[GuestPost] The Nadorcott Case - Shifting the plant variety paradigm from a proprietary to a liability rule

Gary (and the CJEU) takes a bite out of a plant variety

Plant variety rights are the often ignored rights of the IP world.  There are few cases.  Most IP lawyers will never see a plant variety issue cross their desks.  But, when they do, they raise fascinating issues.  Back in December 2019, the Court of Justice of the European (CJEU) issued a decision concerning tangerines that did just that.

Reporting from Matera, Italy, IP lawyer  Vincenzo Vinciguerra, PhD (Roberto Manno's Weblegal) explains the decision and his interpretation on what it means for plant breeders:

"On 19 December 2019, the CJEU ruled on the interplay between Articles 13(3) and 95 of Council Regulation (EC) n. 2100/94 - the Plant Variety Regulation in the case C-176/18, known as “Nadorcott”.  The Plant Variety Regulation governs Community plant variety rights (PVRs).  PVRs can be obtained for plant varieties that are distinct (distinguishable from any existing variety by at least one characteristic), uniform (in their characteristics) and stable (stably reproduces from one generation to another).

The case in question originated in Spain. The holder of a plant variety right - namely a variety of a tangerine - sued a grower who (i) purchased and planted the tangerine variety during the “provisional period” set forth by Article 95 of the Regulation and, then (ii) harvested and marketed the fruit  without obtaining authorization from the rightsholder, or paying equitable remuneration.

Pursuant to Article 13 and Article 13(3), a PVR’s holder has no right to the harvested tangerines unless (amongst others exceptions) such material was obtained “through the unauthorized use of variety constituents of the protected variety”. 

The “provisional period” rule was at first set forth in Article 13 of the International Convention for the Protection of New Varieties of Plants (UPOV Convention) – implemented by Article 95 of the Regulation - that well explains its functioning and rationale: 

“Each Contracting Party [one of which is the European Union, Editor’s note] shall provide measures designed to safeguard the interests of the breeder during the period between the filing or the publication of the application for the grant of a breeder’s right and the grant of that right. Such measures shall have the effect that the holder of a breeder’s right shall at least be entitled to equitable remuneration from any person who, during the said period, has carried out acts which, once the right is granted, require the breeder’s authorization […].”

The litigation ended up to the Spanish Tribunal Supremo (Supreme Court) who sought a preliminary ruling by the CJEU, submitting the following question:  

"If a grower buys in good faith and plants a tree – of tangerine, as it was the case at hand – during the “provisional period” – but without the rightsholder’s authorization - what rights could the grower claim over the harvested material? And, on the other hand, what
rights can the breeder claim?"

The CJEU answered the question asserting that “fruit obtained from those plants [ i.e. from those plants planted during the “provisional period”] may not be regarded as having been obtained through unauthorized use within the meaning of Article13(3), even if harvested after the Community plant variety right was granted” (see par. 46 of the Nadorcott decision), however the rightsholder must be paid a “reasonable compensation” pursuant to Article 95.

The consequences stemming from the Nadorcott case may have huge practical consequences. In fact, a grower that has planted a plant variety during the “provisional period” - without the authorization of the rightsholder – would be legally entitled to freely exploit the harvested material, even after the PVRs are granted, theoretically “forever”, namely until the plant variety dies; provided – of course - that the grower pays the rightsholder the “reasonable compensation” provided by Article 95.

This conclusion has been strongly criticized by some fruit breeders, fearing that the CJEU's ruling would lead to massive activities of counterfeiting.

The author of this Guest Kat post believes that this would not be the case. In fact, the ruling of the CJEU is a systematic coherent outcome of the legal infrastructure built up by the Regulation for the PVRs.

The “sui generis” right to a new plant variety start from the grant of that right under Article 19 Regulation (this construction is confirmed by Article 13 of the “Guidance for the preparation of laws based on the 1991 act of the UPOV convention” that can be found here).  The grant of a PVR has non-retroactive effects, i.e. the right of the PVR starts from the granting of the PVR onward. As a consequence, it must coherently follow that, during the “provisional period” -  the breeder cannot claim and enforce any rights either for the acts carried out during the provisional period or for those acts carried out after the grant of the right in relation to acts originally done before the grant of the rights in question (save for the right of payment of reasonable compensation under Article 95). 

The ruling of the CJEU in the Nadorcott case is then logically coherent with the particular legal framework of the Regulation: the PVR, once granted, would take effect only for the future (i.e. from the granting of the PVR onward) and would not “cover” any acts carried out before then.

On the other hand, if there would have been a retroactive effect - i.e. if the PVR’s effects have started from the publication of the PVR’s application, as it happens, mutatis mutandis, in the field of patentable inventions (see Article 64 of the European Patent Convention) - then the conclusion would have been different. Only based on a retroactive effect could the breeder claim the infringement of its PVRs in all cases in which the plant variety had been planted – without any authorization - during the provisional period and the fruits sold after the granting of the PVRs. In fact, the right of the holder, once granted, would have been considered existing and enforceable as of the publication of the PVR – as if the right was originated in that moment, thanks to the fictio juris provided by the retroactive effects - and, therefore, the right would “cover” any act carried out after the planting out of the new plant variety.

In conclusion, it seems that the ruling of the CJEU  in the Nadorcott case has coherently set down a regime of liability rules for all the harvested material of plants variety that have been planted- even without the breeder’s authorization - during the provisional period.

The concept of liability rule was envisaged by Calabresi and Melamed in their well known contribution “Property Rules, Liability Rules, and Inalienability: One View of the Cathedral”. In the simplest possible terms, property rules are “absolute permission rules”: one cannot take the entitlements without prior permission of the holder, whereas liability rules are “take now, pay later” rules: others can use the entitlement without permission of the owner, so long as they adequately compensate the owner later. Translating the Calabresi-Melamed concepts to the IPRs field, Prof. Reichman depicts a liability rule as a rule “that takes the form of an automatic license without the power to exclude”.

Therefore the breeders have no other choice than to take note of the CJEU's ruling and develop commercial strategies in order to reduce the risk of being caught out by the newly established liability rules instead of the default proprietary rule that characterizes rights in other intellectual property regimes.

There are also other interesting questions, such as: if a grower has planted a plant variety during the provisional period, does he/she have to pay the “reasonable compensation” to the right holder just once – una tantum, i.e. a one-off payment – or does he/she have to pay the “reasonable compensation” on each harvest?"