Dutch court rules that patents based on Ethiopian Teff flour lack inventiveness - Ancientgrain BV and Bakels Senior NV

Earlier this month, former Commissioner of the Ethiopian Investment Commission, Fitsum Arega went on his Twitter page to celebrate the judgment of the Dutch Court of Hague in Ancientgrain BV and Bakels Senior NV delivered on 21st November 2018 and what it means for Ethiopia’s long-fought battle to legally export its popular Teff flour. In that case, the Court of Hague held that there was no infringement of two Dutch patents that refer to (the processing of) Teff flour because those patents lack inventiveness. See the judgment in Dutch, here. [This African Correspondent used Google Translate]

The facts
Ancientgrain instituted an action against Bakels for patent infringement. It claimed that, by offering Teff bread flour mix covered by the scope of its (Ancientgrain) patent, Bakels infringed its patents (NL 977 and NL 978). It claimed inter alia, damages for patent infringement, compensation of €150,000 and its full litigation costs. See paragraph 3.3 of the judgment.

Ethiopian Flag

Ancientgrain became the patent holder in 2014 as the successor-in-title of the previous patentee. The patents refer to flour mixtures of Teff, dough variants made from them and food products and related methods. See paragraph 2.5 of the judgment.

In its defence, Bakels argued that it could not be liable for patent infringement as the patents were invalid due to lack of novelty, or at least inventiveness. Bakels further claimed that Ancientgrain acted unlawfully because it knew or ought to have known that its patents would not stand up in proceedings. It further counterclaimed for the cost of the litigation and attorneys’ fees for €145,250.24, damages in respect of the bank guarantee for the Teff and damages for illegal litigation. See paragraphs 3.5 to 3.7 and 4.26 to 4.27 of the judgment.

The decision

In its judgment, the Dutch Court of Hague held that the patents were invalid as none of the various features described in the claims [ripening characteristic, preferred range, mixing with flour from another crop] conferred inventiveness. See paragraph 4.24.

It also held that the claims on the patents combined or considered separately were obvious and lacked inventiveness. Accordingly, the court rejected the patent claims and held that no infringement could be made on invalid patents. See paragraph 4.24 of the judgment.

Oh teff!

The Court granted the counterclaim for the cost of litigation but rejected the claim for damages based on illegal litigation on the grounds that it would not be unlawful per se for a patentee to sue to enforce its patent rights. For such enforcement action to be unlawful, the person entitled must know or realize that there is a serious, not insignificant chance that his right will not stand in a procedure. See paragraph 4.27.

Comment
The outcome of this case has been widely celebrated in Ethiopia. The Ethiopian Government had been engaged in several legal and diplomatic battles to get the patent holder to relinquish the patent or have the patent cancelled in the Netherlands and in five other countries. The patent had prevented Ethiopia from exporting the Teff flour to Europe and other countries. While the patent will no longer be enforceable in the Netherlands, Ancientgrain still holds similar patents in the UK, Italy, Germany, Belgium and Austria. [These patents are said to be up for expiration in 2024 raising questions about the practicality of expending time and financial costs to invalidate the patent.]

This decision and the events in Ethiopia prior to the decision raise some key points:

(i) There is much talk regarding an access and benefit-sharing agreement executed in 2005 between the Ethiopian Government (through the Ethiopian Institute of Biodiversity Conservation (IBC) and the then Ethiopian Agricultural Research Organization (EARO) and the predecessor of Ancient Grain, Health and Performance Food International (HPFI) [Discussed here.] The agreement provided HPFI with access to specified varieties of the Teff and with the right to use these varieties to produce a wide range of specified food and beverage products not traditional in Ethiopia. In return, HPFI was to share monetary and non-monetary benefits with Ethiopia, as well as research cooperation and the sharing of research results. The claim is that HPFI’s directors had established other companies and transferred values to these companies, which continued to produce and sell Teff flour and Teff products, prior to filing for bankruptcy. This chain of bankruptcy and transfer of assets has made it difficult for the Ethiopian Government to claim its benefits under the asset sharing agreement.

Company law provides for the application of the doctrine of lifting the veil of incorporation when the directors of a company have employed the engine of corporate personality for fraud or improper conduct. Just as the Ethiopian Government’s end of the bargain remained valid regardless of any change of government, corporate succession should be applicable to HFPI and its successors-in-title and it should be possible to lift the corporate veil to hold such successors-in-title responsible for the obligations of HFPI under the access and benefit-sharing agreement.

(ii) Given this access and benefit-sharing arrangement regarding the Teff flour, can the Court’s holding regarding it not being unlawful per se for a patentee to sue to enforce patents, still hold water? In this case, Ancientgrain knew that its right was at best, shaky given the provisions and existence of the access and benefit-sharing arrangement.

(iii) The circumstances of the case with the history of the Teff flour in Ethiopia bring to the fore the challenges of recognising new categories of property in traditional knowledge goods such as genetic resources. Given that the knowledge of the ripening process of Teff and its other natural qualities has been held to lack “inventiveness”, do all other forms of intellectual property rights fail the Ethiopian nation? Does the fact that the claims in the invalidated patent are “public knowledge” in Ethiopia place that knowledge in the public domain? It should be remembered that while genetic resources such as the teff grain, are products of nature, they are also products of years of ingenuity and skill that have produced their current genetic makeup.

(iv) Ancientgrain through its predecessor-in-title has held the patent in the teff flour mix since 2007 and have prevented Ethiopians from validly exporting the Teff. However, while Baskels would receive compensation in terms of its costs of litigation, how would and should the Ethiopian people be compensated for loss of export earnings from the Teff? Can the access sharing agreement provide the basis for such compensation?

Conclusion
Given the fact that the exploitation of traditional knowledge and genetic resources outside their place of origin is widespread and prohibitions of patenting of genetic resources are easily circumvented, there may be need to mandate notification to an international body whenever access-sharing agreements are executed. This may further necessitate the requirement that patent applications relating to genetic resources show certification from the international body that the claims in the patent are not covered by any access-sharing agreement. Using the teff example, Ethiopia would have notified an international body, say WIPO, that an access-sharing agreement was executed regarding its Teff grain. Ancientgrain in filing its patent application would have needed to show a certificate from WIPO confirming that its claims in the patent application are not covered by the access-sharing agreement.

Too much bureaucracy though?