1, 2, and 3, as a result of aggressively pursuing access to the nascent Egyptian plant patent system. In Brazil, UC strawberry cultivars are among the first protected strawberries under the new system of protection.

The decision to file or to engage in expanding the scope of IP for a given territory is made jointly between UC and the respective master licensee. The primary criterion is the expected value of the future licensing revenue stream. UC rarely files its strawberry cultivars “at-risk” (that is, without a licensee already identified in that jurisdiction). Master licensees are required to pay the cost of obtaining and maintaining both IP protection and commercial registration.

3. Structure of Domestic and International Licensing

In the United States and Canada, cultivars are licensed on a nonexclusive basis directly to plant nurseries. Nurseries are licensed the right to propagate plants and to sell the propagated daughter plants to fruit growers. Strawberry growers annually replant fruiting fields, so a royalty is collected annually. Royalties are assessed on a per-1,000 plants (purchased) basis rather than on the basis of sales.

Outside of the United States and Canada, the UC relies on business partners as an intermediary in support of the strawberry licensing program. These partners, referred to as master licensees, are provided with exclusive rights within a defined territory. The master licensee is granted the right to issue nonexclusive sublicense agreements to nurseries within the territory. In exchange for this exclusive right, the master licensee supports IP development and provides enforcement of IP rights including access to the local court system, as required. Critical responsibilities of the master licensee are market development, technical support, and the transfer of production know-how. In addition to being the local eyes and ears of UC’s licensing function, the master licensee facilitates testing and evaluation of promising new cultivars. In exchange for the services provided by the master licensee, UC agrees to share a percentage of collected royalties.

A three-tier royalty structure is utilized. Growers of UC cultivars in California currently pay, in royalties, US$3.00/1000 plants. Growers in the United States outside of California and in Canada pay US$4.50/1000 plants. Outside of the United States and Canada growers pay US$10.50/1000, a percentage of which is shared with the master licensee. In addition to the royalty component described above, a research fee is collected to directly support new cultivar development. The research fee of US$1.00/1000 plants entitles the licensee to a lower royalty rate (rates stated above). The licensee receives a US$1.50 reduction in royalties for the US$1.00 research fee contribution.

The structure of the strawberry licensing program is driven in part by UC’s presence as a public institution in the state of California. Nurseries and fruit growers in California are given preferential treatment, in addition to the reduced royalty rates for California. California-based nurseries (licensees) are the only nurseries in the worldwide licensing program that have access to all licensed markets. The sales territories of non-California nurseries are limited to a defined region. After the initial release of a new UC strawberry cultivar, its use is restricted to California for the first two years. This policy is designed to benefit fruit growers in the state who are concerned about competition in their own markets from UC cultivars grown abroad.

UC strawberry plants are shipped worldwide from California nurseries. To facilitate monitoring of worldwide strawberry plant shipments, an electronic, Web-based system is currently being developed with the goal of providing real-time shipping information for UC and its master licensees worldwide. Licensed nurseries will electronically declare sales before shipment. This pre-shipping electronic notification enables master licensees to accept or reject a proposed sale based on the intended use of the plant material and the licensing status of the recipient. The system is expected to reduce the occurrence of out-of-compliance shipments and provide the supplying nursery with assurance that its shipments are consistent with UC licensing policy worldwide.

4. Income Trends

For the latest fiscal year, gross annual income for the strawberry licensing program was US$4.7 million. Gross income increased from US$3.4 million in 2000 due to the combination of a rate increase in 2000 and market expansion in Europe, North Africa, South America, and Mexico. Approximately 45 percent of annual income is generated by California sales. Five percent derives from sales in the United States outside of California and in Canada. The remaining 50% of licensing income is derived from sales outside the United States and Canada. The largest non-U.S. markets, by country, are Spain, Mexico, Morocco, and Australia (from largest to smallest, within this group). In addition to royalty income, total research fee collection now totals US$650,000 annually and represents the lion’s share of funding for the strawberry breeding program at UC Davis. This amount contrasts with the US$350,000 support from the California Strawberry Commission, the second largest contributor to the breeding program.

After 2007, income is expected to increase based on a 2006 rate increase and further market expansion. Over the next five years, market expansion is anticipated in Brazil, Northern Europe, China, and Turkey. Additionally, new licensing strategies are expected to boost income from established markets as master licensees will be given the opportunity to price-to-market in the high-value territories of the European Union and elsewhere.

The ultimate future of the program is tied to the continued development of competitive cultivars. The UC breeding team is highly skilled, and funding for the endeavor is stable. As a result, the UC breeding and licensing programs are positioned for success for at least the next 10 years.

5. Conclusions

The strawberry licensing program of the University of California provides a clear example of how intellectual property protection by a public sector institution enables the global dissemination of innovative results by providing an economic stimulus to those who adopt the technology. It also allows those who benefit most directly from the technology to help sustain financially the program that serves them.

