scorecardWithout its GM cotton patents, Monsanto may stop doing business in India
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Without its GM cotton patents, Monsanto may stop doing business in India

Without its GM cotton patents, Monsanto may stop doing business in India
Business4 min read

  • Monsanto’s patents on two cotton variants, Bollgard and Bollgard II, were found to be unenforceable under India’s Patents Act.
  • The American biotechnology giant has been locked in a three-year legal feud with its Indian licensee, Nuziveedu Seeds, over unpaid royalties.
  • An arm of India’s agriculture ministry will now determine the royalty rate for Monsanto’s seeds- a move that could scare off other foreign companies.

The Delhi High Court, on March 11th, ruled that Monsanto’s patents on two genetically modified (GM) seed varieties of cotton - Bollgard and Bollgard II - could not be enforced, thereby concluding a three-year legal feud between Monsanto and its Indian licensee, Nuziveedu Seeds, over unpaid royalties. The ruling effectively terminates the American biotechnology giant’s intellectual property rights to Bt cotton technology in India.

The court explained that under India’s Patents Act of 1970, plant varieties and seeds cannot be patented, and that royalties or “trait fees” on Monsanto’s cotton seeds, which are modified to increase resistance to the bollworm pest, would instead be determined by the Protection of Plant Varieties and Farmers’ Rights Authority (PPVFRA), an agency of the ministry of agriculture.

This is in line with the government’s rationale that while Monsanto has patent rights to the Bt cotton gene, once it is introduced into a plant seed, the product becomes subject to the Plant Varieties Act instead of the Patent Act.

Despite the cancellation of a licensing agreement with Monsanto in late 2015 over the alleged non-payment of royalties, Nuziveedu Seeds and its subsidiaries had continued to sell Bt cotton seeds. However, in a separate case last year, the Delhi court ruled that Monsanto’s termination of the agreement was illegal since it had violated its contractual obligations by charging a royalty fee that was higher than that stipulated by the government.

With the latest ruling, Monsanto’s claims against Nuziveedu for unpaid royalties have been waived because its patents are invalid. It will now have to settle for the rates decided by the government.

A huge setback

This is a significant blow for Monsanto, the world’s largest seed producer, as it currently licenses its seeds to nearly 50 domestic companies through its local joint venture with Mahyco Seeds Ltd. It could, in all probability, lead to the company’s complete exit from India.

In March 2016, the government slashed royalty fees on Bt Cotton by 74% to ₹43 per packet, and reduced the maximum sale price of these seeds to ₹800 for a 450 gram packet, from as much as ₹1000 earlier.The move followed pressure from the National Seed Association of India (NSAI), an industry body, that argued that the prices were too high and that the seeds weren’t as effective at resisting the bollworm as originally promised. In response, Monsanto said it would have to reconsider bringing new seed technologies to India and rethink its investments in R&D.

It made good on this threat the following August by stalling the release of a newer cotton strain. It also sold off its cotton seeds business in India in September 2017 to Tierra Agrotech, a seed producer based in Hyderabad.

Monsanto is a company everyone loves to hate - with good reason. It first introduced its GM technology in India in 1995, promising to transform farmers’ livelihoods and maximise yields. In the ensuing decades, the company’s Bt cotton seeds completely took over India’s cotton cultivation.

While yields have increased significantly, Monsanto has long been accused of overcharging farmers for its seeds, especially given the fact that their ability to resist pests diminishes with time. The high cost of seeds and royalties left thousands of farmers in a vicious cycle of debt, which inevitably led to many suicides when crops failed. As a result, the government was forced to start regulating Bt cotton prices in 2006.

Adverse effects

Hence, the Delhi High Court’s ruling can be seen as a moral reckoning on Monsanto. But it also has wider implications. Yes, it will reduce prices for farmers, given that seed licensing companies pass on the royalty costs to them, but it could prove to be the death knell for innovation in the agriculture sector - something that will hurt farmers in the long run.

In essence, Indian seed producers are being allowed to distribute products enhanced by foreign technologies without having to pay sufficient licensing fees. Last month, the government cut royalty fees again, to ₹39, and set the maximum price of cotton seeds at ₹740 for the next sowing season.

High-yielding varieties have helped India become one of the world’s largest producers and exporters of cotton. If patent and pricing rights aren’t adequately protected, a host of companies will be discouraged from selling and investing in the research and development of genetically modified seeds in India. Ever since Monsanto stopped introducing new seed variants in 2016, the trade in illegally-produced copies of genetically-modified seeds has flourished, owing to unmet demand from farmers.

As things stand, Monsanto has been given three months to register its Bt cotton seeds under India’s Plant Varieties Act, which will make it eligible to receive the trait fee that is determined by the PPVFRA. However, it will cede all rights to the genetic material in the seeds. Alternatively, the company could challenge the Delhi High Court’s ruling in the Supreme Court.

Either way, yesterday’s ruling and the continued clampdown on trait fees would have already made other companies wary of making further investments in India, lest they be treated like Monsanto.

Image source: Wikipedia/ CC BY-SA 4.0/ S_Aziz123