New Zealand gold kiwifruit “returns” to China: when plant breeders’ rights meet geopolitical realities meet territorial considerations

Kat friend Doug Calhoun reports on the complicated follow-up to the New Zealand case of infringement of gold kiwifruit.

In a previous post, this blogger described how a plant variety right for a gold kiwifruit variety in New Zealand had been infringed by a rogue grower. In that decision, the grower was licensed to grow the variety in New Zealand, but it had exported budwood of the gold kiwifruit variety into China and thereby helped to establish substantial orchards there. The judge’s reasoning in the High Court decision was that the act of exporting the material into China had diminished Zespri’s enjoyment of its plant variety right.

The concept of “diminished enjoyment” of a right was derived from a 2005 decision, Winchester v Cropmark. In that case, the defendant had “arranged” for a barley crop to be grown from unlicensed seed. The defendant then purchased and exported the crop to a brewery in China. The defendant argued that it had not itself sold unlicensed seed and therefore it did not infringe.

The Court of Appeal in that case took the view that the plaintiff’s proprietary rights were sufficiently broad to include diminishing the grantee’s enjoyment of its right. Therefore, there was an infringement of the plaintiff's rights in New Zealand. (Hard cases make bad law?)

But in the instant case, the Court of Appeal has now overturned the High Court’s result that had been based on diminished enjoyment. It distinguished the earlier decision on the ground that it had involved the sales of infringing seeds in New Zealand. In this case, the infringing activities were carried out in China. Since, the New Zealand Act did not apply on an extra- territorial basis, no infringement had taken place.

However, it was still only a Pyrrhic victory for the grower. The Court of Appeal upheld the lower court’s additional finding that the grower was also in breach of its licence agreement with Zespri. Under that agreement, it was licensed to grow the variety, but only within its own orchard in New Zealand. Among its contractual obligations, the grower could not “dispose of, export or otherwise provide” any material of the variety to any other person except Zespri. As such, the grower was liable for damages of approximately $12M for that breach.

But Zespri is still left with the problem of 5,500 hectares (and counting) of orchards producing gold kiwifruit in China, as the Guardian explains. Zespri have been unwilling (or unable) to enforce its plant breeders’ rights in China without Chinese government support. So, instead, Zespri negotiated an agreement with the Chinese growers to bring them into the tent.

That agreement was subject to the approval of 75% of Zespri shareholders, namely the growers who grow kiwifruit exclusively sold outside New Zealand by Zespri. To Zespri‘s consternation, the growers have said, “No”. New Zealand’s relations with its largest trading partner are not straightforward, especially when there are parochial interests involved.

A new Plant Variety Rights Bill is due to be passed by 30 December 2021, but is not expected to come into force until mid-2022. That Bill, when it comes into force, will establish UPOV 91 rights, including the right to export material of a protected variety. While that would now make the grower’s exporting of budwood an infringement in New Zealand, it will not solve the problem of the Chinese orchards still producing gold kiwifruit without compensation to the New Zealand plant breeders.

Picture by Hiperpinguino and is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license.