Endnotes

All referenced Web sites were last accessed between 1 and 10 October 2007.

¹ Further information on the strawberry licensing program is available at www.ucop.edu/ott/strawberry/welcome.html.

User Comments and Uploads

7 comments including 6 uploads.

Admin (30/04/2010 04:09:32)

We welcome your comments on 17.26 The University of California's Strawberry Licensing Program.

Handbook Editors (30/04/2010 04:10:36)

Regulatory pressure is a source of increasing concern for California producers, and its efficacy has come into question with the recent outbreak of E. coli in spinach produced and packed in Salinas, California. Though regulations have a positive impact on society in terms of cleaner air and water, as well as increased worker safety; they impose multiple costs to farmers in the state. Recent studies have attempted to quantify the impacts of regulation on California farmers. Findings from a 2005 survey of nearly 1,300 specialty crop producers show that regulatory costs add nearly $1 billion to California growers’ costs (Hurley et al., 2006). Johnston and McCalla cite increased regulation as a relatively new driver among 20 major factors affecting the future of California agriculture, but one that will have increasingly negative impacts on the competitiveness of the industry. No less than 25 separate laws at the state and federal levels govern the resource base employed by agriculture (Hurley, 2005).

Related upload: 1099_Paper.pdf (123K) -- .

Handbook Editors (30/04/2010 04:12:15)

Regional agricultural marketing programs are becoming more common in California. They are important components of localized strategies to increase the economic viability of farmers and their communities, especially given the challenges of current market and population trends. The effective place-based branding of agricultural products has the potential to raise farmer incomes while increasing consumer awareness about where the food they eat comes from.
In order to assess how regional ag marketing is faring in California, the University of California Sustainable Agriculture Research and Education Program conducted 25 interviews with people connected to ag marketing campaigns at various geographical scales, from subcounty to the state level. It became apparent that many programs share the same objectives, but the strategies and resources they use to accomplish their goals are considerably different. Some key themes and issues are discussed in detail, both in a general context, and with the specific
purpose of providing Yolo County with considerations related to the creation of its own regional ag marketing program.

Related upload: 20060510_Regional_Agricultural_Marketing_Report.pdf (572K) -- .

Handbook Editors (30/04/2010 04:13:34)

While biotechnology creates new opportunities for agriculture, developments are impeded by confusion in the system for awarding intellectual property rights (IPRs) over agro-biotechnological innovations. An intelligent redesign of the IPR system requires attention to how the definition of rights interacts with the market environment, generating incentives to create value. A distinction is drawn between cost-reducing innovations that increase the efficiency of producing homogeneous
outputs and value-adding innovations that create entirely new types of differentiated outputs. A reform is proposed that would require the mandatory sublicensing of genes and certain core enabling technologies for creating genetically altered organisms.

Related upload: eScholarship UC item 5bv0h963.pdf (576K) -- .

Handbook Editors (30/04/2010 04:14:17)

Over the last 150 years, agriculture has been subjected to several waves of
innovations, including biological and chemical innovations that increase agricultural
productivity, alter its input use, and modify its structure. Agricultural biotechnology is
now emerging as a wellspring of innovations that will reshape agriculture as profoundly as any previous innovation paradigm. This new technology has unique features which must be understood in order to formulate appropriate government and academic policy.

Related upload: Privatization.pdf (21K) -- .

Handbook Editors (30/04/2010 04:17:01)

While the Bayh-Dole Act addressed some of the legal impediments to the commercialization of inventions made by academic scientists, two factors continued to limit private interest in investing in promising academic inventions: the high uncertainty associated with the new technologies and the resistance of some corporate R&D departments to go outside for new ways of doing things. University technology transfer efforts have thus, in many instances, focused on starting up new firms, teaming up university scientists with promising inventions with interested venture capital investors. U.S.university technologies have helped spawn over 3,300 new companies in the last 20 years. Major biotechnology companies like Genentech (South San Francisco, CA) and Chiron (Emeryville, CA) and agricultural biotechnology companies such as Calgene (Davis, CA) and DNA Plant Technologies (Oakland, CA) all started with technologies that originated in university labs. Once a startup’s technology is sufficiently developed and demonstrates commercial viability, major corporations may then invest, sometimes to the extent of acquiring that startup. Monsanto, for example, acquired Calgene, and Savia, a vegetable seed giant, acquired DNA Plant Technologies through its U.S. subsidiaries Seminis and Bionova.

Related upload: v6n3_2.pdf (794K) -- .

Handbook Editors (30/04/2010 04:18:25)

With its nearly year-round supply and 83% market share, the California strawberry
subsector1 dominates production and distribution of fresh strawberries in North America. The subsector has achieved its leading position among competitive production regions (e.g., Florida and Oregon) through the development and interaction of several factors. These factors include the following: superior agro-ecological conditions, economies of size, technological innovation, favorable demand conditions, marketing flexibility, and support infrastructure.

Related upload: WCC_72_straw5.pdf (93K) -- .